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United States
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K


|    |  |                                                                                     
|--- |  | ------------------------------------------------------------------------------------
|[x] |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

OR

|      |  |                                                                                         
|----- |  | ----------------------------------------------------------------------------------------
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|      |  | For the transition period from           to                                             

Commission file number 0-14879

BAY VIEW CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)


|                                                                                  |  |                                                
|--------------------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization)           |  | 94-3078031
(I.R.S. Employer Identification No.)
|                                                                                  |  |                                                
|1840 Gateway Drive
San Mateo, California
(Address of principal executive offices) |  | 94404
(Zip Code)                               

Registrants telephone number, including area code: (650) 312-7200
Securities registered pursuant to Section 12(b) of the Act:

|                                                                                             |  |                                                                                        
|-------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------
|Title of each classCommon Stock, par value $0.01 per share
9.76% Capital Securities due 2028 |  | Name of each exchange on which registeredNew
York Stock ExchangeNew
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 [X]   NO [  ]

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. [  ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).    YES [X]   NO [  ]

The aggregate market value of the voting stock held by non-affiliates of
the registrant as of June 28, 2002 was $397,689,194, based upon the price at which the common equity was last sold on the New York
Stock Exchange as of such date.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of Form 10-K  Portions of the definitive Proxy Statement for
Registrants 2002 Annual Meeting of Stockholders to be filed not later than
April 24, 2003 with the Securities and Exchange Commission are incorporated by
reference in Items 10, 11, 12 and 13.



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TABLE OF CONTENTS



|               |                                                                                               |                                                          |  |  |  |  |  | 
|-------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------- |  |  |  |  |  | 
|Part I        
|               | Item 1. Business                                                                             
|               |                                                                                               | General and Business Overview                           
|               |                                                                                               | Lending and Leasing Activities                          
|               |                                                                                               | Investing Activities                                    
|               |                                                                                               | Deposit Activities                                      
|               |                                                                                               | Borrowing Activities                                    
|               |                                                                                               | Debt                                                    
|               |                                                                                               | Competition                                             
|               |                                                                                               | Economic Conditions, Government Policies and Legislation
|               |                                                                                               | Supervision and Regulation                              
|               |                                                                                               | Employees                                               
|               |                                                                                               | Executive Officers of the Registrant                    
|               | Item 2. Properties                                                                           
|               | Item 3. Legal Proceedings                                                                    
|               | Item 4. Submission of Matters to a Vote of Security Holders                                  
|Part II       
|               | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                
|               | Item 6. Selected Financial Data - Five-Year Financial Information                            
|               | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|               | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                          
|               | Item 8. Financial Statements and Supplementary Data                                          
|               | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|Part III      
|               | Item 10. Directors and Executive Officers of the Registrant                                  
|               | Item 11. Executive Compensation                                                              
|               | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|               | Item 13. Certain Relationships and Related Transaction                                       
|               | Item 14. Controls and Procedures                                                             
|Part IV       
|               | Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K                     
|Signatures    
|CERTIFICATIONS
|EXHIBIT 10a.1 
|EXHIBIT 10a.2 
|EXHIBIT 10a.3 
|EXHIBIT 10a.3 
|EXHIBIT 10.1  
|EXHIBIT 10.2  
|EX-11         
|EXHIBIT 12    
|EXHIBIT 21    
|EX-23(A)      
|EX-23(b)      



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##### Table of Contents



FORM 10-K

|               |  |                                                                                       |  |    
|-------------- |  | ------------------------------------------------------------------------------------- |  | ---
|Part I         |  |                                                                                       |  |    
|Item 1.        |  | Business                                                                              |  |    
|               |  | General and Business Overview                                                         |  | 4  
|               |  | Lending and Leasing Activities                                                        |  | 5  
|               |  | Investing Activities                                                                  |  | 6  
|               |  | Deposit Activities                                                                    |  | 7  
|               |  | Borrowing Activities                                                                  |  | 7  
|               |  | Debt                                                                                  |  | 7  
|               |  | Competition                                                                           |  | 7  
|               |  | Economic Conditions, Government Policies and Legislation                              |  | 7  
|               |  | Supervision and Regulation                                                            |  | 8  
|               |  | Employees                                                                             |  | 12 
|               |  | Executive Officers of the Registrant                                                  |  | 12 
|Item 2.        |  | Properties                                                                            |  | 13 
|Item 3.        |  | Legal Proceedings                                                                     |  | 13 
|Item 4.        |  | Submission of Matters to a Vote of Security Holders                                   |  | 13 
|Part II        |  |                                                                                       |  |    
|Item 5.        |  | Market for Registrants Common Equity and Related Stockholder Matters                 |  | 14 
|Item 6.        |  | Selected Financial Data - Five-Year Financial Information                             |  | 15 
|Item 7.        |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations |  | 16 
|Item 7A.       |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 62 
|Item 8.        |  | Financial Statements and Supplementary Data                                           |  | 66 
|Item 9.        |  | Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure  |  | 121
|Part III       |  |                                                                                       |  |    
|Item 10.       |  | Directors and Executive Officers of the Registrant                                    |  | 121
|Item 11.       |  | Executive Compensation                                                                |  | 121
|Item 12.       |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 121
|Item 13.       |  | Certain Relationships and Related Transactions                                        |  | 121
|Item 14.       |  | Controls and Procedures                                                               |  | 121
|Part IV        |  |                                                                                       |  |    
|Item 15.       |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                       |  | 122
|Signatures     |  |                                                                                       |  |    
|Certifications |  |                                                                                       |  |    

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Forward-Looking Statements

This Form 10-K Annual Report contains forward-looking statements that
describe the implementation and timing of the Plan of Dissolution and
Stockholder Liquidity (the Plan) adopted by the stockholders of Bay View
Capital Corporation (the Company) on October 3, 2002. 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, the
results of the Companys dissolution and the timing and amounts of stockholder
distributions may differ materially from those that the Company currently
anticipates. The factors that may affect these forward-looking statements
include the following:



| |  | The distributions the Company proposes to make in the future to its
stockholders are subject to a number of contingencies. The factors that
could reduce the amounts ultimately distributed or that could cause a
delay in making the distributions include the following:
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Until the dissolution of Bay View Bank, N.A. (the Bank) is
completed later this year, a number of actions the Company and the Bank
intend to take, including distributions to the Companys stockholders,
cannot be taken unless approvals are obtained from the Board of
Governors of the Federal Reserve System (the FRB) in the case of the
Company and the Office of the Comptroller of the Currency (the OCC) in
the case of the Bank;                                                      
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Unforeseen delays in the disposition of the assets of the Company and
the Bank and their formal dissolution may occur;                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  |  | The realization of the Companys deferred tax assets could be less
than the Company currently projects;                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  |  | The Company and the Bank may encounter difficulty in selling some of
their assets, and certain assets may not be able to be sold for the
prices the Company and the Bank currently anticipate;                                                                                                                                                                                                                                                                                                         
|
| |  |  | The Company and the Bank may not be able to discharge certain
liabilities for the amounts the Company and the Bank currently estimate;                                                                                                                                                                                                                                                                                                                                                                 
|
| |  |  | The Company and the Bank may incur or discover presently
unanticipated claims, liabilities or expenses;                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  |  | The Companys ability to obtain commercial financing to fund the
ongoing operations of our auto lending business, Bay View Acceptance
Corporation (BVAC);                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | The amounts the Bank is able to distribute to the Company and the
amounts the Company is able to distribute to its stockholders could be
adversely affected by the results of operations of the Companys and the
Banks remaining operations, particularly in the case of BVAC while the
dissolution process is being implemented;                                                                                                                                                                    
|
| |  |  | The estimates of the distribution
amounts include projections of future events and performance as
distant as 2006 and, accordingly, are inherently subject to many
uncertainties;                                                                                                                                                                                                                                                                                                                      
|
| |  |  | The expenses of the disposition of assets and the dissolution
proceeds may exceed the amounts currently estimated; and                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  |  | Court proceedings could restrict or delay distributions to
stockholders if claimants or creditors satisfy the court that the
amounts to be distributed by the Bank or the Company to stockholders
are needed to provide for the payment of expenses and liabilities of
the Company or the Bank; or, if the amounts ultimately required to
discharge the expenses and liabilities of the Company or the Bank in
full exceeds the value of the remaining assets of the Company or the
Bank, respectively.



| |  | The Companys stockholders could be liable to the extent they receive
distributions in the event the Company does not make adequate
provision for all of its expenses and liabilities, including its
contingent liabilities, as part of its dissolution.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As a result of the foregoing factors, there can be no assurance that the
anticipated stockholder distributions from the implementation of the Plan will
be consistent with those described in any forward-looking statements.
Accordingly, no stockholder should place undue reliance on any forward-looking
statements. The Company does not undertake, and specifically disclaims, any
obligation to update any forward-looking statements and all forward-looking
statements speak only as of the date made.

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Part I




Item 1. Business




General and Business Overview

Bay View Capital Corporation, a Delaware corporation organized in 1989
(the Company), is a bank holding company headquartered in San Mateo,
California. The Companys principal subsidiary is Bay View Bank, N.A. (the
Bank). On November 1, 2002, the Banks 57 branches were sold as part of Bay
Views sale of the Banks retail banking assets to U.S. Bank, as approved by
the stockholders of the Company. (See Note 1 to the Consolidated Financial
Statements, Basis of Presentation, at Item 8, Financial Statements and
Supplementary Data for further information on our subsidiaries).

On August 6, 2002, the Companys Board of Directors adopted a Plan of
Dissolution and Stockholder Liquidity (the Plan) pursuant to which the
Company, under applicable provisions of the Delaware General Corporation Law,
will:



| |  |  | dispose of all of its assets, including all of the assets of the Bank;                            
| | - |  | --------------------------------------------------------------------------------------------------
|
| |  |  | pay all of its debts and liabilities and make reasonable provision for any contingent liabilities;
|
| |  |  | distribute the remaining proceeds from its asset sales to its stockholders; and                   
|
| |  |  | dissolve.                                                                                         

The
Companys stockholders authorized the Plan on October 3,
2002. For further information regarding the Plan, including the full
text of the Plan, reference is made to the Companys
September 13, 2002 proxy statement relating to the
October 3, 2002 special meeting of stockholders.

The background of the Plan is as follows:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      As previously reported, the substantial losses the Company suffered in
2000 materially adversely affected the Companys regulatory capital levels
as well as those of the Bank. The adverse effect on the regulatory
capital levels of the Company and the Bank resulted in the imposition of
written regulatory agreements pursuant to 12 U.S.C. 1818(b) by the Board
of Governors of the Federal Reserve System (the FRB) with respect to the
Company and by the Office of the Comptroller of the Currency (the OCC)
with respect to the Bank. Although both the Company and the Bank are now
well-capitalized within the meaning of the risk-based capital guidelines
of the FRB and the OCC and have complied with all of the provisions of the
written regulatory agreements, it is likely that the written regulatory
agreements will remain in effect until the dissolution of the Bank.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      In March 2001, in light of the critical financial condition and the
uncertain future of the Company and the Bank, the Company and the Bank
retained new management to develop and implement a strategic plan to
restore the financial stability of the Company and the Bank. The
principal elements of the strategic plan were the sale of the Banks
higher risk assets, including the sale of its franchise loan servicing
operations and franchise loans, and a renewed focus on the Banks
commercial and retail banking platforms.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      Following the significant and successful turnaround actions undertaken
and completed in 2001 under the strategic plan, the Company began active
consideration of various alternatives to maximize its value to its
stockholders.
     The Company retained Credit Suisse First Boston Corporation to assist
the Company in evaluating a variety of transactions. Through this
evaluation process, the Company determined that greater stockholder value
could be obtained by adopting the Plan and selling the Companys and the
Banks assets to a series of purchasers rather than by an alternative
approach such as selling or merging the Company or the Bank as a whole.

As a result of the decision to proceed with the Plan, the Company and the
Bank are primarily engaged in asset disposition activities. The two principal
asset disposition transactions effected to date have been the sale of

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approximately $1.0 billion of multifamily and commercial real estate loans to
Washington Mutual Bank, FSA in August 2002 and the sale of the Banks retail banking assets (the Banks
deposits, branches and branch, MoneyCare and service center operations), as
well as approximately $327.7 million of single family residential mortgages,
home equity and commercial loans, to U.S. Bank National Association on November
1, 2002.

Since November 1, 2002, the Bank has not operated any branches, has not
accepted any deposits, and has not otherwise conducted traditional banking
activities. Our principal business activity as a commercial bank in liquidation
is to earn interest on the remaining loans, leases and investment securities
that are funded by borrowings. The difference between interest received and
interest paid comprises the majority of our operating earnings. As we continue
to sell our assets and repay our liabilities, these operating earnings will
contract. The only significant subsidiary of the Bank that is currently
conducting on-going operations is Bay View Acceptance Corporation (BVAC).
BVAC is an automotive finance company engaged primarily in the indirect
financing (the purchase of loan contracts from dealers) of automotive purchases
by individuals. BVAC currently acquires automobile receivables from over 6,500
manufacturers franchised automobile dealerships in 17 states. At December 31,
2002, the Company had brokered deposits outstanding which provided a
significant source of funding for our lending operations. The operating
results of our major business segments prior to September 30, 2002 are
accounted for and presented by platform. (See Item 7, Managements Discussion
and Analysis of Financial Condition and Results of Operations, for further
details and financial information related to our Retail Platform and our
Commercial Platform).

The Company currently anticipates that the dissolution of the Bank will be
completed by third quarter 2003, at which time the Company will no longer be a
bank holding company subject to regulation by the FRB. The Company further
anticipates that its dissolution will be completed by September 2005.




Lending and Leasing Activities

As of December 31, 2002, our on-going lending activities consist solely of
consumer auto lending. All other types of lending were ceased in 2002, or were
in the process of liquidation. The following descriptions are provided as a
reference to those loan portfolios with outstanding balances at December 31,
2002. All outstanding balances at December 31, 2002 are at their net
realizable value and are all classified as held-for-sale.

Consumer Lending

Automobile Financing - At December 31, 2002, auto loans totaled $142.4
million, representing 45.8% of our loan and lease portfolio. Additionally,
auto operating lease assets, excluded from our loan and lease portfolio,
totaled $191.0 million at December 31, 2002, representing 21.8% of our
consolidated assets. We ceased purchasing auto leases in 2000. We underwrite and purchase fixed-rate prime auto loans on
new and used vehicles on an indirect basis. The auto leases are accounted for
as operating leases and the lease asset is capitalized and depreciated to its
estimated residual value over the term of the lease.

We underwrite all loans that we purchase. Our underwriting standards
focus on the borrowers ability to repay, as demonstrated by debt-to-income
ratios, as well as the borrowers willingness to repay, as demonstrated by the
results of our proprietary credit scoring system.

We periodically securitize and/or sell our auto loans. During 2002, we
securitized and sold $453 million of auto loans. We retained an interest in
this securitization with an initial balance of $23.2 million.

Commercial Lending

Asset-Based Lending, Syndicated Loans, Factoring and Equipment Leasing-
At December 31, 2002, our commercial loans and leases, excluding franchise
loans and business loans and lines of credit, totaled $104.3 million, representing 33.6% of our loan and lease
portfolio. Approximately $91.9 million of the loans and leases outstanding at
December 31, 2002 were asset-based loans, $10.7 million in syndicated loans,
another $0.7 million of the balance were related to receivable factoring and
$1.0 million were equipment leases. On January 31, 2003, $71.0 million of
asset-based loans were sold.

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Asset-based loans and
factored receivables are primarily adjustable-rate loans based on the prime
rate index. Equipment leases are fixed-rate direct financing leases.
We have employed underwriting procedures which include, among other things,
continuous reviews of the borrowers financial condition and periodic audits of
the receivables, equipment or other assets securing the loans and leases.

Business Loans and Lines of Credit- At December 31, 2002, our business
loans totaled $7.2 million, representing 2.3% of our loan and lease portfolio.
Coincident with the sale of the Banks retail banking assets, we have ceased
originating business loans and lines of credit.

Franchise Lending- At December 31, 2002, our commercial franchise loans
totaled $46.9 million, representing 15.1% of our loan and lease portfolio. We
ceased the purchase and origination of franchise loans in September 2000.
Since then, we have focused on disposing of our franchise assets through loan
sales. During 2002, franchise loan sales, as well as loan payoffs and
amortization have helped reduce our franchise loan concentration to $46.9
million at December 31, 2002 from $160.1 million at December 31, 2001.

Our franchise loans are primarily fully amortizing, long-term, fixed- or
adjustable-rate loans provided for the purpose of acquisition or refinance of
existing business units. These loans generally have a maximum term of up to 20
years and maximum amortization of up to 25 years. Fixed-rate loans are based
upon U.S. Treasury rates at the time of funding plus a credit spread.
Adjustable-rate loans are tied to LIBOR plus a credit spread and generally
reprice on a monthly basis. At December 31, 2002, total franchise loans
included $27.5 million of loans to restaurant operators and $19.4 million of
loans to gas station/convenience store and truckstop operators.

Real Estate Lending

Multi-Family Residential Mortgage Loans (five or more units) - At December
31, 2002, loans secured by multi-family residential real estate totaled $2.4
million, representing 0.8% of our gross loan and lease portfolio. The loans
that we hold in our portfolio are primarily fully-amortizing ARMs with original
terms of 30 years or 15-year ARMs with monthly payments calculated on a 30-year
amortization period with a balloon payment due at maturity.

Nonresidential Commercial Real Estate Loans - At December 31, 2002, loans
secured by nonresidential commercial real estate totaled $7.7 million,
representing 2.5% of our loan and lease portfolio. The majority of our
commercial real estate loans are ARMs. ARMs secured by commercial real estate
are generally made on the same terms and conditions as ARMs secured by
multi-family residences.

We employ monitoring procedures which include, among other things,
continuous reviews of the borrowers financial condition and business results.
We focus on the cash flow of the business and the continuing ability of the
borrower to operate the business unit in a cash positive manner since cash from
operations represents the primary source of repayment over the life of the
loan.




Investing Activities

At December 31, 2002, our investment portfolio totaled $70.7 million. Our
portfolio includes mortgage-backed securities issued by Fannie Mae and Freddie
Mac and senior tranches of private issue collateralized mortgage obligations,
or CMOs. In addition to these securities, we also hold asset-backed
securities, retained interests in loan and lease securitizations, and other
short-term securities, including federal funds sold and commercial paper. At
December 31, 2002, our investment portfolio consisted of $32.5 million of
mortgage-backed securities, $6.3 million in asset-backed securities and $31.9
million in retained interests. During 2002, we sold $254.9 million of
mortgage-backed and other investment securities.

In accordance with liquidation basis accounting which we adopted as of
September 30, 2002, all securities are classified as held-for-sale and recorded
at their net realizable value based on published information or quotes by
registered securities brokers. Adjustments to net realizable value, if any,
are recorded on a quarterly basis in earnings

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through the adjustment for
liquidation basis. Interest on securities continues to be accrued as income
only to the extent considered collectible.




Deposit Activities

During 2002, we sold all of Bay View Banks retail deposits to U.S. Bank
as part of the transaction to sell the 57-branch retail banking business.
During the second quarter of 2002, we began acquiring brokered certificates of
deposit to provide additional liquidity in anticipation of funding the U.S.
Bank sale transaction. At December 31, 2002, the Bank had $224.2 million in
brokered deposits, all of which are scheduled to mature by March 31, 2003.




Borrowing Activities

On December 31, 2001, we completed a financing secured by the contractual
cash flows of our auto lease portfolio. The transaction was recorded as a
secured financing in accordance with accounting principles generally accepted
in the United States of America and resulted in an increase in other borrowings
of approximately $136.5 million at December 31, 2001. The transaction was
treated as a sale for tax purposes. As of December 31, 2002, the balance of
other borrowings was $62.0 million.

We are
currently in the process of negotiating a revolving line of credit
facility to finance BVACs current portfolio of automotive loans and its future
originations of automotive loans. At December 31, 2002, the Company had
brokered deposits outstanding which provided a significant source of funding
for BVACs lending operations. This revolving line of credit is intended to
replace the maturing brokered deposits. BVAC intends to periodically
securitize and sell its production of automotive loans in order to repay the
line of credit. There can be no assurances that the Company will be successful
in obtaining this financing.




Debt

At December 31, 2002, we had $90 million of debt outstanding comprised of
9.76% Capital Securities due December 31, 2028 issued in December 1998 by Bay
View Capital I, a Delaware business trust we sponsor. The Capital Securities
are callable at par on December 31, 2003.




Competition

Due to limited nature of our current operations and the active
implementation of our plan of dissolution and stockholder liquidity, our auto
finance group is the only area of our business affected by competition. The
competitive environment is a result primarily of changes in regulation,
including the 1999 Financial Services Modernization Act, changes in technology
and product delivery systems, and the accelerating pace of consolidation among
financial services providers. We compete for loans with commercial banks,
finance companies and credit unions. Many of these competitors are much larger
in total assets and capitalization, have greater access to existing and newly
emerging capital markets and offer a broader range of financial services than
Bay View. In addition, recent federal legislation may have the effect of
further increasing the pace of consolidation within the financial services
industry.




Economic Conditions, Government Policies and Legislation

Our profitability, like most financial institutions, is dependent on
interest rate differentials. In general, the difference between the interest
rates we pay on our interest-bearing liabilities, such as deposits and other
borrowings, and the interest rates we receive on our interest-earning assets,
such as loans, leases and securities, comprises a significant portion of our
earnings. These rates are highly sensitive to many factors that are beyond our
control, such as inflation, recession and unemployment and the impact of future
changes in domestic and foreign economic conditions that we cannot predict.

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Supervision and Regulation

General

Bay View Capital Corporation and Bay View Bank are extensively regulated
under federal law. This regulation is intended primarily for the protection of
depositors and the deposit insurance fund and not for the benefit of our
stockholders. Set forth below is a summary description of the material laws
and regulations which relate to our operations. The description is qualified
in its entirety by reference to the applicable laws and regulations. Upon
completion of the anticipated voluntary liquidation of Bay View Bank, many of
the described regulations will no longer apply.

Bay View Capital Corporation

As a registered bank holding company, we are subject to regulation under
the Bank Holding Company Act of 1956, as amended, sometimes referred to as the
BHCA. We are required to file with the Federal Reserve Board quarterly,
semi-annual and annual reports, and such additional information as the Federal
Reserve Board may require pursuant to the BHCA. The Federal Reserve Board may
conduct examinations of Bay View Capital Corporation and our subsidiaries.

The Federal Reserve Board may require that we terminate an activity or
terminate control of, or liquidate or divest certain subsidiaries or affiliates
when the Federal Reserve Board believes the activity, or the control of the
subsidiary or affiliate constitutes a significant risk to the financial safety,
soundness or stability of any of our banking subsidiaries. The Federal Reserve
Board also has the authority to regulate provisions of certain bank holding
company debt, including authority to impose interest ceilings and reserve
requirements on such debt. Under certain circumstances, we must file written
notice and obtain approval from the Federal Reserve Board prior to purchasing
or redeeming our equity securities.

Under the BHCA and regulations adopted by the Federal Reserve Board, we
and our nonbanking subsidiaries are prohibited from requiring certain tie-in
arrangements in connection with any extension of credit, lease or sale of
property or furnishing of services by Bay View Bank, N.A. Further, we are
required by the Federal Reserve Board to maintain certain levels of regulatory
capital.

Under Federal Reserve Board regulations, a bank holding company is
required to serve as a source of financial and managerial strength to its
subsidiary banks and may not conduct its operations in an unsafe or unsound
manner. In addition, it is the Federal Reserve Boards policy that in serving
as a source of strength to its subsidiary banks, a bank holding company should
stand ready to use available resources to provide adequate capital funds to its
subsidiary banks during periods of financial stress or adversity and should
maintain the financial flexibility and capital-raising capacity to obtain
additional resources for assisting its subsidiary banks. A bank holding
companys failure to meet its obligations to serve as a source of strength to
its subsidiary banks will generally be considered by the Federal Reserve Board
to be an unsafe and unsound banking practice or a violation of the Federal
Reserve Boards regulations or both.

Our securities are registered with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended. As such, we are subject
to the information, proxy solicitation, insider trading and other requirements
and restrictions of the Securities Exchange Act.

Our common stock trades under the ticker symbol BVC, our capital
securities trade under the ticker symbol BVS, and our Subordinated Notes
trade under the ticker symbol BVC 07.

Bay View Bank, N.A.

Bay View Bank, N.A., as a national banking association, is subject to
primary supervision, examination and regulation by the Office of the
Comptroller of the Currency, sometimes referred to as the OCC. To a lesser
extent, Bay View Bank is also subject to regulations of the Federal Deposit
Insurance Corporation, sometimes referred to as

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the FDIC, which insures our deposit accounts, and the Federal Reserve Board.
Various remedies are available to the OCC if, as a result of an examination, it
determines that the financial condition, capital resources, asset quality,
earnings prospects, management, liquidity or other aspects of Bay View Banks
operations are unsatisfactory, or that Bay View Bank or its management is
violating or has violated any law or regulation. Such remedies include the
power to enjoin unsafe or unsound practices, to require affirmative action to
correct any conditions resulting from any violation or practice, to issue an
administrative order that can be judicially enforced, to direct an increase in
capital, to restrict the growth of Bay View Bank, to assess civil monetary
penalties, and to remove officers and directors. The FDIC has similar
enforcement authority, in addition to its authority to terminate Bay View
Banks deposit insurance in the absence of action by the OCC and upon a finding
that we are in an unsafe or unsound condition, are engaging in unsafe or
unsound activities, or that our conduct poses a risk to the deposit insurance
fund or may prejudice the interest of our depositors.

Agreements with Regulatory Agencies

As previously discussed, during the third quarter of 2000, we entered into
formal agreements with the OCC and the Federal Reserve Bank of San Francisco.
(See Note 4 to the Consolidated Financial Statements, Regulatory Matters, at
Item 8, Financial Statements and Supplementary Data).

Dividends and Other Transfers of Funds

Bay View Bank is a legal entity separate and distinct from Bay View
Capital Corporation. Bay View Bank is subject to various statutory and
regulatory restrictions on its ability to pay dividends to us. In addition,
the OCC has the authority to prohibit Bay View Bank from paying dividends,
depending upon its financial condition, if such payment is deemed to constitute
an unsafe or unsound practice. As a national bank, Bay View Bank may pay
dividends in any one calendar year equal to its net earnings in that calendar
year plus net earnings for the previous two calendar years, less any dividends
paid during this three-year period. Under Bay View Banks current agreement
with the OCC, dividends may not be declared or distributed to us without the
prior written approval of the OCC.

Bay View Bank is subject to certain restrictions imposed by federal law on
any extensions of credit to, or the issuance of a guarantee or letter of credit
on behalf of, Bay View Capital Corporation or other affiliates, the purchase
of, or investments in, stock or other securities thereof, the taking of such
securities as collateral for loans, and the purchase of our assets. Such
restrictions prevent us from borrowing from Bay View Bank unless the loans are
secured by designated amounts of specified collateral. Further, unless an
exception applies, such secured loans and investments are limited for any one
affiliate to 10% of Bay View Banks capital and surplus (as defined by federal
regulations), and such secured loans and investments are limited for all
affiliates in total, to 20% of Bay View Banks capital and surplus (as defined
by federal regulations). California law also imposes certain restrictions with
respect to transactions involving Bay View Capital Corporation and other
controlling persons of Bay View Bank. Additional restrictions on transactions
with affiliates may be imposed on Bay View Bank under the prompt corrective
action provisions of federal law. See Prompt Corrective Action and Other
Enforcement Mechanisms.

Capital Standards

The Federal Reserve Board and the OCC have adopted risk-based minimum
capital guidelines intended to provide a measure of capital that reflects the
degree of risk associated with a banking organizations operations for both
transactions reported on the balance sheet as assets and transactions, and for
items such as letters of credit and recourse arrangements, which are recorded
as off-balance sheet items. Under these guidelines, nominal dollar amounts of
assets and credit equivalent amounts of off-balance sheet items are multiplied
by one of several risk adjustment percentages, which range from 0% for assets
with low credit risk, such as certain U.S. Treasury securities, to 100% for
assets with a higher degree of credit risk, such as commercial loans.

The federal banking agencies require a minimum ratio of qualifying total
risk-based capital to risk-adjusted assets of 8% and a minimum ratio of Tier 1
capital to risk-adjusted assets of 4%. In addition to the risk-based
guidelines, federal banking regulators require banking organizations to
maintain a minimum amount of Tier 1 capital to total

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average assets, referred to as the leverage ratio. For a
banking organization rated in the highest of the five categories used by regulators to rate banking
organizations, the minimum leverage ratio of Tier 1 capital to total average assets is 3%; otherwise, it is generally considered to be 4%. In addition to
these uniform risk-based capital guidelines and leverage ratios that apply
across the industry, the regulators have the discretion to set individual
minimum capital requirements for specific institutions at rates significantly
above the minimum guidelines and ratios.

At December 31, 2002, we exceeded the minimum requirements necessary to be
considered adequately capitalized while Bay View Bank exceeded both the minimum
requirements as well as the requirements to be considered well-capitalized.
(See Item 7, Managements Discussion and Analysis of Financial Condition and
Results of Operations and Note 14 to the Consolidated Financial Statements,
Regulatory Capital Requirements, at Item 8, Financial Statements and
Supplementary Data for further discussion of our capital ratios).

Prompt Corrective Action and Other Enforcement Mechanisms

Federal banking agencies possess broad powers to take corrective and other
supervisory action to resolve the problems of insured depository institutions,
including but not limited to those institutions that fall below one or more
prescribed minimum capital ratios. The OCC, which regulates Bay View Bank, has
promulgated regulations defining the following five categories in which an
insured depository institution will be placed, based upon its capital ratios:
well-capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized. At
December 31, 2002, Bay View Bank exceeded the ratios required for
classification as well-capitalized.

An institution that, based upon its capital levels, is classified as
well-capitalized, adequately capitalized or undercapitalized may be treated as
though it were in the next lower capital category if the appropriate federal
banking agency, after notice and opportunity for hearing, determines that an
unsafe or unsound condition or an unsafe or unsound practice warrants such
treatment. At each successive lower capital category, an insured depository
institution is subject to more restrictions. A significantly undercapitalized
institution cannot be treated as critically undercapitalized unless its capital
ratio actually warrants such treatment.

Compliance with the standards set forth in the risk-based minimum capital
guidelines and the restrictions that are or may be imposed under the prompt
corrective action provisions of federal law could limit the amount of dividends
that Bay View Bank or Bay View Capital Corporation may pay. An insured
depository institution is prohibited from paying management fees to any
controlling persons or, with certain limited exceptions, making capital
distributions, if after such transaction the institution would be
undercapitalized.

In addition to measures taken under the prompt corrective action
provisions, commercial banking organizations may be subject to potential
enforcement actions by federal regulators for unsafe or unsound practices in
conducting their businesses or for violations of any law, rule, regulation, or
any condition imposed in writing by the agency or any written agreement with
the agency.

Safety and Soundness Standards

The federal banking agencies have adopted guidelines designed to assist
them in identifying and addressing potential safety and soundness concerns
before capital becomes impaired. The guidelines set forth operational and
managerial standards relating to: (i) internal controls, information systems
and internal audit systems, (ii) loan documentation, (iii) credit underwriting,
(iv) asset growth, (v) earnings, and (vi) compensation, fees and benefits. In
addition, the federal banking agencies have also adopted safety and soundness
guidelines with respect to asset quality and earnings standards. These
guidelines provide six standards for establishing and maintaining a system to
identify problem assets and preventing those assets from deteriorating. Under
these standards, an insured depository institution should: (i) conduct periodic
asset quality reviews to identify problem assets, (ii) estimate the inherent
losses in problem assets and establish reserves that are sufficient to absorb
estimated losses, (iii) compare problem asset totals to capital, (iv) take
appropriate corrective action to resolve problem assets, (v) consider the size
and potential risks of material asset concentrations, and (vi) provide periodic
asset quality reports with adequate information for

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management and the Board of Directors to assess the level of asset risk. These guidelines also set forth standards
for evaluating and monitoring earnings and for ensuring that earnings are
sufficient to maintain adequate capital and reserves.

Premiums for Deposit Insurance

Bay View Banks deposit accounts are insured by the Savings Association
Insurance Fund, or SAIF, as administered by the FDIC, up to the maximum amounts
permitted by law. Insurance of deposits may be terminated by the FDIC upon a
finding that an institution has engaged in unsafe or unsound practices, is in
an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC or
the institutions primary regulator.

The FDIC charges an annual assessment for the insurance of deposits based
on the risk that a particular institution poses to its deposit insurance fund.
The risk classification is based on an institutions capital group and
supervisory subgroup assignment. Although Bay View Bank sold most of its
deposit accounts to U.S. Bank, it continues to maintain a portfolio of brokered
deposits insured by the FDIC. Effective January 2, 2003, our total deposit
insurance premium was 18.68 basis points per $100 of insured deposits (See Note
15 to the Consolidated Financial Statements, Regulatory Capital Requirements,
at Item 8, Financial Statements and Supplementary Data).

Interstate Banking and Branching

The BHCA permits bank holding companies from any state to acquire banks
and bank holding companies located in any other state, subject to certain
conditions, including certain nationwide- and state-imposed concentration
limits.

Pursuant to its agreement with U.S. Bank, Bay View Bank has agreed that it
will not establish deposit branches in Northern California for a period of
three years from November 1, 2002.

Community Reinvestment Act and Fair Lending Developments

Bay View Bank is subject to certain fair lending requirements and
reporting obligations involving home mortgage lending operations and Community
Reinvestment Act, or CRA, activities. The CRA generally requires the federal
banking agencies to evaluate the record of a financial institution in meeting
the credit needs of its local communities, including low- and moderate-income
neighborhoods. A bank may be subject to substantial penalties and corrective
measures for a violation of certain fair lending laws. The federal banking
agencies may take compliance with such laws and CRA obligations into account
when regulating and supervising other activities.

A banks compliance with its CRA obligations is based upon a
performance-based evaluation system which bases CRA ratings on an institutions
lending, service and investment performance. When a bank holding company
applies for approval to acquire a bank or other bank holding company, the
Federal Reserve Board will review the assessment of each subsidiary bank of the
applicant bank holding company, and such records may be the basis for denying
the application. Based on an examination conducted April 3, 2000, Bay View
Bank was rated satisfactory in complying with its CRA obligations.

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Employees

At December 31, 2002, we had a total of 322 employees on a full-time
equivalent basis, consisting of both full-time and permanent part-time
employees, as follows:

|                                     |  |  |     | 
|------------------------------------ |  |  | --- | 
|Bay View Bank, N.A. and Subsidiaries |  |  | 240 | 
|Bay View Capital Corporation         |  |  | 82  | 
|                                     |  |  |     | 
|Total                                |  |  | 322 | 
|                                     |  |  |     | 

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 the executive officers of the Registrant:

|                   |  |     |    |          |  |                                                                |  |  |      |      |  | 
|------------------ |  | --- | -- | -------- |  | -------------------------------------------------------------- |  |  | ---- | ---- |  | 
|                   |  |     |    |          |  |                                                                |  |  |      | Year
|Name               |  | Age |    | Position |  | Appointed                                                     
|                   |  |     |    |          |  |                                                               
|Charles G. Cooper  |  |     | 55 |          |  | Director, President and Chief Executive Officer                |  |  | 2002 |     
|James A. Badame    |  |     | 59 |          |  | President, Bay View Acceptance Corporation                     |  |  | 1998 |     
|Joseph J. Catalano |  |     | 56 |          |  | Senior Vice President, General Counsel and Corporate Secretary |  |  | 2002 |     
|Weldon Culley      |  |     | 58 |          |  | Senior Vice President and Director of Risk Management          |  |  | 2001 |     
|John Okubo         |  |     | 49 |          |  | Executive Vice President and Chief Financial Officer           |  |  | 2002 |     
|Sossy Soukiassian  |  |     | 39 |          |  | Senior Vice President and General Auditor                      |  |  | 2002 |     

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 Bay View 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. Badame has served as President of Bay View Acceptance Corporation
since 1998. Prior to joining the Company, he served as Director of Operations
for Triad Financial Corporation, a non-prime indirect automobile loan
originator. He has over 25 years of experience in the indirect retail and
wholesale automobile dealer financing business in a commercial bank
environment, including management and executive positions with Bank of America,
Marine Midland Bank and Imperial Thrift. Mr. Badame has also held sales,
business and general management positions with General Motors, Chrysler and
Honda franchisees in the retail automobile industry.

Mr. Catalano, Senior Vice President, was promoted to General Counsel and
Corporate Secretary of Bay View Capital Corporation in December 2002. Mr.
Catalano joined Bay View in 1993 and served as Assistant General Counsel from
2000 to 2002. He has also served as Senior Counsel.

Mr. Culley, Senior Vice President, has served as Director of Risk
Management of Bay View Capital Corporation since August 2001. Previously he
served as Vice President, Asset Quality for BancFirst in Oklahoma City from
July 2000 to July 2001. Mr. Culley was self-employed as a bank consultant from
April 1998 to July 2000. Mr. Culley has more than 30 years of experience in
the banking industry including 10 years as a bank examiner for the Texas
Department of Banking.

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Mr. Okubo, Executive Vice President, was promoted to Chief Financial
Officer of Bay View Capital Corporation in November 2002. Mr. Okubo joined Bay
View in 1996 and has held various financial management positions, including
Treasurer from June 2001 to his recent promotion and Controller for Bay View
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.

Ms. Soukiassian, Senior Vice President, was promoted to General Auditor in
November 2002. Previously she served as Director of Corporate Projects of Bay
View Capital Corporation from 1998 to 2002. Previously, 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, 2002, we occupied a total of 18 offices plus our
administrative corporate office 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 and
branches, all of which are used in our business activities.




Item 3. Legal Proceedings

As previously reported on our Current Report on Form 8-K dated June 25,
2002, we entered into a settlement agreement with JP Morgan Chase Bank relating
to the complaint filed against BVFMAC which we sold during 2001.

We are involved as plaintiff or defendant in various other legal actions
and are occasionally exposed to unasserted claims arising in the normal course
of business. In the opinion of management, after consultation with counsel,
the resolution of these other legal actions will not have a material adverse
effect on our consolidated financial condition or results of operations.




Item 4. Submission of Matters to a Vote of Security Holders

At a special meeting of our stockholders, held October 3, 2002, the
stockholders considered the following two proposals:



|1. |  | To authorize a plan of dissolution and stockholder liquidity under which
we will sell or otherwise dispose of all of our assets, including the sale
of the Banks retail banking assets to U.S. Bank, and, after we pay or
make arrangements to pay our liabilities and expenses, we will distribute
the net proceeds of our asset sales to our stockholders; and
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | To approve the sale of the Banks retail banking assets to U.S. Bank
pursuant to the terms of the Purchase and Assumption Agreement dated July
22, 2002 between the Bank and U.S. Bank.                                                                                                                                                                          

The vote on these two proposals were as follows:

|                                                      |  |     |            |                     |  |  |         | 
|----------------------------------------------------- |  | --- | ---------- | ------------------- |  |  | ------- | 
|                                                      |  | For |            | Withheld or Against
|Plan of dissolution and
stockholder liquidity         |  |     | 41,057,266 |                     |  |  | 483,766 | 
|Sale of the Banks retail
banking assets to U.S. Bank |  |     | 41,085,125 |                     |  |  | 455,907 | 

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Part II




Item 5. Market for Registrants Common Equity and Related Stockholder Matters

At December 31, 2002, our common stock was traded on the New York Stock
Exchange under the stock symbol BVC. At December 31, 2002, 62,947,396 shares
of our common stock were outstanding, which were owned by 1,424 stockholders of
record.

The following tables illustrate quarterly closing stock price activity for 2002 and 2001:

|                   |  |         |      |         |  |         |      |         |  |   |      |  |  |   |      | 
|------------------ |  | ------- | ---- | ------- |  | ------- | ---- | ------- |  | - | ---- |  |  | - | ---- | 
|                   |  | 2002   
|                   |  |        
|                   |  | First   |      | Second  |  | Third   |      | Fourth 
|                   |  | Quarter |      | Quarter |  | Quarter |      | Quarter
|                   |  |         |      |         |  |         |      |        
|Stock price - high |  | $       | 7.50 |         |  | $       | 7.16 |         |  | $ | 6.76 |  |  | $ | 5.97 | 
|Stock price - low  |  | $       | 6.38 |         |  | $       | 6.35 |         |  | $ | 5.51 |  |  | $ | 5.54 | 

|                   |  |         |      |         |  |         |      |         |  |   |      |  |  |   |      | 
|------------------ |  | ------- | ---- | ------- |  | ------- | ---- | ------- |  | - | ---- |  |  | - | ---- | 
|                   |  | 2001   
|                   |  |        
|                   |  | First   |      | Second  |  | Third   |      | Fourth 
|                   |  | Quarter |      | Quarter |  | Quarter |      | Quarter
|                   |  |         |      |         |  |         |      |        
|Stock price - high |  | $       | 7.22 |         |  | $       | 7.48 |         |  | $ | 7.78 |  |  | $ | 7.48 | 
|Stock price - low  |  | $       | 4.27 |         |  | $       | 3.64 |         |  | $ | 6.53 |  |  | $ | 6.61 | 

No dividends were declared in 2002 and 2001. Our ability to pay dividends
is subject to certain restrictions and limitations pursuant to applicable laws
and regulations. During the third quarter of 2000 we entered into an agreement
with the Federal Reserve Bank that, among other matters, requires prior
approval of any dividend payments on our common stock. Our primary source of
income is dividends from Bay View Bank. Bay View Bank is prohibited from
paying dividends to us without prior approval of the OCC under its agreement
with the OCC. (See Note 15 to the Consolidated Financial Statements,
Regulatory Capital Requirements, at Item 8, Financial Statements and
Supplementary Data).

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Item 6. Selected Financial Data - Five-Year Financial Information

|                                          |  |                        |         |      |  |      |           |      |  |      |           |  |  |   |           |  |  |   |           | 
|----------------------------------------- |  | ---------------------- | ------- | ---- |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | --------- |  |  | - | --------- | 
|                                          |  | At December 31,       
|                                          |  |                       
|Selected Balance Sheet Information(1)     |  | 2002(2)                |         | 2001 |  | 2000 |           | 1999 |  | 1998
|                                          |  |                        |         |      |  |      |           |      |  |     
|                                          |  | (Dollars in thousands)
|Total assets                              |  | $                      | 875,545 |      |  | $    | 4,014,105 |      |  | $    | 5,360,931 |  |  | $ | 6,498,700 |  |  | $ | 5,596,232 | 
|Mortgage-backed securities                |  |                        | 32,516  |      |  |      | 278,891   |      |  |      | 642,628   |  |  |   | 654,713   |  |  |   | 635,389   | 
|Loans and leases held-for-investment, net |  |                        |        |      |  |      | 2,326,787 |      |  |      | 2,751,794 |  |  |   | 4,295,246 |  |  |   | 4,191,269 | 
|Loans and leases held-for-sale            |  |                        | 311,014 |      |  |      | 40,608    |      |  |      | 345,207   |  |  |   | 66,247    |  |  |   |          | 
|Investment in operating lease assets, net |  |                        | 191,005 |      |  |      | 339,349   |      |  |      | 479,829   |  |  |   | 463,088   |  |  |   | 183,453   | 
|Deposits                                  |  |                        | 224,189 |      |  |      | 3,234,927 |      |  |      | 3,746,312 |  |  |   | 3,729,780 |  |  |   | 3,269,637 | 
|Borrowings                                |  |                        | 61,969  |      |  |      | 287,168   |      |  |      | 1,153,443 |  |  |   | 1,935,517 |  |  |   | 1,833,116 | 
|Intangible assets                         |  |                        |        |      |  |      | 123,573   |      |  |      | 134,936   |  |  |   | 329,005   |  |  |   | 134,088   | 
|Capital Securities                        |  |                        | 90,000  |      |  |      | 90,000    |      |  |      | 90,000    |  |  |   | 90,000    |  |  |   | 90,000    | 
|Net assets in liquidation                 |  |                        | 410,064 |      |  |      |          |      |  |      |          |  |  |   |          |  |  |   |          | 
|Stockholders equity                      |  |                        |        |      |  |      | 336,187   |      |  |      | 297,849   |  |  |   | 631,194   |  |  |   | 377,811   | 

|                                                                              |  |                                                  |          |      |  |      |          |      |  |      |          |   |  |   |          |   |  |   |          |   |  |  |  | 
|----------------------------------------------------------------------------- |  | ------------------------------------------------ | -------- | ---- |  | ---- | -------- | ---- |  | ---- | -------- | - |  | - | -------- | - |  | - | -------- | - |  |  |  | 
|                                                                              |  | For the Year Ended December 31,                 
|                                                                              |  |                                                 
|Selected Results of OperationsInformation (1)                                 |  | 2002(3)                                          |          | 2001 |  | 2000 |          | 1999 |  | 1998 |          |   |  |  
|                                                                              |  |                                                  |          |      |  |      |          |      |  |      |          |   |  |  
|                                                                              |  | (Dollars in thousands, except per share amounts)
|Interest income                                                               |  | $                                                | 162,486  |      |  | $    | 302,745  |      |  | $    | 460,192  |   |  | $ | 421,656  |   |  | $ | 406,363  |  
|Interest expense                                                              |  |                                                  | (70,069  | )    |  |      | (180,497 | )    |  |      | (294,752 | ) |  |   | (251,172 | ) |  |   | (251,762 | )
|                                                                              |  |                                                  |          |      |  |      |          |      |  |      |          |   |  |   |          |   |  |   |          |  
|Net interest income                                                           |  |                                                  | 92,417   |      |  |      | 122,248  |      |  |      | 165,440  |   |  |   | 170,484  |   |  |   | 154,601  |  
|Provision for losses on loans and leases                                      |  |                                                  | (10,700  | )    |  |      | (71,890  | )    |  |      | (62,600  | ) |  |   | (28,311  | ) |  |   | (9,114   | )
|Leasing income                                                                |  |                                                  | 70,827   |      |  |      | 92,305   |      |  |      | 97,207   |   |  |   | 58,558   |   |  |   | 11,341   |  
|Gain (loss) on sales of assets and liabilities, net                           |  |                                                  | 18,706   |      |  |      | (10,547  | )    |  |      | (52,606  | ) |  |   | 10,058   |   |  |   | 1,060    |  
|Other income, net                                                             |  |                                                  | 20,352   |      |  |      | 25,411   |      |  |      | 32,041   |   |  |   | 22,916   |   |  |   | 18,671   |  
|General and administrative expenses                                           |  |                                                  | (110,698 | )    |  |      | (155,287 | )    |  |      | (158,590 | ) |  |   | (117,116 | ) |  |   | (113,567 | )
|Litigation Expense                                                            |  |                                                  | (13,100  | )    |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Restructuring charges                                                         |  |                                                  |         |      |  |      | (6,935   | )    |  |      | (9,213   | ) |  |   |         |   |  |   |         |  
|Revaluation of franchise-related assets                                       |  |                                                  |         |      |  |      | (70,146  | )    |  |      | (101,894 | ) |  |   |         |   |  |   |         |  
|Leasing expense                                                               |  |                                                  | (54,838  | )    |  |      | (86,120  | )    |  |      | (69,350  | ) |  |   | (40,188  | ) |  |   | (7,682   | )
|Real estate operations, net                                                   |  |                                                  | (1,201   | )    |  |      | (2,085   | )    |  |      | (65      | ) |  |   | 238      |   |  |   | 240      |  
|Provision for losses on real estate owned                                     |  |                                                  | (418     | )    |  |      | (2,936   | )    |  |      |         |   |  |   |         |   |  |   |         |  
|Amortization of intangible assets                                             |  |                                                  | (993     | )    |  |      | (11,280  | )    |  |      | (11,158  | ) |  |   | (11,993  | ) |  |   | (11,372  | )
|Amortization of intangible assets  franchise                                 |  |                                                  |         |      |  |      |         |      |  |      | (9,608   | ) |  |   | (1,694   | ) |  |   |         |  
|Write-off of intangible assets  franchise                                    |  |                                                  |         |      |  |      |         |      |  |      | (192,622 | ) |  |   |         |   |  |   |         |  
|                                                                              |  |                                                  |          |      |  |      |          |      |  |      |          |   |  |   |          |   |  |   |          |  
|Income
(loss) before income tax expense (benefit) taxes & extraordinary items |  |                                                  | 10,354   |      |  |      | (177,262 | )    |  |      | (373,018 | ) |  |   | 62,952   |   |  |   | 44,178   |  
|Adjustment for liquidation basis                                              |  |                                                  | 263,749  |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Income tax (expense) benefit                                                  |  |                                                  | (176,906 | )    |  |      | 85,866   |      |  |      | 55,810   |   |  |   | (25,053  | ) |  |   | (21,215  | )
|Dividends on Capital Securities                                               |  |                                                  | (10,615  | )    |  |      | (9,774   | )    |  |      | (8,989   | ) |  |   | (8,935   | ) |  |   | (244     | )
|Cumulative effect of change in accounting principle                           |  |                                                  | (18,920  | )    |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|                                                                              |  |                                                  |          |      |  |      |          |      |  |      |          |   |  |   |          |   |  |   |          |  
|Net income (loss)                                                             |  | $                                                | 67,662   |      |  | $    | (101,170 | )    |  | $    | (326,197 | ) |  | $ | 28,964   |   |  | $ | 22,719   |  
|                                                                              |  |                                                  |          |      |  |      |          |      |  |      |          |   |  |   |          |   |  |   |          |  
|Net assets in liquidation per diluted share                                   |  | $                                                | 6.43     |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Earnings (loss) per diluted share                                             |  | $                                                |         |      |  | $    | (1.99    | )    |  | $    | (10.00   | ) |  | $ | 1.36     |   |  | $ | 1.12     |  
|Dividends declared per share                                                  |  | $                                                |         |      |  | $    |         |      |  | $    | 0.30     |   |  | $ | 0.30     |   |  | $ | 0.40     |  

|                                              |  |                                                  |        |      |  |      |        |      |  |      |         |    |  |   |        |   |  |   |        |  
|--------------------------------------------- |  | ------------------------------------------------ | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------- | -- |  | - | ------ | - |  | - | ------ | -
|                                              |  | At and For the Year Ended December 31,          
|                                              |  |                                                 
|Selected Others Information(1)                |  | 2002                                             |        | 2001 |  | 2000 |        | 1999 |  | 1998
|                                              |  |                                                  |        |      |  |      |        |      |  |     
|                                              |  | (Dollars in thousands, except per share amounts)
|Net interest margin                           |  |                                                  | N/A    |      |  |      | 3.18   | %    |  |      | 3.13    | %  |  |   | 3.23   | % |  |   | 3.03   | %
|Return on average assets                      |  |                                                  | N/A    |      |  |      | (2.21  | )%   |  |      | (5.20   | )% |  |   | 0.49   | % |  |   | 0.41   | %
|Return on average equity                      |  |                                                  | N/A    |      |  |      | (30.96 | )%   |  |      | (58.80  | )% |  |   | 7.00   | % |  |   | 5.87   | %
|Ratio of total equity to total assets         |  |                                                  | N/A    |      |  |      | 8.38   | %    |  |      | 5.56    | %  |  |   | 9.71   | % |  |   | 6.75   | %
|Book value per share                          |  |                                                  | N/A    |      |  | $    | 5.37   |      |  | $    | 9.14    |    |  | $ | 19.38  |   |  | $ | 19.77  |  
|Dividend payout ratio                         |  |                                                  | N/A    |      |  |      | N/A    |      |  |      | N/A     |    |  |   | 19.26  | % |  |   | 35.57  | %
|Nonperforming assets                          |  | $                                                | 27,268 |      |  | $    | 89,817 |      |  | $    | 101,173 |    |  | $ | 25,939 |   |  | $ | 18,020 |  
|Ratio of nonperforming assets to total assets |  |                                                  | 3.11   | %    |  |      | 2.24   | %    |  |      | 1.89    | %  |  |   | 0.40   | % |  |   | 0.32   | %

(1)     Includes the acquisitions of America First Eureka Holdings
effective January 2, 1998, Franchise Mortgage Acceptance Company effective
November 1, 1999 and Goodman Factors, Inc. effective February 1, 2000

(2)     Amounts
at December 31, 2002 were prepared under the liquidation basis
of accounting.

(3)     Amounts
for the three months ended December 31, 2002 were prepared under the liquidation basis
of accounting while the amounts for the first nine months of 2002
were presented on a going concern basis.

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##### Table of Contents






Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations

INDEX

|                                        |                              |                                                                      |    |    |    | 
|--------------------------------------- | ---------------------------- | -------------------------------------------------------------------- | -- | -- | -- | 
|Strategic Overview                      |                              |                                                                      | 17 |   
|                                        | Our Strategy                 |                                                                      |    | 17 |   
|                                        | Segments                     |                                                                      |    | 18 |   
|                                        | Critical Accounting Policies |                                                                      |    | 19 |   
|Results of Operations                   |                              |                                                                      | 20 |   
|                                        | Liquidation Basis            |                                                                      |    | 20 |   
|                                        |                              | Net Assets in Liquidation  December 31, 2002 vs. September 30, 2002 |    |    | 20 | 
|                                        | Going Concern Basis          |                                                                      |    | 23 |   
|                                        |                              | First Nine Months of 2002 versus First Nine Months of 2001           |    |    | 23 | 
|                                        |                              | 2001 versus 2000                                                     |    |    | 35 | 
|Balance Sheet Analysis                  |                              |                                                                      | 46 |   
|                                        | Securities                   |                                                                      |    | 46 |   
|                                        | Loans and Leases             |                                                                      |    | 49 |   
|                                        | Deposits                     |                                                                      |    | 56 |   
|                                        | Borrowings                   |                                                                      |    | 56 |   
|Liquidity                               |                              |                                                                      | 58 |   
|Capital Resources                       |                              |                                                                      | 59 |   
|Stock Repurchase Program                |                              |                                                                      | 61 |   
|Impact of Inflation and Changing Prices |                              |                                                                      | 61 |   

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##### Table of Contents



Strategic Overview

Bay View Capital Corporation (the Company) is a commercial bank holding
company headquartered in San Mateo, California. Our principal subsidiary is
Bay View Bank, N.A. (the Bank) which, through October 31, 2002, operated a 57
full-service branch-banking network.

Our Strategy

From 1996 to 1999, our strategy was to transform Bay View Bank from a
traditional thrift to a commercial bank. During this period, we nearly doubled
in size, replaced a majority of our mortgage-based loans with higher-yielding
consumer and commercial loans and leases and transformed a significant portion
of our deposits into lower-cost transaction accounts.

We incurred substantial losses in 2000 that adversely affected our
regulatory capital level and that of the Bank, and resulted in the imposition
of written regulatory agreements. Since late 2000, our primary focus has been
the restoration of our financial stability under the direction of new
management that joined us in March 2001.

In May 2001, we completed a rights offering and a concurrent offering to
standby purchasers that generated aggregate gross proceeds of $137.5 million.
With this additional capital, we implemented a new strategic plan that included
exiting businesses inconsistent with a California-focused bank and included
assumptions related to the liquidation of our remaining franchise-related
assets and operations and our remaining high loan-to-value home equity loans.
Our results for 2001 included specific charges consistent with our new
strategic plan. The specific charges were primarily related to the stock sale
of the legal entity Bay View Franchise Mortgage Acceptance Company (BVFMAC)
and its related servicing platform, the disposition of franchise-related
assets, restructuring charges primarily related to the reduction in our
workforce announced in May 2001 and prepayment penalties related to a reduction
in higher-cost borrowings.

As a result of the significant and successful turnaround actions
undertaken and completed in 2001 under the strategic plan, the Company began
active consideration of various alternatives to maximize its value to its
stockholders and retained Credit Suisse First Boston Corporation to assist in
that process. We initially considered a variety of transactions. However,
through this evaluation process, the Company determined that greater
stockholder value could be obtained by adopting a plan of dissolution and
selling selected assets of the Company and the Bank to more than one purchaser
rather than by an alternative approach such as selling all of the Company or
the Bank as a whole. We believe this fact is largely the result of the
mismatch between the character of the Banks and the Companys assets and
liabilities, which resulted from strategies of prior management.

On July 22, 2002, Bay View Bank executed a definitive agreement with U.S.
Bank, a wholly owned subsidiary of U.S. Bancorp, pursuant to which U.S. Bank
agreed to purchase Bay View Banks deposits, branches and branch and service
center operations, as well as approximately $373.0 million of single family,
home equity and commercial loans. Bay View Bank also executed a definitive
agreement on the same date with Washington Mutual pursuant to which Washington
Mutual would purchase approximately $1.0 billion of multi-family and commercial
real estate loans from the Bank.

On August 6, 2002, our Board of Directors approved a plan of dissolution
and stockholder liquidity (the Plan). Under the Plan, we intend to dispose
of our remaining assets in an orderly manner and to collect all additional
monies owed to us. We have made and will continue to make adequate reserves
for the payment of all of our liabilities and obligations, including all
expenses related to the sale of our assets and the Plan. Our Board of
Directors, at its discretion, may also set aside a contingency reserve to pay
any claims that may arise against us, whether known or unknown. We will make
one or more liquidating distributions to our stockholders, representing the net
proceeds of our asset sales. Any liquidating distributions will be made to our
stockholders based on their pro rata ownership of our common stock as of the
record date to be established for each distribution.

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It is not possible at this time to indicate an exact amount for the
distributions we intend to make to our stockholders for a number of reasons,
including: the need to obtain the Board of Governors of the Federal Reserve
System (FRB) and Office of the Comptroller of the Currency (OCC) approval
to make any distributions; possible negative post-closing purchase price
adjustments pursuant to the Banks agreements with U.S. Bank and Washington
Mutual; the proceeds that we in fact receive from the disposition of other
assets that are not yet subject to purchase commitments could be less than we
currently anticipate; and our expenses and other obligations prior to
liquidation could be greater than we currently anticipate. As a result, no
assurance can be given as to the amount of the distributions that will be made
to our stockholders, either in cash or in the stock of operating companies.

On September 6, 2002, the sale of $995.5 million of multi-family and
commercial real estate loans to Washington Mutual was completed.

Our stockholders approved the Plan and the sale of the Banks retail
banking assets to U.S. Bank at a special meeting held on October 3, 2002. At a
meeting also held on October 3, 2002, holders of the Capital Securities of Bay
View Capital I approved a waiver of those provisions of the legal instruments
governing the Capital Securities and the Companys 9.76% Junior Subordinated
Deferrable Interest Debentures that would, absent the waiver, prevent us from
disposing of all of our assets pursuant to the Plan.

As a result of the stockholders approval of the Plan and the close of the
U.S. Bank transaction on November 1, 2002, we adopted liquidation basis
accounting, effective September 30, 2002, in accordance with accounting
principles generally accepted in the United States of America (GAAP).

On November 1, 2002, the Company completed the U.S. Bank sale transaction.
At the closing of the transaction, U.S. Bank paid Bay View 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 $327.7 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. Bay View Bank paid to U.S. Bank at
the closing an amount equal to the deposits being assumed by U.S. Bank of
approximately $3.307 billion, less amounts payable by U.S. Bank to Bay View
Bank as described above. The amounts paid at closing were subject to a
post-closing adjustment based upon a balance sheet as of the closing date.

Segments

As a result of our adoption of liquidation basis accounting effective
September 30, 2002, we currently operate in a single segment focused on
liquidating the Companys assets and liabilities.

Prior to September 30, 2002, we operated two distinct business platforms
representing the two basic distribution channels of our primary businesses,
retail and commercial banking. The platforms results include the income and
expenses related to these business activities.

The Retail Platform has historically included single-family real estate
loans, home equity loans and lines of credit, auto loans and leases,
mortgage-backed securities and other investments, and other consumer banking
products and services. Since November 2002, we have not conducted any retail
banking activities other than originating and purchasing fixed-rate loans
secured by new and used autos where a highly qualified borrower desires a
higher relative loan amount and/or a longer term than is offered by other more
traditional auto financing sources. In return for the flexibility of the
products offered, we charge higher interest rates while still applying
traditional underwriting criteria to mitigate potential loan losses. We ceased
purchasing auto leases in June 2000.

The Commercial Platform historically included multi-family and commercial
real estate loans, franchise loans, asset-based loans, syndicated loans,
factored receivables, commercial leases, and other business banking products
and services. We purchased and originated franchise loans until the franchise
lending division was shut down in
18Table of Contents

September 2000. We ceased originating multi-family and commercial mortgage loans in
August 2002 subsequent to the Washington Mutual sale transaction.

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 investment in operating lease assets, income taxes and the
value of assets and liabilities in liquidation and the reserve for estimated
costs during the period of liquidation. See Note 2 to the Consolidated
Financial Statements, Plan of Dissolution and Stockholder Liquidity, at Item
8, Financial Statements and Supplementary Data for further discussion of our
liquidation basis accounting policies.

Investment in Operating Lease Assets

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 we adopted effective January 1, 2002. Statement No. 144, which
supersedes Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, retains the fundamental
provisions of Statement No. 121 related to the recognition and measurement of
the impairment of long-lived assets to be held and used and the measurement of
long-lived assets to be disposed of by sale. 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 automobiles 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 to the lessor 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 reduced 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 are similar to the original contract lease rate.
For those impaired leases where the estimated fair value is less than the net
book value, an impairment charge is recorded for the difference. Since the
inception of the lease portfolio in June 1998, the Company has recorded
additional monthly depreciation charges, also included in leasing expense, to
provide for losses that may be incurred at the end of the lease terms.

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Income Taxes

As a result of the Companys Plan, a valuation allowance of $21.5 million
was established based on the realizability of deferred tax assets in years
after 2002. The realization of the net deferred tax assets of $5.9 million,
which is net of the established valuation allowance, is dependent upon the
total projected future income through the final liquidation of the Company.

Liquidation Basis Accounting

The Company adopted liquidation basis accounting effective September 30,
2002 in accordance with GAAP. Accordingly, assets have been valued at their
estimated net realizable values and liabilities include 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. See Note 2 to the Consolidated Financial Statements, Plan of
Dissolution and Stockholder Liquidity, at Item 8, Financial Statements and
Supplementary Data for further discussion of our liquidation basis accounting
policies.

Under liquidation basis accounting, the Company has estimated future
liabilities associated with carrying out the Plan. The Company has not
reflected any future revenues and expenses of and operating nature, as such
income and expenses will be recognized when realized.

The reserve for estimated costs during the period of liquidation include
accruals for severance payments and facility closures, investment banking and
other professional fees and estimated litigation expense. These expense
accruals are reviewed for adequacy on a quarterly basis. Changes to the
accruals will be recorded as adjustments in liquidation basis in future
periods.

Results of Operations

As discussed above, we adopted liquidation basis accounting effective
September 30, 2002, in accordance with GAAP. Under the liquidation basis of
accounting, we are now reporting the value of, and the changes in, net assets
available for distribution to stockholders (net assets in liquidation)
instead of results from continuing operations.
Accordingly, our financial statements as of and for the quarter ended December
31, 2002 have been prepared under the liquidation basis of accounting including
the replacement of the Consolidated Statement of Operations and Comprehensive
Income with the Consolidated Statement of Changes in Net Assets in Liquidation.
For reporting periods prior to September 30, 2002, our financial statements
are presented on a going concern basis of accounting. Since we adopted
liquidation basis accounting on September 30, 2002, the Consolidated Statement
of Operations and Comprehensive Income for the nine months ended September 30,
2002 is presented in a similar format as the going concern financial
statements. As a result, we are providing, in Item 8. Financial Statements and
Supplementary Data, a (1) Consolidated Statement of Net Assets (Liquidation
Basis) as of December 31, 2002 and a Consolidated Statement of Financial
Condition (Going Concern Basis) as of December 31, 2001, a (2) Consolidated
Statement of Changes in Net Assets in Liquidation (Liquidation Basis) for the
three months ended December 31, 2002 and (3) Consolidated Statements of
Operations and Comprehensive Income (Loss) for the nine month period ended
September 30, 2002 (Liquidation Basis) and the years ended December 31, 2001
and 2000 (Going Concern Basis).

Liquidation Basis

Net Assets in Liquidation  December 31, 2002 vs. September 30, 2002

Our net assets in liquidation at December 31, 2002 totaled $410.1 million,
or $6.43 in net assets in liquidation per outstanding share as compared to
$413.7 million, or $6.50 in net assets in liquidation per outstanding share at
September 30, 2002. The decrease in net assets in liquidation and net assets
in liquidation per outstanding share was primarily the result of 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 deposits to U.S. Bank, N.A. from October 1 to
November 1. Our liquidation of earning assets in

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advance of the anticipated October 1 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.

During the fourth quarter, 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 the Companys auto lending business available to
absorb existing deferred tax benefits. Our 2002 effective tax rate of 72% is
higher than 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. The
effective tax rate for the fourth quarter declined to 55%, primarily as a
result of an increase in state taxes partially offset by reductions to the
valuation allowance.

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
$3.307 billion, its branches and service center operations, and purchased
$327.7 million of loans. On November 29, 2002, we prepaid the entire $100
million of our 9 1/8% Subordinated Notes due 2007 at a premium of 4.563%.
Additionally, on December 9, 2002, the Bank redeemed the entire $50 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, the 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. Although we intend to pay out future dividends as scheduled,
it continues to be subject to a formal agreement with the FRB and, accordingly,
future distributions will remain subject to FRB approval.

In accordance with the Plan, we sold loans totaling $456.4 million in
outstanding principal, including the $327.7 million of loans sold to U.S. Bank,
N.A., during the fourth quarter. The loans sold consisted of approximately
$157.4 million of home equity loans, $139.4 million of single-family loans,
$57.4 million of business loans, $38.4 million of commercial real estate loans,
$25.6 million of factored receivables, $21.1 million of commercial leases,
$14.4 million of franchise loans and $2.7 million of consumer loans.

Year-to-date, we have completed the sale of approximately $2.0 billion of
loans. The loans sold consisted of $859.6 million of multi-family mortgage
loans, $207.7 million of commercial real estate loans, $157.4 million of home
equity loans, $139.4 million of single-family loans, $67.8 million of business
loans, $60.6 million of franchise loans, $50.8 million of factored receivables,
$21.1 million of commercial leases and $2.7 million of consumer loans.
Additionally, we securitized and sold $453.2 million of our auto loans.

Our loans and leases portfolio decreased to $311.0 million at December 31,
2002 from $2.4 billion at December 31, 2001.

Loan sales during the quarter and during 2002 were partially offset by
originations totaling $84.9 million and $686.2 million, respectively.
Originations for the quarter included $69.5 million of auto loans, $8.8 million
of commercial and business loans and $6.6 million of home equity loans.
Originations for 2002 included $314.7 million of auto loans, $204.3 million of
multi-family mortgage loans, $87.5 million of home equity loans, $66.2 million
of commercial and business loans and $13.5 million of commercial real estate
loans. Going forward, we will continue to originate auto loans, however, we
ceased all other loan production activities during the fourth quarter of 2002.

Investment in Operating Lease Assets

Leasing expense represents expenses related to our auto leasing
activities. Because the leases are accounted for as operating leases, the
corresponding assets are capitalized and depreciated to their estimated
residual values over their lease terms. This depreciation expense is included
in leasing expenses, along with the amortization of

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capitalized initial direct
lease costs and impairment charges. Leasing expenses were $10.9 million for
the fourth quarter of 2002 as compared to $24.5 million for the fourth quarter
of 2001. The decrease in leasing expenses was primarily due to lower
provision for impairment combined with lower depreciation expense associated
with the declining balance of our auto-related operating lease portfolio. We
ceased purchasing auto leases in June 2000.

At
December 31, 2002, approximately 4,839 of the 11,428
vehicles in our automobile lease portfolio, or 42%, were considered
impaired. However, this impairment is subject to a number of
significant assumptions that could change in the near term, and
adversely affect the valuation of the automobile lease portfolio.
These assumptions were previously described under Critical Accounting
Policies, Investment in Operating Lease Assets. Two of these
assumptionsincluding the residual values of individual leases
that are projected by ALG and the relative probabilities of the three
alternatives for disposing of vehiclesare particularly
susceptible to changes in market conditions. As an illustration of
the sensitivity of these assumptionsif the market values of the
individual vehicles declined by $250, an additional 2% of the leases
would be deemed to be impaired and, therefore, potentially subject
to an impairment charge. Furthermore, if the percentage of vehicles
returned to the Company were greater than was projected at year-end,
the impairment charge could increase because the value realized under
this scenario is normally less than if the lessee purchased the
automobile prior to the end of the lease term.

Income Taxes

We recorded a tax benefit of $4.9 million for the fourth quarter of 2002
and a tax benefit of $26.0 million for the fourth quarter of 2001. Our 2002 effective
tax rate of 72% is higher than 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. Our effective tax rate for 2001 was 45.9%. During the fourth quarter,
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 the
Companys auto lending business available to absorb existing deferred tax
benefits.

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Going Concern Basis

Results of Operations  First Nine Months of 2002 versus First Nine Months of
2001

Our net income for the first nine months of 2002, including net
adjustments required to convert from a going concern basis to a liquidation
basis of accounting effective September 30, 2002, totaled $71.7 million, or
$1.13 per diluted share. Our net loss for the first nine months of 2001,
presented on a going concern basis of accounting, was $103.9 million, or $2.22
per diluted share. Excluding the liquidation adjustments, our operating income
before taxes totaled $5.9 million for the first nine months of 2002 as compared
to a net loss before taxes of $163.8 million for the first nine months of 2001.

In accordance with liquidation basis accounting, our assets have been
valued at their estimated net realizable value and liabilities include
estimated costs associated with carrying out the Plan. We recorded pre-tax
adjustments 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. The valuation adjustments primarily consisted of the following:



| |  |  | $463.5 million deposit premium, which was calculated as 14% of
non-brokered retail deposits based on October average deposit levels
plus $5 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 adjustment related to loan balances
reflecting the estimated net realizable value of our remaining loan
portfolios under an accelerated timeline to sell such loans pursuant to
the Plan;                                                                
|
| |  |  | $51.1 million in charges related to the sale of our 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 our and Bay View
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.                                                                                                                                              

Also during the third quarter of 2002, we recorded $18.9 million in
impairment charges, net of taxes, for 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 the transitional provisions of
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets, which we adopted as of January 1, 2002, the impairment loss
is 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, 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 loan receivables and sold $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 investment securities.

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Our results for the first nine months of 2002 included a charge of $13.1
million, recorded during the second quarter of 2002, related to the settlement
of litigation. As previously reported in Bay View Capital Corporations
Current Report on Form 8-K dated June 25, 2002, we entered into a settlement
agreement with JP Morgan Chase Bank relating to the complaint filed against Bay
View Franchise Mortgage Acceptance Company which we sold during 2001. The
settlement resulted in a $13.1 million pre-tax charge to second quarter
earnings and included the removal of approximately $12 million of nonperforming
franchise loans from our consolidated balance sheet.

On June 5, 2002, 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. Through this transaction, we converted
approximately $6.5 million of goodwill to tangible equity.

Net Interest Income and Net Interest Margin

Net interest income represents the difference between interest earned on
loans, leases and investments and interest paid on funding sources, including
deposits and borrowings, and has historically been our principal source of
revenue. Net interest margin is the amount of net interest income expressed as
a percentage of average interest-earning assets.

Average Balance Sheet

The following table illustrates average yields on our interest-earning
assets and average rates on our interest-bearing liabilities for the periods
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 years indicated. Average balances of interest-earning assets and
interest-bearing liabilities were calculated by averaging the relevant
month-end amounts for the respective periods.

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|                                           |                                |   |                                    |           |                           |   |            |         |         |  |          |      |            |   |           |           |         |   |         |         |  |  |      |      |  
|------------------------------------------ | ------------------------------ | - | ---------------------------------- | --------- | ------------------------- | - | ---------- | ------- | ------- |  | -------- | ---- | ---------- | - | --------- | --------- | ------- | - | ------- | ------- |  |  | ---- | ---- | -
|                                           |                                |   | AVERAGE BALANCES, YIELDS AND RATES
|                                           |                                |   |                                   
|                                           |                                |   | For the Nine Months Ended          |           | For the Nine Months Ended
|                                           |                                |   | September 30, 2002                 |           | September 30, 2001       
|                                           |                                |   |                                    |           |                          
|                                           |                                |   | Average                            |           |                           |   |            |         | Average |  | Average  |      |            |   |           |           | Average
|                                           |                                |   | Balance                            |           | Interest                  |   | Yield/Rate |         | Balance |  | Interest |      | Yield/Rate
|                                           |                                |   |                                    |           |                           |   |            |         |         |  |          |      |           
|                                           |                                |   | (Dollars in thousands)            
|Assets                                     |                                |   |                                    |           |                           |   |            |         |         |  |          |      |            |   |           |           |         |   |         |         |  |  |      |     
|Interest-earning assets:                   |                                |   |                                    |           |                           |   |            |         |         |  |          |      |            |   |           |           |         |   |         |         |  |  |      |     
|                                           | Loans and leases               |   | $                                  | 2,158,992 |                           |   | $          | 122,208 |         |  |          | 7.70 | %          |   | $         | 2,882,264 |         |   | $       | 192,698 |  |  |      | 8.90 | %
|                                           | Mortgage-backed securities (1) |   |                                    | 231,499   |                           |   |            | 8,314   |         |  |          | 4.78 |            |   |           | 531,533   |         |   |         | 27,852  |  |  |      | 6.97 |  
|                                           | Investments(1)                 |   |                                    | 794,862   |                           |   |            | 14,717  |         |  |          | 2.45 |            |   |           | 601,987   |         |   |         | 23,333  |  |  |      | 5.13 |  
|                                           |                                |   |                                    |           |                           |   |            |         |         |  |          |      |            |   |           |           |         |   |         |         |  |  |      |      |  
|Total interest-earning assets              |                                |   | 3,185,353                          |           |                           |   | 145,239    |         |         |  | 6.08     | %    |            |   | 4,015,784 |           |         |   | 243,883 |         |  |  | 8.08 | %   
|                                           |                                |   |                                    |           |                           |   |            |         |         |  |          |      |            |   |           |           |         |   |         |         |  |  |      |      |  
|Other assets                               |                                |   | 680,673                            |           |                           |   |            |         |         |  |          |      |            |   | 736,270   |           |         |   |         |         |  |  |      |     
|                                           |                                |   |                                    |           |                           |   |            |         |         |  |          |      |            |   |           |           |         |   |         |         |  |  |      |     
|Total assets                               |                                | $ | 3,866,026                          |           |                           |   |            |         |         |  |          |      |            | $ | 4,752,054 |           |         |   |         |         |  |  |      |     
|                                           |                                |   |                                    |           |                           |   |            |         |         |  |          |      |            |   |           |           |         |   |         |         |  |  |      |     
|Liabilities and Stockholders Equity       |                                |   |                                    |           |                           |   |            |         |         |  |          |      |            |   |           |           |         |   |         |         |  |  |      |     
|Interest-bearing liabilities:              |                                |   |                                    |           |                           |   |            |         |         |  |          |      |            |   |           |           |         |   |         |         |  |  |      |     
|                                           | Deposits                       |   | $                                  | 3,141,636 |                           |   | $          | 44,509  |         |  |          | 1.89 | %          |   | $         | 3,559,904 |         |   | $       | 114,065 |  |  |      | 4.28 | %
|                                           | Borrowings(2)                  |   |                                    | 270,718   |                           |   |            | 15,559  |         |  |          | 7.67 |            |   |           | 752,740   |         |   |         | 39,819  |  |  |      | 7.05 |  
|                                           |                                |   |                                    |           |                           |   |            |         |         |  |          |      |            |   |           |           |         |   |         |         |  |  |      |      |  
|Total interest-bearing liabilities         |                                |   | 3,412,354                          |           |                           |   | 60,068     |         |         |  | 2.35     | %    |            |   | 4,312,644 |           |         |   | 153,884 |         |  |  | 4.77 | %   
|                                           |                                |   |                                    |           |                           |   |            |         |         |  |          |      |            |   |           |           |         |   |         |         |  |  |      |      |  
|Other liabilities                          |                                |   | 107,646                            |           |                           |   |            |         |         |  |          |      |            |   | 115,458   |           |         |   |         |         |  |  |      |     
|                                           |                                |   |                                    |           |                           |   |            |         |         |  |          |      |            |   |           |           |         |   |         |         |  |  |      |     
|Total liabilities                          |                                |   | 3,520,000                          |           |                           |   |            |         |         |  |          |      |            |   | 4,428,102 |           |         |   |         |         |  |  |      |     
|Stockholders equity                       |                                |   | 346,026                            |           |                           |   |            |         |         |  |          |      |            |   | 323,952   |           |         |   |         |         |  |  |      |     
|                                           |                                |   |                                    |           |                           |   |            |         |         |  |          |      |            |   |           |           |         |   |         |         |  |  |      |     
|Total liabilities and stockholders equity |                                | $ | 3,866,026                          |           |                           |   |            |         |         |  |          |      |            | $ | 4,752,054 |           |         |   |         |         |  |  |      |     
|                                           |                                |   |                                    |           |                           |   |            |         |         |  |          |      |            |   |           |           |         |   |         |         |  |  |      |     
|Net interest income/net interest spread    |                                |   |                                    |           |                           | $ | 85,171     |         |         |  | 3.73     | %    |            |   |           |           |         | $ | 89,999  |         |  |  | 3.31 | %   
|                                           |                                |   |                                    |           |                           |   |            |         |         |  |          |      |            |   |           |           |         |   |         |         |  |  |      |     
|Net interest-bearing liabilities           |                                | $ | (227,001                           | )         |                           |   |            |         |         |  |          |      |            | $ | (296,860  | )         |         |   |         |         |  |  |      |     
|                                           |                                |   |                                    |           |                           |   |            |         |         |  |          |      |            |   |           |           |         |   |         |         |  |  |      |     
|Net interest margin(3)                     |                                |   |                                    |           |                           |   |            |         |         |  | 3.56     | %    |            |   |           |           |         |   |         |         |  |  | 2.96 | %   
|                                           |                                |   |                                    |           |                           |   |            |         |         |  |          |      |            |   |           |           |         |   |         |         |  |  |      |     



|(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.                                                               

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Net interest income for the first nine months of 2002 was $85.2 million as
compared to $90.0 million for the first nine months of 2001. Net interest
margin was 3.56% for the first nine months of 2002 as compared to 2.96% for the
first nine months of 2001.

The following table illustrates net interest income and net interest
margin, by platform, for the periods indicated (also see Note 23 to the
Consolidated Financial Statements, Segment and Related Information, at Item
8, Financial Statements and Supplementary Data for further discussion of our
business platforms):

|                    |  |                           |        |                    |  |                        |      |          |  |   |        |  |  |  |      |  
|------------------- |  | ------------------------- | ------ | ------------------ |  | ---------------------- | ---- | -------- |  | - | ------ |  |  |  | ---- | -
|                    |  | For the Nine Months Ended
|                    |  |                          
|                    |  | September 30, 2002        |        | September 30, 2001
|                    |  |                           |        |                   
|                    |  | Net                       |        | Net                |  | Net                    |      | Net     
|                    |  | Interest                  |        | Interest           |  | Interest               |      | Interest
|                    |  | Income                    |        | Margin             |  | Income                 |      | Margin  
|                    |  |                           |        |                    |  |                        |      |         
|                    |  |                           |        |                    |  | (Dollars in thousands) |      |          |  |  
|Retail Platform
(1) |  | $                         | 28,872 |                    |  |                        | 2.11 | %        |  | $ | 23,496 |  |  |  | 1.48 | %
|Commercial
Platform |  |                           | 56,299 |                    |  |                        | 5.47 |          |  |   | 66,503 |  |  |  | 4.59 |  
|                    |  |                           |        |                    |  |                        |      |          |  |   |        |  |  |  |      |  
|Total               |  | $                         | 85,171 |                    |  |                        | 3.56 | %        |  | $ | 89,999 |  |  |  | 2.96 | %
|                    |  |                           |        |                    |  |                        |      |          |  |   |        |  |  |  |      |  



|(1) |  | The Retail Platforms net interest margin and net interest income
presented above do not include the revenue impact of our auto leasing
activities, which is included in noninterest income, but do include the
associated funding costs.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The decrease in net interest income for the first nine months of 2002, as
compared to the first nine months of 2001, was primarily due to a decrease in
average interest-earning assets partially offset by an increase in net interest
margin. The decrease in average interest-earning assets was primarily due to
asset sales during the fourth quarter of 2001 and the first nine months of
2002. The increase in net interest margin and net interest spread were due to
lower overall cost of funds resulting from the lower cost of deposits, the
lower borrowing levels and the prevailing lower interest rate environment which
allowed us to reduce the cost of funding more rapidly than the declining asset
yields which were due to the lower interest rate environment and sales of
higher-yielding loans and mortgage-backed securities during the fourth quarter
of 2001 and the first nine months of 2002.

Our net interest margin, calculated in accordance with GAAP, excludes the
revenue from our auto leasing activities, 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 in accordance with
GAAP.

The following table illustrates average interest-earning assets for the
periods indicated:

|                    |  |                          |           |               |  |   |           | 
|------------------- |  | ------------------------ | --------- | ------------- |  | - | --------- | 
|                    |  | Average Balances for the
|                    |  | Nine Months Ended       
|                    |  |                         
|                    |  | September 30,            |           | September 30,
|                    |  | 2002                     |           | 2001         
|                    |  |                          |           |              
|                    |  | (Dollars in thousands)  
|Retail Platform     |  | $                        | 1,816,891 |               |  | $ | 2,105,155 | 
|Commercial
Platform |  |                          | 1,368,462 |               |  |   | 1,910,629 | 
|                    |  |                          |           |               |  |   |           | 
|Total               |  | $                        | 3,185,353 |               |  | $ | 4,015,784 | 
|                    |  |                          |           |               |  |   |           | 

The decrease in the Retail Platforms average interest-earning assets for
the first nine months of 2002, as compared to the first nine months of 2001,
was primarily due to the impact of asset sales during the fourth quarter of
2001 and throughout 2002 partially offset by purchases of mortgage-backed and
investment securities and loan originations during the same periods.

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The decrease in the Commercial Platforms average interest-earning assets
for the first nine months of 2002, as compared to the first nine months of
2001, reflect the impact of the sales of multi-family mortgage loans,
commercial real estate, franchise loans and factored receivables during the fourth
quarter of 2001 and throughout 2002 as well as the impact of the writedowns
related to the revaluation of our franchise-related assets during 2001.

The following table illustrates interest-earning assets as of the dates indicated:

|                    |  |                        |           |              |  |               |           |  |  |   |           | 
|------------------- |  | ---------------------- | --------- | ------------ |  | ------------- | --------- |  |  | - | --------- | 
|                    |  | At                     |           | At           |  | At           
|                    |  | September 30,          |           | December 31, |  | September 30,
|                    |  | 2002                   |           | 2001         |  | 2001         
|                    |  |                        |           |              |  |              
|                    |  | (Dollars in thousands)
|Retail Platform     |  | $                      | 3,048,863 |              |  | $             | 1,454,150 |  |  | $ | 1,618,376 | 
|Commercial
Platform |  |                        | 358,258   |              |  |               | 1,541,310 |  |  |   | 1,647,957 | 
|                    |  |                        |           |              |  |               |           |  |  |   |           | 
|Total               |  | $                      | 3,407,121 |              |  | $             | 2,995,460 |  |  | $ | 3,266,333 | 
|                    |  |                        |           |              |  |               |           |  |  |   |           | 

The increase in the Retail Platforms interest-earning assets at September
30, 2002, as compared to December 31, 2001, reflects the change in the mix of
assets, as previously disclosed or as discussed elsewhere herein, as well as
purchases of investment securities and loan originations during 2002. These
were partially offset by the securitization and sale of auto loans, sales of
mortgage-backed and other investment securities and mark-to-market liquidation
adjustments to our retail loan portfolio.

The decrease in the Commercial Platforms interest-earning assets was
primarily due to the sale of multi-family mortgage and commercial real estate
loans to Washington Mutual, the sale of Bay View Funding and its factored
receivables, franchise loan sales and payoffs and mark-to-market valuation
adjustments on our commercial loan portfolio and franchise-related assets in
connection with our adoption of liquidation basis accounting. These were
partially offset by loan originations during the first nine months of 2002.

Interest Income

Interest income was $145.2 million for the first nine months of 2002 as
compared to $243.9 million for the first nine months of 2001. The average
yield on interest-earning assets was 6.08% for the first nine months of 2002 as
compared to 8.08% for the first nine months of 2001. The following table
illustrates interest income, by platform, for the periods indicated:

|                          |                            |   |                           |           |                    |   |         |        |         |  |          |      |         |   |           |           |  |   |         |         |  |  |      |       |  
|------------------------- | -------------------------- | - | ------------------------- | --------- | ------------------ | - | ------- | ------ | ------- |  | -------- | ---- | ------- | - | --------- | --------- |  | - | ------- | ------- |  |  | ---- | ----- | -
|                          |                            |   | For the Nine Months Ended
|                          |                            |   |                          
|                          |                            |   | September 30, 2002        |           | September 30, 2001
|                          |                            |   |                           |           |                   
|                          |                            |   | Average                   |           | Interest           |   | Average |        | Average |  | Interest |      | Average
|                          |                            |   | Balance                   |           | Income             |   | Yield   |        | Balance |  | Income   |      | Yield  
|                          |                            |   |                           |           |                    |   |         |        |         |  |          |      |        
|                          |                            |   | (Dollars in thousands)   
|Retail Platform:          |                            |   |                           |           |                    |   |         |        |         |  |          |      |         |   |           |           |  |   |         |         |  |  |      |      
|                          | Loans                      |   | $                         | 796,480   |                    |   | $       | 46,355 |         |  |          | 7.76 | %       |   | $         | 985,222   |  |   | $       | 62,314  |  |  |      | 8.42  | %
|                          | Mortgage-backed securities |   |                           | 231,499   |                    |   |         | 8,314  |         |  |          | 4.78 |         |   |           | 531,533   |  |   |         | 27,852  |  |  |      | 6.97  |  
|                          | Investments                |   |                           | 788,912   |                    |   |         | 14,385 |         |  |          | 2.42 |         |   |           | 588,400   |  |   |         | 22,190  |  |  |      | 4.99  |  
|                          |                            |   |                           |           |                    |   |         |        |         |  |          |      |         |   |           |           |  |   |         |         |  |  |      |      
|Total Retail Platform     |                            |   | 1,816,891                 |           |                    |   | 69,054  |        |         |  | 5.06     |      |         |   | 2,105,155 |           |  |   | 112,356 |         |  |  | 7.09 |      
|                          |                            |   |                           |           |                    |   |         |        |         |  |          |      |         |   |           |           |  |   |         |         |  |  |      |      
|Commercial Platform:      |                            |   |                           |           |                    |   |         |        |         |  |          |      |         |   |           |           |  |   |         |         |  |  |      |      
|                          | Loans and leases           |   |                           | 1,362,512 |                    |   |         | 75,853 |         |  |          | 7.42 |         |   |           | 1,897,042 |  |   |         | 130,383 |  |  |      | 9.15  |  
|                          | Investments                |   |                           | 5,950     |                    |   |         | 332    |         |  |          | 7.47 |         |   |           | 13,587    |  |   |         | 1,144   |  |  |      | 11.35 |  
|                          |                            |   |                           |           |                    |   |         |        |         |  |          |      |         |   |           |           |  |   |         |         |  |  |      |      
|Total Commercial Platform |                            |   | 1,368,462                 |           |                    |   | 76,185  |        |         |  | 7.42     |      |         |   | 1,910,629 |           |  |   | 131,527 |         |  |  | 9.17 |      
|                          |                            |   |                           |           |                    |   |         |        |         |  |          |      |         |   |           |           |  |   |         |         |  |  |      |      
|Total                     |                            | $ | 3,185,353                 |           |                    | $ | 145,239 |        |         |  | 6.08     | %    |         | $ | 4,015,784 |           |  | $ | 243,883 |         |  |  | 8.08 | %    
|                          |                            |   |                           |           |                    |   |         |        |         |  |          |      |         |   |           |           |  |   |         |         |  |  |      |      

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Retail Platform

Interest income for the Retail Platform was $69.1 million for the first
nine months of 2002 as compared to $112.4 million for the first nine months of
2001. The average yield on interest-earning assets for the Retail Platform was
5.06% for the first nine months of 2002 as compared to 7.09% for the first nine
months of 2001.

The decrease in the Retail Platforms interest income for the first nine
months of 2002, as compared to the first nine months of 2001, was attributable
to lower average asset balances and lower average asset yields. The decrease
in average asset balances was due to lower average loan and mortgage-backed
securities balances, primarily resulting from sales completed during 2002,
partially offset by higher investment securities average balances as proceeds
from the sales of loans, including Commercial Platform loan sales, and
investment securities were reinvested into short-term investments. The decline
in the Retail Platforms average asset yields was attributable to the
prevailing lower interest rate environment and the reinvestment of the proceeds
from sales of higher-yielding loans and fixed-rate mortgage-backed securities,
including GNMA securities, into lower-yielding short-term investments, as
previously discussed or discussed elsewhere herein.

Commercial Platform

Interest income for the Commercial Platform was $76.2 million for the
first nine months of 2002 as compared to $131.5 million for the first nine
months of 2001. The average yield on interest-earning assets for the
Commercial Platform was 7.42% for the first nine months of 2002 as compared to
9.17% for the first nine months of 2001.

The decrease in the Commercial Platforms interest income for the first
nine months of 2002, as compared to the first nine months of 2001, was
primarily due to lower average loan and lease balances combined with lower
investment securities balances. In addition, we ceased accreting the discount
on our residual interests in franchise loan securitizations during the third
quarter of 2002. The decrease in average asset balances was primarily due to
the impact of loan sales during the fourth quarter of 2001 and throughout 2002
as well as writedowns related to the revaluation of franchise loans and the
revaluation of residual interests in franchise loan securitizations during
2001. We wrote-off our residual interests in franchise loan securitizations
during the third quarter of 2002 in connection with our adoption of liquidation
basis accounting.

Interest Expense

Deposits

Interest expense on our deposits was $44.5 million for the first nine
months of 2002 as compared to $114.1 million for the first nine months of 2001.
The average cost of deposits was 1.89% for the first nine months of 2002 as
compared to 4.28% for the first nine months of 2001.

The decrease in interest expense on deposits for the first nine months of
2002, as compared to the first nine months of 2001, was due to lower cost of
deposits and average deposit balances. The decrease in the cost of deposits
was primarily a result of the lower interest rate environment and the repricing
of both higher-cost retail certificates of deposit and transaction accounts at
lower rates. The decrease in average deposit balances for the first nine
months of 2002, as compared to the first nine months of 2001, was a result of
the maturities of certificates of deposit, including brokered certificates of
deposit which matured during 2001 and were not renewed, partially offset by the
growth in our transaction accounts.

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##### Table of Contents



The following table summarizes our deposit costs by type for the periods indicated:

|                                 |  |                           |           |               |  |         |      |         |  |   |           |  |  |  |      |  
|-------------------------------- |  | ------------------------- | --------- | ------------- |  | ------- | ---- | ------- |  | - | --------- |  |  |  | ---- | -
|                                 |  | For the Nine Months Ended
|                                 |  |                          
|                                 |  | September 30,             |           | September 30,
|                                 |  | 2002                      |           | 2001         
|                                 |  |                           |           |              
|                                 |  | Average                   |           | Average       |  | Average |      | Average
|                                 |  | Balance                   |           | Rate          |  | Balance |      | Rate   
|                                 |  |                           |           |               |  |         |      |        
|                                 |  | (Dollars in thousands)   
|Savings                          |  | $                         | 159,805   |               |  |         | 0.58 | %       |  | $ | 146,133   |  |  |  | 1.37 | %
|Money Market                     |  |                           | 991,639   |               |  |         | 1.72 |         |  |   | 1,183,329 |  |  |  | 3.95 |  
|Checking accounts                |  |                           | 734,123   |               |  |         | 0.84 |         |  |   | 456,126   |  |  |  | 1.13 |  
|                                 |  |                           |           |               |  |         |      |         |  |   |           |  |  |  |      |  
|Total transaction accounts       |  |                           | 1,885,567 |               |  |         | 1.28 |         |  |   | 1,785,588 |  |  |  | 3.02 |  
|Retail certificates of deposit   |  |                           | 1,219,779 |               |  |         | 2.83 |         |  |   | 1,672,073 |  |  |  | 5.45 |  
|Brokered certificates of deposit |  |                           | 36,290    |               |  |         | 2.35 |         |  |   | 102,243   |  |  |  | 7.24 |  
|                                 |  |                           |           |               |  |         |      |         |  |   |           |  |  |  |      |  
|Total deposits                   |  | $                         | 3,141,636 |               |  |         | 1.89 | %       |  | $ | 3,559,904 |  |  |  | 4.28 | %
|                                 |  |                           |           |               |  |         |      |         |  |   |           |  |  |  |      |  

Borrowings

Interest expense on our borrowings was $15.6 million for the first nine
months of 2002 as compared to $39.8 million for the first nine months of 2001.
The average cost of borrowings was 7.67% for the first nine months of 2002 as
compared to 7.05% for the first nine months of 2001. In accordance with GAAP,
these amounts exclude the expense associated with our Capital Securities.

The decrease in interest expense on borrowings for the first nine months
of 2002, as compared to the first nine months of 2001, was primarily due to
lower average balances partially offset by higher funding costs. The decreases
in average balances were due to the paydown of borrowings, including warehouse
lines, Federal Home Loan Bank advances and securities sold under agreements to
repurchase, as we sold interest-bearing assets during 2001 and the first nine
months of 2002. The increases in borrowing costs were primarily attributable
to changes in our borrowing mix.

The following table illustrates the changes in net interest income due to
changes in the rate and volume of our interest-earning assets and
interest-bearing liabilities for the nine-month period ended September 30, 2002
as compared to the nine-month period ended September 30, 2001. Changes in rate
and volume which cannot be segregated (e.g., changes in average interest rate
multiplied by average portfolio balance) have been allocated proportionately
between the change in rate and the change in volume.

|                    |                            |   |                                                       |         |          |   |          |         |   |   |         |         |  
|------------------- | -------------------------- | - | ----------------------------------------------------- | ------- | -------- | - | -------- | ------- | - | - | ------- | ------- | -
|                    |                            |   | For the Nine Months Ended September 30, 2002 vs. 2001
|                    |                            |   |                                                      
|                    |                            |   | Rate                                                  |         | Volume   |   | Total   
|                    |                            |   | Variance                                              |         | Variance |   | Variance
|                    |                            |   |                                                       |         |          |   |         
|                    |                            |   | (Dollars in thousands)                               
|Interest income:    |                            |   |                                                       |         |          |   |          |         |   |   |         |        
|                    | Loans and leases           |   | $                                                     | (24,637 | )        |   | $        | (45,853 | ) |   | $       | (70,490 | )
|                    | Mortgage-backed securities |   |                                                       | (6,987  | )        |   |          | (12,551 | ) |   |         | (19,538 | )
|                    | Investment securities      |   |                                                       | (22,281 | )        |   |          | 13,665  |   |   |         | (8,616  | )
|                    |                            |   |                                                       |         |          |   |          |         |   |   |         |        
|                    |                            |   | (53,905                                               | )       |          |   | (44,739  | )       |   |   | (98,644 | )      
|                    |                            |   |                                                       |         |          |   |          |         |   |   |         |        
|Interest expense:   |                            |   |                                                       |         |          |   |          |         |   |   |         |        
|                    | Deposits                   |   |                                                       | (57,465 | )        |   |          | (12,091 | ) |   |         | (69,556 | )
|                    | Borrowings                 |   |                                                       | 3,862   |          |   |          | (28,122 | ) |   |         | (24,260 | )
|                    |                            |   |                                                       |         |          |   |          |         |   |   |         |        
|                    |                            |   | (53,603                                               | )       |          |   | (40,213  | )       |   |   | (93,816 | )      
|                    |                            |   |                                                       |         |          |   |          |         |   |   |         |        
|Net interest income |                            | $ | (302                                                  | )       |          | $ | (4,526   | )       |   | $ | (4,828  | )      
|                    |                            |   |                                                       |         |          |   |          |         |   |   |         |        

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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 as compared to $63.0 million for the first nine months
of 2001.

The decrease in the provision for losses on loans and leases, as compared
to the respective prior periods, were primarily due to the $52.1 million in
allowance reductions, recorded during the second quarter of 2001, related to
the mark-to-market adjustments on loans transferred from held-for-investment to
held-for-sale during the quarter. Additionally, the year-to-date 2002
provision for the Retail Platform reflects a true-up of the indicated allowance
within each platform which was impacted by the $2.6 million recovery on the
sale of charged-off high loan-to-value home equity loans during the fourth
quarter of 2001.

We ceased the process of evaluating the allowance and providing the
monthly provision for losses on loans and leases effective September 30, 2002
as the allowance for loan and lease losses was reallocated as mark-to-market
adjustments to individual loans and leases and groups of homogeneous loans in
liquidation in connection with our adoption of liquidation basis accounting.

The
following table illustrates the provision for losses on loans and
leases, by platform, for the periods indicated:

|                    |  |                           |        |               |  |   |        | 
|------------------- |  | ------------------------- | ------ | ------------- |  | - | ------ | 
|                    |  | For the Nine Months Ended
|                    |  |                          
|                    |  | September 30,             |        | September 30,
|                    |  | 2002                      |        | 2001         
|                    |  |                           |        |              
|                    |  | (Dollars in thousands)   
|Retail Platform     |  | $                         | 2,106  |               |  | $ | 6,109  | 
|Commercial Platform |  |                           | 8,594  |               |  |   | 56,881 | 
|                    |  |                           |        |               |  |   |        | 
|Total               |  | $                         | 10,700 |               |  | $ | 62,990 | 
|                    |  |                           |        |               |  |   |        | 

Noninterest Income

Noninterest income for the first nine months of 2002 was $91.6 million as
compared to $80.4 million for the first nine months of 2001. Excluding net
gains or losses on sales of assets and liabilities, noninterest income for the
first nine months of 2002 was $72.9 million, as compared to $90.2 million for
the first nine months of 2001. The decrease in noninterest income, excluding
net gains or losses on sales of assets and liabilities, was largely due to
lower auto leasing income in the Retail Platform and lower loan servicing
income in the Commercial Platform primarily resulting from the sale of BVFMAC
during 2001. The following table illustrates noninterest income (loss), by
platform, for the periods indicated:

|                    |  |                           |        |               |  |   |        |  
|------------------- |  | ------------------------- | ------ | ------------- |  | - | ------ | -
|                    |  | For the Nine Months Ended
|                    |  |                          
|                    |  | September 30,             |        | September 30,
|                    |  | 2002                      |        | 2001         
|                    |  |                           |        |              
|                    |  | (Dollars in thousands)   
|Retail Platform     |  | $                         | 78,775 |               |  | $ | 89,708 |  
|Commercial Platform |  |                           | 12,790 |               |  |   | (9,308 | )
|                    |  |                           |        |               |  |   |        |  
|Total               |  | $                         | 91,565 |               |  | $ | 80,400 |  
|                    |  |                           |        |               |  |   |        |  

Noninterest income for the first nine months of 2002 included net gains on
sales of assets totaling $18.6 million consisting of net gains of $13.1 million
within the Retail Platform and $5.5 million within the Commercial Platform.
The gain within the Retail Platform was primarily due to an $11.8 million gain
related to the securitization and sale of approximately $450.0 million of auto
loans combined with a $1.3 million gain on the sale of mortgage-backed and
other investment securities. The gain within the Commercial Platform was
largely due to a $6.3 million gain on the sale of multi-family loans and
commercial real estate to Washington Mutual partially offset by a $0.4 million
loss on

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the sale of Bay View Funding and $0.4 million net loss on the sale of
franchise, multi-family and commercial real estate loans as well as the sale of
other franchise-related assets.

Noninterest income for the first nine months of 2001 included losses on
sales of assets totaling $9.8 million, consisting of net losses of $16.4
million within the Commercial Platform partially offset by net gains of $6.6
million within the Retail Platform. The loss within the Commercial Platform
was largely due to the $22.9 million loss on the sale of BVFMAC and $3.6
million in mark-to-market adjustments related to our hedges partially offset by
$6.5 million of contingent gains received during the first quarter of 2001
related to December 2000 asset sales and $3.6 million net gains on franchise
loan sales during 2001. The gain within the Retail Platform was primarily due
to $13.5 million in net gains on sales of mortgage-backed securities and other
investments securities, $3.6 million of contingent gains received during the
first quarter of 2001 related to the December 2000 home equity loan sales and
$0.7 million of contingent gains related to the sale of auto loans offset by a
$10.3 million loss on the sale of home equity loans in June 2001 and $0.9
million of writedowns of our residual interests and other assets related to our
auto loan securitizations.

Noninterest Expense

General and Administrative Expenses

General and administrative expenses for the first nine months of 2002 were
$93.0 million as compared to $117.2 million for the first nine months of 2001.
Excluding special mention items, as discussed below, the decrease in general
and administrative expenses for the first nine months of 2002, as compared to
the first nine months of 2001, was primarily due to the elimination of BVFMAC
servicing platform expenses with the sale of the legal entity BVFMAC during
2001, the elimination of Bay View Funding expenses with the sale of our San
Mateo-based factoring division effective June 2002 as well as certain
cost-savings we continue to realize from our ongoing restructuring initiated in
2001.

Special mention items generally include items recognized during the period
that we believe are significant and/or unusual in nature and therefore useful
in evaluating our performance and trends. These items may or may not be
nonrecurring in nature. There were no special mention items included in
general and administrative expenses for the first nine months of 2002.

Special mention items for the first nine months of 2001 included $4.7
million related to the prepayment of FHLB advances, $2.6 million related to the
Companys issuance of stock options during the second quarter with below market
exercise prices, $2.2 million in legal and professional fees related to the
implementation of the Companys new strategic plan and $2.5 million in other
non-recurring items.

The following table illustrates general and administrative expenses, by
platform (not reflecting the allocation of branch network general and
administrative expenses), for the periods indicated:

|                                |  |                           |        |               |  |   |         | 
|------------------------------- |  | ------------------------- | ------ | ------------- |  | - | ------- | 
|                                |  | For the Nine Months Ended
|                                |  |                          
|                                |  | September 30,             |        | September 30,
|                                |  | 2002                      |        | 2001         
|                                |  |                           |        |              
|                                |  | (Dollars in thousands)   
|Retail Platform                 |  | $                         | 68,712 |               |  | $ | 76,094  | 
|Commercial Platform             |  |                           | 7,813  |               |  |   | 18,527  | 
|                                |  |                           |        |               |  |   |         | 
|Subtotal                        |  |                           | 76,525 |               |  |   | 94,621  | 
|Indirect corporate overhead
(1) |  |                           | 16,476 |               |  |   | 22,529  | 
|                                |  |                           |        |               |  |   |         | 
|Total                           |  | $                         | 93,001 |               |  | $ | 117,150 | 
|                                |  |                           |        |               |  |   |         | 



|(1) |  | Amount represents indirect corporate expenses not specifically
identifiable with, or allocable to, our business platforms.
|--- |  | --------------------------------------------------------------------------------------------------------------------------

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The following table illustrates the ratio of general and administrative
expenses to average total assets, including auto-related securitized assets, on
an annualized basis for the periods indicated:

|                                                                                                                  |  |                           |           |               |  |   |           |  
|----------------------------------------------------------------------------------------------------------------- |  | ------------------------- | --------- | ------------- |  | - | --------- | -
|                                                                                                                  |  | For the Nine Months Ended
|                                                                                                                  |  |                          
|                                                                                                                  |  | September 30,             |           | September 30,
|                                                                                                                  |  | 2002                      |           | 2001         
|                                                                                                                  |  |                           |           |              
|                                                                                                                  |  | (Dollars in thousands)   
|General and administrative expenses                                                                               |  | $                         | 93,001    |               |  | $ | 117,150   |  
|Average total assets, including auto-related
securitized assets                                                   |  | $                         | 4,073,742 |               |  | $ | 4,909,364 |  
|                                                                                                                  |  |                           |           |               |  |   |           |  
|Annualized general and administrative
expenses to
average total assets, including auto-related
securitized assets |  |                           | 3.04      | %             |  |   | 3.18      | %
|                                                                                                                  |  |                           |           |               |  |   |           |  

Another measure that management uses to monitor our level of general and
administrative expenses is the efficiency ratio. The efficiency ratio is
calculated by dividing the amount of general and administrative expenses by
operating revenues, defined as net interest income, as adjusted to include
expenses associated with our Capital Securities, the excess of our
leasing-related rental income over leasing-related depreciation expense and
other noninterest income. This ratio reflects the level of general and
administrative expenses required to generate $1 of operating revenue.

The following table illustrates the efficiency ratio for the periods
indicated:

|                                    |  |                           |         |               |  |   |         |  
|----------------------------------- |  | ------------------------- | ------- | ------------- |  | - | ------- | -
|                                    |  | For the Nine Months Ended
|                                    |  |                          
|                                    |  | September 30,             |         | September 30,
|                                    |  | 2002                      |         | 2001         
|                                    |  |                           |         |              
|                                    |  | (Dollars in thousands)   
|General and administrative
expenses |  | $                         | 93,001  |               |  | $ | 117,150 |  
|Operating revenues, as defined      |  | $                         | 133,657 |               |  | $ | 142,840 |  
|                                    |  |                           |         |               |  |   |         |  
|Efficiency ratio                    |  |                           | 69.6    | %             |  |   | 82.0    | %
|                                    |  |                           |         |               |  |   |         |  

Revaluation of Franchise-Related Assets

Excluding the mark-to-market valuation adjustments related to our adoption
of liquidation basis accounting, there was no adjustment related to the
revaluation of franchise-related assets during the first nine months of 2002.
The revaluation of certain franchise-related assets resulted in a $68.6 million
pre-tax adjustment for the first nine months of 2001. The revaluation included
a $31.7 million adjustment, recorded in the second quarter, related to the sale
of approximately $278 million in loans to Goldman Sachs Mortgage Co. as well as
writedowns of other franchise-related assets recorded primarily in the first
and second quarters of 2001. The writedowns included $15.5 million in
adjustments to servicing assets, $11.1 million in adjustments to residual
interests on securitizations, reflecting anticipated market yields, and $5.0
million in adjustments to equity investments. During the third quarter of
2001, the revaluation charges were reduced by $1.4 million due to a $1.0
million reduction in previously recorded mark-to-market adjustments on
franchise loans associated with a pending sale and a $0.4 million recovery of
servicer advances written off in the second quarter of 2001.

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Investment in Operating Lease Assets

Leasing expense represents expenses related to our auto leasing
activities. Because the leases are accounted for as operating leases, the
corresponding assets are capitalized and depreciated to their estimated
residual values over their lease terms. This depreciation expense is included
in leasing expenses, along with the amortization of capitalized
initial direct lease costs and impairment charges. Leasing expenses were $44.0
million for the first nine months of 2002 as compared to $61.6 million for the
first nine months of 2001. The decrease in leasing expenses was primarily due
to lower provision for impairment combined with lower depreciation expense
associated with the declining balance of our auto-related operating lease
portfolio. This was partially offset by a $1.5 million accrual related to
certain residual and credit incentives pursuant to our purchase contract with
Lendco Financial Services recorded during the second quarter of 2002. We
ceased purchasing auto leases in June 2000. Leasing expenses for the
nine-month period ended September 30, 2001 included $10.0 million of additional
provision for impairment primarily as a result of revising the estimated
residual values associated with the auto lease portfolio.

Real Estate Owned

Net expense related to our real estate owned was $1.0 million for the
first nine months of 2002 as compared to net income of $252,000 for the first
nine months of 2001. Additionally, we recorded $266,000 of provision for
losses on real estate owned during the first nine months of 2002. The
increases in expenses and provision related to real estate owned for the first
nine months of 2002, as compared to the first nine months of 2001, were
primarily due to increases in real estate owned activity, primarily
representing foreclosed franchise properties.

Income Taxes

The Company recorded tax expense of $181.8 million for the nine months
ended September 30, 2002, of which $11.9 million is current and $169.9 million
is deferred. The Company also recorded a deferred tax benefit of $2.3 million
on the cumulative effect of change in accounting principle, which is presented
net of this tax benefit. As a result of the Companys Plan, income tax expense
includes 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 realizability of deferred tax assets and the related valuation
allowance are based on total projected future income through the final
liquidation of the Company.

The effective tax rate used in computing the $181.8 million tax expense
for the first nine months of 2002 was 71.5%. This expected 2002 effective tax
rate is higher than the federal statutory rate due primarily to state income
taxes, the valuation allowance on deferred tax assets, amortization and
disposition of nondeductible goodwill and nondeductible compensation associated
with the Companys Plan. For the first nine months of 2001, the Company
recorded a $59.9 million tax benefit at a 36.5% effective tax rate.

During 2000, the Company recorded a $26.0 million valuation allowance
against its gross deferred tax assets primarily relating to approximately $48.6
million in federal net operating loss carryforwards that were expiring in 2001
as the Company did not expect to be able to fully utilize these amounts prior
to their expiration date. In May 2001, the Company raised $137.5 million of
additional capital which enabled the Company to implement a new strategic plan,
including the disposition of non-core and higher-risk assets. As a result of
these actions, the

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Companys ability to generate future taxable income became
more predictable. During 2001, the Company also executed certain transactions
that resulted in significant amounts of taxable income. These transactions
included the sale of the BVFMAC legal entity which generated significant
taxable income related to previously deferred gains in the franchise
securitization trusts. The Company also executed a financing secured by the
contractual cash flows of our auto operating lease portfolio that was treated as a sale for income tax
purposes and generated $136.5 million in taxable income. Primarily as a result
of these transactions, the Company generated sufficient taxable income during
the year to be able to utilize the majority of its net operating loss
carryforwards expiring in 2001. In addition, the Company identified
tax-planning strategies which included the sale of certain assets obtained in
connection with a previous purchase business combination with significant
built-in gains for tax purposes which would be triggered in the event of a
sale. Such a transaction would not only generate significant levels of taxable
income, but would also increase the limitation on the utilization of the net
operating loss carryforward acquired in connection with a previous purchase
business combination. As a result, the Company eliminated the $26.0 million
valuation allowance against its gross deferred tax assets during 2001. As of
September 30, 2002, in anticipation of the close of the sale of the Banks
retail banking assets to U.S. Bank and other 2002 asset sales transactions, the
Company estimated it would utilize approximately $143.6 million of its net
deferred tax assets.

In the event the Company does not generate sufficient levels of future
taxable income, the Company may not be able to utilize its net operating loss
carryforwards prior to their expiration date or may not be able to realize
other net deferred tax assets related to timing difference between reported
financial statement income (loss) and taxable income (loss). If the Company
determines in the future that it cannot fully utilize its net deferred tax
assets, it would be required to increase its valuation allowance for the
portion of net deferred tax assets estimated not to be realizable.

Capital Securities

On December 21, 1998, we issued $90 million in Capital Securities through
Bay View Capital I, a business trust formed to issue the securities. The
Capital Securities, which were sold in an underwritten public offering, accrue
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 as compared to $6.9 million
for the first nine months of 2001.

In September of 2000, we entered into an agreement with the FRB which
requires that we obtain their approval prior to disbursing any dividends
associated with our Capital Securities. Beginning with the third quarter of
2000, we began deferring distributions quarterly in accordance with the terms
of the Capital Securities. During this deferral period, distributions to which
holders are entitled will 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). Holders of the Capital
Securities at the time the distributions are resumed are entitled to receive
the cumulative deferred distributions plus the cumulative interest thereon.
Deferred distributions and interest, which were fully accrued, were $21.8
million at September 30, 2002 as compared to $14.1 million at December 31,
2001.

At a meeting held on October 3, 2002, holders of the Capital Securities of
Bay View Capital I approved a waiver of those provisions of the legal
instruments governing the Capital Securities and the Companys 9.76% Junior
Subordinated Deferrable Interest Debentures that would, absent the waiver,
prevent the Company from disposing of all of its assets pursuant to its Plan.
Capital Securities holders also approved the amendment of certain provisions of
the legal instruments governing the Capital Securities and the Junior
Debentures that would allow early redemption of the Capital Securities at the
option of each holder of the Capital Securities.

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 total amount paid per share as of
December 31, 2002 was $6.10 for the 10 quarterly distributions plus $0.715 in
accrued interest. Although we intend to pay out future distributions as
scheduled, we continue to be subject to a formal agreement with the FRB and,
accordingly, future distributions will remain subject to their prior approval.

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Results of Operations  2001 versus 2000

As a result of our adoption of liquidation basis accounting as of
September 30, 2002, a full year going concern basis of accounting comparative
information for 2002 is not available for disclosure herein. Therefore, only
the full year comparative information for the years ended December 31, 2001 and
2000 is included in this section.

Our consolidated net loss was $101.2 million, or $1.99 per diluted share,
for the year ended December 31, 2001 as compared to net loss of $326.2 million,
or $10.00 per diluted share, for 2000.

The net loss for 2001 was primarily due to specific charges consistent
with our strategic plan adopted during 2001 and implemented following the
successful completion of our $137.5 million rights offering. Specific charges
recognized during 2001 included $70.1 million in pre-tax charges associated
with the revaluation of franchise-related assets, $59.5 million of provision
for loan and lease losses related to franchise loans, $18.7 million of
additional provision for impairment primarily as a result of revising the
estimated residual values associated with the auto lease portfolio, $10.5
million in net losses on sales of assets, $8.2 million in FHLB prepayment
penalties related to our strategy to reduce high-cost borrowings, and $6.9
million in restructuring charges primarily related to the reduction in our
workforce as discussed elsewhere herein or as previously disclosed.

The revaluation charges consisted primarily of $31.7 million in pre-tax
charges related to the sale of $278 million in loans during the second quarter
of 2001 as well as writedowns of other franchise-related assets, including
$13.6 million in adjustments to servicing assets, $12.6 million in adjustments
to residual interests on securitizations, $5.0 million in adjustments to equity
investments and $1.9 million in adjustments to servicer advances. The
year-to-date loan loss provision totaled $71.9 million which includes amounts
necessary to restore the allowance for reductions related to the mark-to-market
on loans transferred from held-for-investment to held-for-sale primarily during
the second quarter of 2001 as well as additional allowance provided on the
remaining franchise loan portfolio.

Our net losses on sales of assets totaling $10.5 million for the year
ended December 31, 2001 included losses on the sale of BVFMAC and home equity
loans which were offset by contingent gains recognized during the first quarter
of 2001 from sales of assets in December 2000 and net gains on the sale of
franchise loans and mortgage-backed securities and other investment securities
during 2001.

The net loss in 2000 was primarily the result of the restructuring of our
franchise lending division and the revaluation of franchise-related assets.
Restructuring charges totaled $9.2 million before taxes and consisted primarily
of severance, occupancy and related facility costs. Goodwill of $192.6 million
was written off, representing the unamortized balance associated with the
purchase of FMAC. The revaluation of certain franchise-related assets resulted
in a $101.9 million pre-tax adjustment. The revaluation included a $35.4
million adjustment to residual and servicing assets related to the franchise
loan securitizations and other franchise-related assets and a $66.5 million
mark-to-market charge on our $336.3 million portfolio of franchise loans
held-for-sale, reflecting estimated bulk-sale pricing. Additionally, we
recorded $52.6 million in pre-tax net losses associated with asset sales and
$43.5 million of loan loss provision related to franchise loans during 2000.

Net Interest Income and Net Interest Margin

Average Balance Sheet

The following table illustrates average yields on our interest-earning
assets and average rates on our interest-bearing liabilities for the years
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 years indicated. Average balances of interest-earning assets and
interest-bearing liabilities were calculated by averaging the relevant
month-end amounts for the respective years.

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|                                           |                                |   |                                    |           |          |      |            |         |         |  |                        |      |            |   |           |           |         |   |         |         |  |  |      |      |  
|------------------------------------------ | ------------------------------ | - | ---------------------------------- | --------- | -------- | ---- | ---------- | ------- | ------- |  | ---------------------- | ---- | ---------- | - | --------- | --------- | ------- | - | ------- | ------- |  |  | ---- | ---- | -
|                                           |                                |   | AVERAGE BALANCES, YIELDS AND RATES
|                                           |                                |   |                                   
|                                           |                                |   | For the Year Ended December 31,   
|                                           |                                |   |                                   
|                                           |                                |   |                                    | 2001      |          | 2000
|                                           |                                |   |                                    |           |         
|                                           |                                |   | Average                            |           |          |      |            |         | Average |  | Average                |      |            |   |           |           | Average
|                                           |                                |   | Balance                            |           | Interest |      | Yield/Rate |         | Balance |  | Interest               |      | Yield/Rate
|                                           |                                |   |                                    |           |          |      |            |         |         |  |                        |      |           
|                                           |                                |   |                                    |           |          |      |            |         |         |  | (Dollars in thousands) |      |            |   |           |           |         |   |        
|Assets                                     |                                |   |                                    |           |          |      |            |         |         |  |                        |      |            |   |           |           |         |   |         |         |  |  |      |     
|Interest-earning assets:                   |                                |   |                                    |           |          |      |            |         |         |  |                        |      |            |   |           |           |         |   |         |         |  |  |      |     
|                                           | Loans and leases               |   | $                                  | 2,787,990 |          |      | $          | 243,163 |         |  |                        | 8.72 | %          |   | $         | 3,949,017 |         |   | $       | 360,203 |  |  |      | 9.12 | %
|                                           | Mortgage-backed
securities (1) |   |                                    | 468,397   |          |      |            | 31,695  |         |  |                        | 6.77 |            |   |           | 856,004   |         |   |         | 60,923  |  |  |      | 7.12 |  
|                                           | Investments
(1)                |   |                                    | 591,393   |          |      |            | 27,887  |         |  |                        | 4.72 |            |   |           | 481,519   |         |   |         | 39,066  |  |  |      | 8.11 |  
|                                           |                                |   |                                    |           |          |      |            |         |         |  |                        |      |            |   |           |           |         |   |         |         |  |  |      |      |  
|Total interest-earning assets              |                                |   | 3,847,780                          |           |          |      | 302,745    |         |         |  | 7.87                   | %    |            |   | 5,286,540 |           |         |   | 460,192 |         |  |  | 8.71 | %   
|                                           |                                |   |                                    |           |          |      |            |         |         |  |                        |      |            |   |           |           |         |   |         |         |  |  |      |      |  
|Other assets                               |                                |   | 728,656                            |           |          |      |            |         |         |  |                        |      |            |   | 981,775   |           |         |   |         |         |  |  |      |     
|                                           |                                |   |                                    |           |          |      |            |         |         |  |                        |      |            |   |           |           |         |   |         |         |  |  |      |      |  
|Total assets                               |                                | $ | 4,576,436                          |           |          |      |            |         |         |  |                        |      |            | $ | 6,268,315 |           |         |   |         |         |  |  |      |     
|                                           |                                |   |                                    |           |          |      |            |         |         |  |                        |      |            |   |           |           |         |   |         |         |  |  |      |      |  
|Liabilities and Stockholders Equity       |                                |   |                                    |           |          |      |            |         |         |  |                        |      |            |   |           |           |         |   |         |         |  |  |      |     
|Interest-bearing liabilities:              |                                |   |                                    |           |          |      |            |         |         |  |                        |      |            |   |           |           |         |   |         |         |  |  |      |     
|                                           | Deposits                       |   | $                                  | 3,500,083 |          |      | $          | 135,736 |         |  |                        | 3.88 | %          |   | $         | 3,751,034 |         |   | $       | 176,602 |  |  |      | 4.71 | %
|                                           | Borrowings
(2)                 |   |                                    | 626,296   |          |      |            | 44,761  |         |  |                        | 7.15 |            |   |           | 1,783,514 |         |   |         | 118,150 |  |  |      | 6.62 |  
|                                           |                                |   |                                    |           |          |      |            |         |         |  |                        |      |            |   |           |           |         |   |         |         |  |  |      |      |  
|Total interest-bearing liabilities         |                                |   | 4,126,379                          |           |          |      | 180,497    |         |         |  | 4.37                   | %    |            |   | 5,534,548 |           |         |   | 294,752 |         |  |  | 5.33 | %   
|                                           |                                |   |                                    |           |          |      |            |         |         |  |                        |      |            |   |           |           |         |   |         |         |  |  |      |      |  
|Other liabilities                          |                                |   | 123,249                            |           |          |      |            |         |         |  |                        |      |            |   | 179,015   |           |         |   |         |         |  |  |      |     
|                                           |                                |   |                                    |           |          |      |            |         |         |  |                        |      |            |   |           |           |         |   |         |         |  |  |      |      |  
|Total liabilities                          |                                |   | 4,249,628                          |           |          |      |            |         |         |  |                        |      |            |   | 5,713,563 |           |         |   |         |         |  |  |      |     
|Stockholders equity                       |                                |   | 326,808                            |           |          |      |            |         |         |  |                        |      |            |   | 554,752   |           |         |   |         |         |  |  |      |     
|                                           |                                |   |                                    |           |          |      |            |         |         |  |                        |      |            |   |           |           |         |   |         |         |  |  |      |      |  
|Total liabilities and stockholders
equity |                                | $ | 4,576,436                          |           |          |      |            |         |         |  |                        |      |            | $ | 6,268,315 |           |         |   |         |         |  |  |      |     
|                                           |                                |   |                                    |           |          |      |            |         |         |  |                        |      |            |   |           |           |         |   |         |         |  |  |      |      |  
|Net interest income/net interest spread    |                                |   |                                    |           |          | $    | 122,248    |         |         |  | 3.50                   | %    |            |   |           |           |         | $ | 165,440 |         |  |  | 3.38 | %   
|                                           |                                |   |                                    |           |          |      |            |         |         |  |                        |      |            |   |           |           |         |   |         |         |  |  |      |      |  
|Net interest-bearing liabilities           |                                | $ | (278,599                           | )         |          |      |            |         |         |  |                        |      |            | $ | (248,008  | )         |         |   |         |         |  |  |      |     
|                                           |                                |   |                                    |           |          |      |            |         |         |  |                        |      |            |   |           |           |         |   |         |         |  |  |      |      |  
|Net
interest margin (3)                    |                                |   |                                    |           |          |      |            |         |         |  | 3.18                   | %    |            |   |           |           |         |   |         |         |  |  | 3.13 | %   
|                                           |                                |   |                                    |           |          |      |            |         |         |  |                        |      |            |   |           |           |         |   |         |         |  |  |      |      |  



|(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.                                                               

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Net interest income was $122.2 million for the year ended December 31,
2001 as compared to $165.4 million for 2000. Net interest margin was 3.18% for
the year ended December 31, 2001 as compared to 3.13% for 2000.

The following table illustrates net interest income and net interest
margin, by platform, for the years indicated (also see Note 23 to the
Consolidated Financial Statements, Segment and Related Information, at Item
8, Financial Statements and Supplementary Data for further discussion of our
business platforms):

|                    |  |                                 |         |          |  |                        |      |          |  |   |         |  |  |  |      |  
|------------------- |  | ------------------------------- | ------- | -------- |  | ---------------------- | ---- | -------- |  | - | ------- |  |  |  | ---- | -
|                    |  | For the Year Ended December 31,
|                    |  |                                
|                    |  | 2001                            |         | 2000    
|                    |  |                                 |         |         
|                    |  | Net                             |         | Net      |  | Net                    |      | Net     
|                    |  | Interest                        |         | Interest |  | Interest               |      | Interest
|                    |  | Income                          |         | Margin   |  | Income                 |      | Margin  
|                    |  |                                 |         |          |  |                        |      |         
|                    |  |                                 |         |          |  | (Dollars in thousands) |      |          |  |  
|Retail Platform
(1) |  | $                               | 30,939  |          |  |                        | 1.48 | %        |  | $ | 62,120  |  |  |  | 2.27 | %
|Commercial
Platform |  |                                 | 91,309  |          |  |                        | 5.21 |          |  |   | 103,320 |  |  |  | 4.04 |  
|                    |  |                                 |         |          |  |                        |      |          |  |   |         |  |  |  |      |  
|Total               |  | $                               | 122,248 |          |  |                        | 3.18 | %        |  | $ | 165,440 |  |  |  | 3.13 | %
|                    |  |                                 |         |          |  |                        |      |          |  |   |         |  |  |  |      |  



|(1) |  | The Retail Platforms net interest margin and net interest income
presented above excludes the revenue impact of our auto leasing
activities, which is included in noninterest income, but does include the
associated funding costs.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The decrease in net interest income for 2001, as compared to 2000, was due
to lower average interest-earning asset balances partially offset by an
increase in net interest margin. Our average interest-earning assets decreased
due to sales of franchise loans, home equity loans and mortgage-backed
securities throughout 2001 as well as the December 2000 sales of franchise
asset-backed and mortgage-backed securities and home equity and auto loans,
partially offset by higher investment balances due to the deployment of sales
proceeds into short-term investments. Our net interest margin and net interest
spread increased due to lower overall cost of funds resulting from the lower
cost of deposits, the lower borrowings level and the prevailing low interest
rate environment. This was partially offset by lower yields on assets which
were also impacted by the lower interest rate environment.

Our net interest margin, calculated in accordance with GAAP, excludes the
revenue impact of our auto leasing activities, but includes the associated
funding costs. Because 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 in accordance with
GAAP.

Net interest income and net interest margin by platform for 2001, as
compared to 2000, reflect our strategy to sell our higher-risk assets,
specifically franchise loans and securities and high loan-to-value home equity
loans, and focus on our core banking operations. The decrease in the Retail
Platforms net interest margin reflects the increased impact of the funding
costs of auto leases as average interest-earning asset balances decline due to
loan sales and securitizations. The increase in the Commercial Platforms net
interest margin was due to the impact of franchise loan sales and
securitizations, as franchise loans have lower yields relative to the yields on
our asset-based, factoring and other commercial loans. For more detail, see
discussions of Interest Income and Interest Expense.

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The following table illustrates average interest-earning assets for the years ended as indicated:

|                    |  |                               |           |      |  |   |           | 
|------------------- |  | ----------------------------- | --------- | ---- |  | - | --------- | 
|                    |  | Average
Balances for the Year
|                    |  | Ended December 31,           
|                    |  |                              
|                    |  | 2001                          |           | 2000
|                    |  |                               |           |     
|                    |  | (Dollars in thousands)       
|Retail Platform
(1) |  | $                             | 2,095,094 |      |  | $ | 2,732,093 | 
|Commercial
Platform |  |                               | 1,752,686 |      |  |   | 2,554,447 | 
|                    |  |                               |           |      |  |   |           | 
|Total               |  | $                             | 3,847,780 |      |  | $ | 5,286,540 | 
|                    |  |                               |           |      |  |   |           | 



|(1) |  | Amounts exclude auto-related operating lease assets. The average balance
of these assets was $435.1 million for the year ended December 31, 2001
and $513.3 million for the year ended December 31, 2000.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The decrease in the Retail Platforms average interest-earning assets for
2001, as compared to 2000, reflects the impact of loan and investment
securities sales during 2001. The decrease in the Commercial Platforms
average interest-earning assets for 2001, as compared to 2000, reflects
franchise loan sales during 2001, the December 2000 sale of franchise
asset-backed securities generated by our on-balance sheet securitization during
the second quarter of 2000 as well as the impact of the writedowns related to
the revaluation of our franchise-related assets during December 2000 and 2001.

The following table illustrates interest-earning assets as of the dates
indicated:

|                    |  |                        |           |      |  |   |           | 
|------------------- |  | ---------------------- | --------- | ---- |  | - | --------- | 
|                    |  | At December 31,       
|                    |  |                       
|                    |  | 2001                   |           | 2000
|                    |  |                        |           |     
|                    |  | (Dollars in thousands)
|Retail
Platform (1) |  | $                      | 1,454,150 |      |  | $ | 1,727,537 | 
|Commercial Platform |  |                        | 1,541,310 |      |  |   | 2,178,619 | 
|                    |  |                        |           |      |  |   |           | 
|Total               |  | $                      | 2,995,460 |      |  | $ | 3,906,156 | 
|                    |  |                        |           |      |  |   |           | 



|(1) |  | Amounts exclude auto-related operating lease assets. These assets
totaled $339.3 million at December 31, 2001
and $479.8 million at December 31, 2000.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

The decrease in the Retail Platforms interest-earning assets at December
31, 2001, as compared to December 31, 2000, was due primarily to sales of
$398.5 million of mortgage-backed securities and investment securities and
$142.8 million of home equity loans during 2001. The loan sales were partially
offset by the deployment of non interest-earning cash at December 31, 2000 and
loan sales proceeds into interest-earning investments during 2001. The
decrease in the Commercial Platforms interest-earning assets was due primarily
to the sale of $488.2 million of franchise loans during 2001, as well as loan
payoffs and amortization, combined with the impact of the writedowns related to
the revaluation of our franchise-related assets.

Interest Income

Interest income was $302.7 million for the year ended December 31, 2001 as
compared to $460.2 million for 2000. The average yield on interest-earning
assets was 7.87% for the year ended December 31, 2001 as compared to 8.71% for
2000. The decrease in interest income and average yields in 2001, as compared
to 2000, was primarily due to a decrease in average-interest earning assets and
the lower interest rate environment.

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##### Table of Contents



The following table illustrates interest income, by platform, for the periods indicated:

|                          |                            |   |                                 |           |          |   |         |         |         |  |          |       |         |   |           |           |  |   |         |         |  |  |      |      |  
|------------------------- | -------------------------- | - | ------------------------------- | --------- | -------- | - | ------- | ------- | ------- |  | -------- | ----- | ------- | - | --------- | --------- |  | - | ------- | ------- |  |  | ---- | ---- | -
|                          |                            |   | For the Year Ended December 31,
|                          |                            |   |                                
|                          |                            |   | 2001                            |           | 2000    
|                          |                            |   |                                 |           |         
|                          |                            |   | Average                         |           | Interest |   | Average |         | Average |  | Interest |       | Average
|                          |                            |   | Balance                         |           | Income   |   | Yield   |         | Balance |  | Income   |       | Yield  
|                          |                            |   |                                 |           |          |   |         |         |         |  |          |       |        
|                          |                            |   | (Dollars in thousands)         
|Retail Platform:          |                            |   |                                 |           |          |   |         |         |         |  |          |       |         |   |           |           |  |   |         |         |  |  |      |     
|                          | Loans                      |   | $                               | 1,047,244 |          |   | $       | 81,019  |         |  |          | 7.74  | %       |   | $         | 1,587,130 |  |   | $       | 138,792 |  |  |      | 8.74 | %
|                          | Mortgage-backed securities |   |                                 | 468,397   |          |   |         | 31,695  |         |  |          | 6.77  |         |   |           | 856,004   |  |   |         | 60,923  |  |  |      | 7.12 |  
|                          | Investments                |   |                                 | 579,453   |          |   |         | 26,401  |         |  |          | 4.56  |         |   |           | 288,959   |  |   |         | 21,736  |  |  |      | 7.52 |  
|                          |                            |   |                                 |           |          |   |         |         |         |  |          |       |         |   |           |           |  |   |         |         |  |  |      |     
|Total Retail Platform     |                            |   | 2,095,094                       |           |          |   | 139,115 |         |         |  | 6.64     |       |         |   | 2,732,093 |           |  |   | 221,451 |         |  |  | 8.11 |     
|                          |                            |   |                                 |           |          |   |         |         |         |  |          |       |         |   |           |           |  |   |         |         |  |  |      |     
|Commercial Platform:      |                            |   |                                 |           |          |   |         |         |         |  |          |       |         |   |           |           |  |   |         |         |  |  |      |     
|                          | Loans and leases           |   |                                 | 1,740,746 |          |   |         | 162,144 |         |  |          | 9.32  |         |   |           | 2,361,887 |  |   |         | 221,411 |  |  |      | 9.37 |  
|                          | Investments                |   |                                 | 11,940    |          |   |         | 1,486   |         |  |          | 12.45 |         |   |           | 192,560   |  |   |         | 17,330  |  |  |      | 9.00 |  
|                          |                            |   |                                 |           |          |   |         |         |         |  |          |       |         |   |           |           |  |   |         |         |  |  |      |     
|Total Commercial Platform |                            |   | 1,752,686                       |           |          |   | 163,630 |         |         |  | 9.34     |       |         |   | 2,554,447 |           |  |   | 238,741 |         |  |  | 9.35 |     
|                          |                            |   |                                 |           |          |   |         |         |         |  |          |       |         |   |           |           |  |   |         |         |  |  |      |     
|Total                     |                            | $ | 3,847,780                       |           |          | $ | 302,745 |         |         |  | 7.87     | %     |         | $ | 5,286,540 |           |  | $ | 460,192 |         |  |  | 8.71 | %   
|                          |                            |   |                                 |           |          |   |         |         |         |  |          |       |         |   |           |           |  |   |         |         |  |  |      |     

Retail Platform

Interest income for the Retail Platform was $139.1 million for the year
ended December 31, 2001 as compared to $221.5 million for 2000. The average
yield on interest-earning assets for the Retail Platform was 6.64% for the year
ended December 31, 2001 as compared to 8.11% for 2000.

The decrease in the Retail Platforms interest income in 2001, as compared
to 2000, was attributable to lower average asset balances and lower average
asset yields. The decrease in average asset balances was due to a decrease in
average loan and mortgage-backed securities balances partially offset by an
increase in the average balance of our investment securities. The decline in
average loan balances was due to the sale of $142.8 million of home equity
loans during 2001 as well as the December 2000 sales of home equity loans
totaling $244.0 million and auto loans totaling $49.1 million. The average
balance of our mortgage-backed securities decreased as purchases throughout the
year were more than offset by sales, including the sale of $231 million of
Government National Mortgage Association, or GNMA, securities during December
2000. These securities were transferred from our held-to-maturity portfolio to
available-for-sale in connection with our adoption of Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and
Hedging Activities, on October 1, 2000. During the second quarter of 2001, we
transferred our remaining held-to-maturity securities to available-for-sale and
sold $282 million of GNMA mortgage-backed securities in June 2001. As a result
of the transfer and subsequent sales of mortgage-backed securities from our
held-to-maturity portfolio during the second quarter, we do not intend to hold
any mortgage-backed securities as held-to-maturity in the foreseeable future.
Approximately $97 million in additional mortgage-backed securities were sold
during the latter half of 2001. The increase in investment securities average
balances was primarily due to purchases of Federal Home Loan Bank, sometimes
referred to as FHLB, securities throughout 2001 using proceeds from
year-to-date sales. The decrease in average asset yields was primarily due to
the impact of the prevailing low interest rate environment and the sales of
relatively higher-yielding GNMA securities during 2001 as discussed above.

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##### Table of Contents



Commercial Platform

Interest income for the Commercial Platform was $163.6 million for the
year ended December 31, 2001 as compared to $238.7 million for 2000. The
average yield on interest-earning assets for the Commercial Platform was 9.34%
for the year ended December 31, 2001 as compared to 9.35% for 2000.

The decrease in the Commercial Platforms interest income for 2001, as
compared to 2000, was attributable to lower average loan and lease balances
combined with lower investment securities balances. Additionally, the discount
accretion on our residual interests in franchise loan securitizations was lower
during 2001. The decrease in average loan and lease balances was due to loan
sales and writedowns related to the revaluation of franchise loans throughout
2001. The decrease in average investment securities balances was primarily due
to the December 2000 sale of franchise asset-backed securities and the
revaluation of residual interests in franchise loan securitizations during 2000
and 2001. The Commercial Platforms average asset yields remained unchanged,
compared to 2000, as the impact of the lower interest rate environment during
2001 was more than offset by the sales of the lower-yielding asset-backed
securities in December 2000.

Interest Expense

Deposits

Interest expense on our deposits was $135.7 million for the year ended
December 31, 2001 as compared to $176.6 million for 2000. The average cost of
deposits was 3.88% for the year ended December 31, 2001 as compared to 4.71%
for 2000.

The decrease in interest expense on deposits for 2001, as compared to
2000, was due to a decrease in the cost of deposits combined with a decrease in
average deposit balances. The decrease in the cost of our deposits was
primarily due to the lower interest rate environment, maturities of higher-cost
certificates of deposit, including brokered certificates of deposit, and an
increase in our transaction accounts as a percentage of our total deposits.
The decrease in average deposit balances was a result of the maturities of
certificates of deposit, including brokered certificates of deposit which
matured during the second quarter of 2001 and were not renewed, partially
offset by the growth in our transaction accounts.

The following table summarizes our deposit costs by type for the periods
indicated:

|                                 |  |                                 |           |              |  |                 |      |              |  |   |           |  |  |  |      |  
|-------------------------------- |  | ------------------------------- | --------- | ------------ |  | --------------- | ---- | ------------ |  | - | --------- |  |  |  | ---- | -
|                                 |  | For the Year Ended December 31,
|                                 |  |                                
|                                 |  | 2001                            |           | 2000        
|                                 |  |                                 |           |             
|                                 |  | Average Balance                 |           | Average Rate |  | Average Balance |      | Average Rate
|                                 |  |                                 |           |              |  |                 |      |             
|                                 |  | (Dollars in thousands)         
|Savings                          |  | $                               | 150,111   |              |  |                 | 1.18 | %            |  | $ | 139,657   |  |  |  | 2.00 | %
|Money Market                     |  |                                 | 1,190,820 |              |  |                 | 3.52 |              |  |   | 1,092,593 |  |  |  | 4.40 |  
|Checking accounts                |  |                                 | 489,867   |              |  |                 | 1.00 |              |  |   | 404,539   |  |  |  | 1.09 |  
|                                 |  |                                 |           |              |  |                 |      |              |  |   |           |  |  |  |      |  
|Total transaction accounts       |  |                                 | 1,830,798 |              |  |                 | 2.65 |              |  |   | 1,636,789 |  |  |  | 3.38 |  
|Retail certificates of deposit   |  |                                 | 1,592,812 |              |  |                 | 5.13 |              |  |   | 1,717,418 |  |  |  | 5.52 |  
|Brokered certificates of deposit |  |                                 | 76,473    |              |  |                 | 7.24 |              |  |   | 396,827   |  |  |  | 6.67 |  
|                                 |  |                                 |           |              |  |                 |      |              |  |   |           |  |  |  |      |  
|Total deposits                   |  | $                               | 3,500,083 |              |  |                 | 3.88 | %            |  | $ | 3,751,034 |  |  |  | 4.71 | %
|                                 |  |                                 |           |              |  |                 |      |              |  |   |           |  |  |  |      |  

Borrowings

Interest expense on our borrowings, excluding the Capital Securities
issued in December 1998, was $44.8 million for the year ended December 31, 2001
as compared to $118.2 million for 2000. The average cost of borrowings was
7.15% for the year ended December 31, 2001 as compared to 6.62% for 2000.

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The decrease in interest expense on borrowings for 2001, as compared to
2000, was primarily due to lower average balances partially offset by higher
funding costs. The decrease in average balances was due to the paydown of our
borrowings, including warehouse lines, Federal Home Loan Bank advances and
securities sold under agreements to repurchase, as we sold interest-bearing
assets during the latter half of 2000 and throughout 2001. The increase in
borrowing costs was primarily due to higher costs associated with our warehouse
line, including the accelerated amortization of fees resulting from the payoff
of the warehouse line in August 2001.

The following table illustrates the changes in net interest income due to
changes in the rate and volume of our interest-earning assets and
interest-bearing liabilities. The variances include the effects of our
acquisitions. Changes in rate and volume which cannot be segregated (i.e.,
changes in weighted-average interest rate multiplied by average portfolio
balance) have been allocated proportionately to the change in rate and the
change in volume.

|                              |                            |   |                                               |         |          |   |          |          |   |   |          |          |  
|----------------------------- | -------------------------- | - | --------------------------------------------- | ------- | -------- | - | -------- | -------- | - | - | -------- | -------- | -
|                              |                            |   | For the Year Ended December 31, 2001 vs. 2000
|                              |                            |   |                                              
|                              |                            |   | Rate                                          |         | Volume   |   | Total   
|                              |                            |   | Variance                                      |         | Variance |   | Variance
|                              |                            |   |                                               |         |          |   |         
|                              |                            |   | (Dollars in thousands)                       
|Interest income:              |                            |   |                                               |         |          |   |          |          |   |   |          |         
|                              | Loans and leases           |   | $                                             | (15,194 | )        |   | $        | (101,846 | ) |   | $        | (117,040 | )
|                              | Mortgage-backed securities |   |                                               | (2,862  | )        |   |          | (26,366  | ) |   |          | (29,228  | )
|                              | Investments                |   |                                               | (24,617 | )        |   |          | 13,438   |   |   |          | (11,179  | )
|                              |                            |   |                                               |         |          |   |          |          |   |   |          |          |  
|                              |                            |   | (42,673                                       | )       |          |   | (114,774 | )        |   |   | (157,447 | )       
|                              |                            |   |                                               |         |          |   |          |          |   |   |          |          |  
|Interest expense:             |                            |   |                                               |         |          |   |          |          |   |   |          |         
|                              | Deposits                   |   |                                               | (29,621 | )        |   |          | (11,245  | ) |   |          | (40,866  | )
|                              | Borrowings                 |   |                                               | 10,330  |          |   |          | (83,719  | ) |   |          | (73,389  | )
|                              |                            |   |                                               |         |          |   |          |          |   |   |          |          |  
|                              |                            |   | (19,291                                       | )       |          |   | (94,964  | )        |   |   | (114,255 | )       
|                              |                            |   |                                               |         |          |   |          |          |   |   |          |          |  
|Change in net interest income |                            | $ | (23,382                                       | )       |          | $ | (19,810  | )        |   | $ | (43,192  | )       
|                              |                            |   |                                               |         |          |   |          |          |   |   |          |          |  

Provision For Losses on Loans and Leases

The provision for losses on loans and leases was $71.9 million for the
year ended December 31, 2001 as compared to $62.6 million for 2000. The
increase in the provision for losses on loans and leases for 2001, as compared
to the 2000, was primarily due to $52.1 million in allowance reductions related
to the mark-to-market on franchise and home equity loans transferred from
held-for-investment to held-for-sale during the second quarter of 2001 as well
as additional allowance requirements on the remaining franchise loan portfolio.

The following table illustrates the provision for losses on loans and
leases, by platform, for the periods indicated:

|                    |  |                                 |        |      |  |   |        | 
|------------------- |  | ------------------------------- | ------ | ---- |  | - | ------ | 
|                    |  | For the Year Ended December 31,
|                    |  |                                
|                    |  | 2001                            |        | 2000
|                    |  |                                 |        |     
|                    |  | (Dollars in thousands)         
|Retail Platform     |  | $                               | 8,419  |      |  | $ | 10,354 | 
|Commercial Platform |  |                                 | 63,471 |      |  |   | 52,246 | 
|                    |  |                                 |        |      |  |   |        | 
|Total               |  | $                               | 71,890 |      |  | $ | 62,600 | 
|                    |  |                                 |        |      |  |   |        | 

Noninterest Income

Noninterest income was $107.2 million for the year ended December 31, 2001
as compared to $76.6 million for 2000. The increase in noninterest income for
2001, as compared to 2000, was primarily due to lower net losses on sales of
assets and liabilities in both the Retail and Commercial Platforms partially
offset by lower auto leasing income and loan-related fees in the Retail
Platform and lower loan servicing and fee income and other income in the
Commercial Platform. The Commercial Platforms loan servicing and fee
income was primarily impacted by the

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June 22, 2001 sale of BVFMAC
while its other income was impacted by the sale of our insurance service subsidiary, FMAC
Insurance Services, on February 28, 2001. The following table illustrates
noninterest income (loss), by platform, for the periods indicated:

|                    |  |                                 |         |      |  |   |         |  
|------------------- |  | ------------------------------- | ------- | ---- |  | - | ------- | -
|                    |  | For the Year Ended December 31,
|                    |  |                                
|                    |  | 2001                            |         | 2000
|                    |  |                                 |         |     
|                    |  | (Dollars in thousands)         
|Retail Platform     |  | $                               | 114,575 |      |  | $ | 90,350  |  
|Commercial Platform |  |                                 | (7,406  | )    |  |   | (13,708 | )
|                    |  |                                 |         |      |  |   |         |  
|Total               |  | $                               | 107,169 |      |  | $ | 76,642  |  
|                    |  |                                 |         |      |  |   |         |  

Noninterest income for 2001 included losses on sales of assets totaling
$10.5 million, consisting of net losses of $16.3 million within the Commercial
Platform partially offset by net gains of $5.8 million within the Retail
Platform. The loss within the Commercial Platform was largely due to the $22.9
million loss on the sale of BVFMAC and $3.7 million in mark-to-market
adjustments related to our hedges partially offset by $6.5 million of
contingent gains received during the first quarter of 2001 related to December
2000 asset sales and $3.6 million net gains on franchise loan sales during
2001. The gain within the Retail Platform was primarily due to $13.5 million
in net gains on sales of mortgage-backed securities and other investments
securities and $3.6 million of contingent gains received during the first
quarter of 2001 related to December 2000 home equity loan sales offset by the
$10.3 million loss on the sale of home equity loans in June 2001 and $1.6
million of writedowns of our residual interests and other assets related to our
auto loan securitizations.

During 2000, noninterest income within our Retail Platform included $19.4
million in net losses from the sales of single-family mortgage loans, high
loan-to-value home equity loans and auto loans, $9.1 million in losses related
to the revaluation of our retained interests in our auto loan securitizations
combined with charges associated with the exercise of the cleanup call on our
1997 auto loan securitization, and $2.1 million in losses related to our
implementation of Statement No. 133, partially offset by a $2.1 million gain
associated with the sale of servicing rights. Noninterest loss for our
Commercial Platform included $26.4 million in losses related to the sale of
franchise asset-backed securities, a $4.9 million loss on the sale of
substantially all of the assets and certain liabilities of Bankers Mutual, $2.6
million in net losses from the sales of multi-family mortgage loans, franchise
loans and commercial leases, and a $1.1 million writedown of an equity
security. These losses were offset by a $10.0 million gain on the auction of
$180 million of Federal Home Loan Bank liabilities with below-market interest
rates.

We serviced off-balance sheet portfolios of franchise loans through June
22, 2001 and multi-family loans associated with Bankers Mutual through June 30,
2000. Servicing income on franchise loans through June 22, 2001, the effective
date of the sale of BVFMAC and its related servicing platform, was $2.9 million
on a servicing portfolio of $2.2 billion. Servicing income on franchise loans
was $3.6 million for 2000 on a servicing portfolio of $2.4 billion. Servicing
income on Bankers Mutuals multi-family loans through June 30, 2000, the
effective date of the sale of substantially all of Bankers Mutuals assets to
Berkshire Mortgage Finance Limited Partnership, was $742,000 on a servicing
portfolio totaling approximately $3.4 billion.

Noninterest Expense

General and Administrative

General and administrative expenses for the year ended December 31, 2001
were $155.3 million as compared to $158.6 million for 2000. Excluding special
mention items, as discussed below, the decrease in general and administrative
expenses for 2001, as compared to 2000, was primarily due to the elimination of
BVFMAC loan production expenses with the shutdown of the division effective
September 2000, the elimination of Bankers Mutual expenses with the sale of
that subsidiary effective June 2000, the elimination of BVFMAC servicing
platform expenses with the sale of the legal entity BVFMAC effective June 2001 and the
realization of certain cost-savings by the end of the third quarter of 2001
related to our June 2001 restructuring.

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Special mention items generally include items recognized during the period
that we believe are significant and/or unusual in nature and therefore useful
to you in evaluating our performance and trends. These items may or may not be
nonrecurring in nature. Our general and administrative expenses for the year
ended December 31, 2001 included $16.7 million in special mention items, as
compared to $5.8 million in special mention items for 2000.

Special mention items for 2001 included $8.2 million related to the
prepayment of FHLB advances, $2.6 million related to the Companys issuance of
stock options during the second quarter with below market exercise prices, $2.4
million in legal and professional fees related to the implementation of the
Companys new strategic plan, a $1.0 million accrual related to post-retirement
health care benefits and $2.5 million in other non-recurring items.

Special mention items for 2000 included approximately $3.8 million in
BVFMAC-related transition costs and other operational charges including the
consolidation of certain loan servicing operations, the closure of a BVFMAC
satellite loan production office and the outsourcing of our internal audit
function. Special mention items for 2000 also included $1.1 million in fees
associated with our financial advisor, and $0.9 million in legal settlement
expenses.

The following table illustrates general and administrative expenses, by platform, for the periods indicated:

|                                |                                                                        |   |                                 |        |      |   |         |        | 
|------------------------------- | ---------------------------------------------------------------------- | - | ------------------------------- | ------ | ---- | - | ------- | ------ | 
|                                |                                                                        |   | For the Year Ended December 31,
|                                |                                                                        |   |                                
|                                |                                                                        |   | 2001                            |        | 2000
|                                |                                                                        |   |                                 |        |     
|                                |                                                                        |   | (Dollars in thousands)         
|Retail Platform                 |                                                                        | $ | 104,033                         |        |      | $ | 79,856  |       
|Commercial Platform:            |                                                                        |   |                                 |        |      |   |         |       
|                                | Direct general and administrative expenses                             |   |                                 | 22,988 |      |   |         | 31,547 | 
|                                | Direct general and administrative expenses  franchise
loan production |   |                                 |       |      |   |         | 15,561 | 
|                                | Direct general and administrative expenses  Bankers Mutual            |   |                                 |       |      |   |         | 6,311  | 
|                                |                                                                        |   |                                 |        |      |   |         |       
|Total Commercial Platform       |                                                                        |   | 22,988                          |        |      |   | 53,419  |       
|                                |                                                                        |   |                                 |        |      |   |         |       
|Subtotal                        |                                                                        |   | 127,021                         |        |      |   | 133,275 |       
|Indirect
corporate overhead (1) |                                                                        |   | 28,266                          |        |      |   | 25,315  |       
|                                |                                                                        |   |                                 |        |      |   |         |       
|Total                           |                                                                        | $ | 155,287                         |        |      | $ | 158,590 |       
|                                |                                                                        |   |                                 |        |      |   |         |       



|1 | Amount represents indirect corporate expenses not specifically
identifiable with, or allocable to, our business platforms.
|- | --------------------------------------------------------------------------------------------------------------------------

The following table illustrates the ratio of general and administrative
expenses to average total assets, including auto-related securitized assets, on
an annualized basis for the periods indicated:

|                                                                                                                  |  |                                 |           |      |  |   |           |  
|----------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | --------- | ---- |  | - | --------- | -
|                                                                                                                  |  | For the Year Ended December 31,
|                                                                                                                  |  |                                
|                                                                                                                  |  | 2001                            |           | 2000
|                                                                                                                  |  |                                 |           |     
|                                                                                                                  |  | (Dollars in thousands)         
|General and administrative expenses                                                                               |  | $                               | 155,287   |      |  | $ | 158,590   |  
|Average total assets, including auto-related securitized
assets                                                   |  | $                               | 4,869,314 |      |  | $ | 6,711,135 |  
|                                                                                                                  |  |                                 |           |      |  |   |           |  
|Annualized general and administrative expenses to
average total assets, including auto-related securitized
assets |  |                                 | 3.19      | %    |  |   | 2.36      | %
|                                                                                                                  |  |                                 |           |      |  |   |           |  

Another measure that management uses to monitor our level of general and
administrative expenses is the efficiency ratio. The efficiency ratio is
calculated by dividing the amount of general and administrative expenses by
operating revenues, defined as net interest income, as adjusted to include
expenses associated with our Capital Securities, the excess of our
leasing-related rental income over leasing-related depreciation expense, and
other noninterest income. This ratio reflects the level of general and
administrative expenses required to generate $1 of operating revenue.

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The following table illustrates the efficiency ratio for the periods
indicated:

|                                    |  |                                 |         |      |  |   |         |  
|----------------------------------- |  | ------------------------------- | ------- | ---- |  | - | ------- | -
|                                    |  | For the Year Ended December 31,
|                                    |  |                                
|                                    |  | 2001                            |         | 2000
|                                    |  |                                 |         |     
|                                    |  | (Dollars in thousands)         
|General and administrative
expenses |  | $                               | 155,287 |      |  | $ | 158,590 |  
|Operating revenues, as defined      |  | $                               | 185,609 |      |  | $ | 173,405 |  
|                                    |  |                                 |         |      |  |   |         |  
|Efficiency ratio                    |  |                                 | 83.7    | %    |  |   | 91.5    | %
|                                    |  |                                 |         |      |  |   |         |  

Restructuring Charges

During 2001, we recorded a total of $6.9 million in restructuring charges
primarily related to a reduction in our workforce. The restructuring charges
consisted primarily of severance and facilities charges that were recorded in
the second quarter. During 2000, we recorded a total of $9.2 million in
restructuring charges related to the shutdown of our franchise lending division
effective September 30, 2000. The restructuring charges consisted primarily of
severance, occupancy and related facility costs. (See Note 3 to the
Consolidated Financial Statements, Restructuring Charges, at Item 8,
Financial Statements and Supplementary Data for further discussion).

Revaluation of Franchise-Related Assets

The revaluation of certain franchise-related assets resulted in a $70.1
million and $101.9 million pre-tax expense for 2001 and 2000, respectively.
Revaluation charges for 2001 included a $31.7 million adjustment related to the
sale of approximately $278 million in loans during the second quarter of 2001
as well as writedowns of other franchise-related assets. The writedowns
included $13.6 million in adjustments to servicing assets, $12.6 million in
adjustments to residual interests on securitizations, reflecting anticipated
market yields, $5.0 million in adjustments to equity investments and $1.9
million in adjustments to servicer advances.

During 2000, the revaluation included $35.4 million in adjustments
resulting primarily from permanent impairments to our franchise-related
residual and servicing assets, reflecting higher loss assumptions and a higher
discount rate. The revaluation also included a $66.5 million mark-to-market
charge on our portfolio of franchise loans held-for-sale, reflecting estimated
bulk-sale pricing versus pricing based on smaller loan pool sales to multiple
investors.

Leasing Expense

Leasing expense represents expenses related to our auto leasing
activities. Because the leases are accounted for as operating leases, the
corresponding assets are capitalized and depreciated to their estimated
residual values over their lease terms. This depreciation expense is included
in leasing expenses, along with the amortization of capitalized initial direct
lease costs and impairment charges. Leasing expenses for the year ended
December 31, 2001 were $86.1 million as compared to $69.4 million for 2000.
The increase in leasing expenses from 2000 to 2001 was primarily due to the
$18.7 million of additional provision for impairment primarily as a result of
revising the estimated residual values associated with the auto lease portfolio
partially offset by lower depreciation expense associated with the declining
balance of the auto lease portfolio.

The Company performs a quarterly impairment analysis of its automobile
operating lease portfolio in accordance with SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
as previously discussed or discussed elsewhere herein. For the year ended
December 31, 2001, the Company recorded $18.7 million in impairment charges against approximately
9,000 of its 18,272 lease contracts that were considered impaired and which is
included in leasing expense. In addition, since the inception of the lease
portfolio in June 1998, the Company has recorded additional monthly
depreciation charges, also included in leasing

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expense, to provide for losses that may be incurred at the end of the lease terms. At December 31, 2001 and
2000, the Company has provided $32.7 million and $9.9 million, respectively, in
impairment and additional monthly charges against its automobile operating
lease portfolio which are available to absorb potential future residual losses.

Real Estate Owned

The net expense related to our real estate owned was $2.1 million for the
year ended December 31, 2001 as compared to $65,000 for 2000. Additionally, we
recorded $2.9 million of provision for losses on real estate owned during 2001.
The increase in expenses and provision related to real estate owned for 2001,
as compared to prior periods, was primarily due to an increase in real estate
owned activity, primarily representing foreclosed franchise properties, as our
net real estate owned balance increased to $9.5 million at December 31, 2001
from $1.0 million at December 31, 2000.

Amortization of Intangible Assets

Amortization expense related to intangible assets was $11.3 million for
the year ended December 31, 2001 as compared to $20.8 million for 2000. The
decrease in amortization expense for 2001, as compared to 2000, was primarily
due to the elimination of goodwill related to the BVFMAC loan production unit
and Bankers Mutual. In connection with the shutdown of BVFMACs lending
operations, goodwill of $192.6 million was written off, representing the entire
unamortized balance associated with our FMAC acquisition.

Income Taxes

The Company recorded an income tax benefit of $85.9 million for the year
ended December 31, 2001 as compared to a benefit of $55.8 million for 2000.
The Companys effective tax rate was 45.9% for 2001 as compared to 14.6% for
2000. Our effective rate differs from our 35.0% statutory tax rate primarily
due to the impact of nondeductible goodwill, the impact of state income taxes,
net of federal income taxes, and the impact of a $26.0 million valuation
allowance established against our gross deferred tax assets in 2000 that was
eliminated in 2001.

During 2000, the Company recorded a $26.0 million valuation allowance
against its gross deferred tax assets primarily relating to approximately $48.6
million in federal net operating loss carryforwards that were expiring in 2001
as the Company did not expect to be able to fully utilize these amounts prior
to their expiration date. In May 2001, the Company raised $137.5 million of
additional capital which enabled the Company to implement a new strategic plan,
including the disposition of non-core and higher-risk assets. As a result of
these actions, the Companys ability to generate future taxable income is more
predictable. During 2001, the Company also executed certain transactions that
resulted in significant amounts of taxable income. These transactions included
the sale of the BVFMAC legal entity which generated significant taxable income
related to previously deferred gains in the franchise securitization trusts.
The Company also executed a financing secured by the contractual cash flows of
our auto operating lease portfolio that was treated as a sale for income tax
purposes and generated $136.5 million in taxable income. Primarily as a result
of these transactions, the Company generated sufficient taxable income during
the year to be able to utilize the majority of its net operating loss
carryforwards expiring in 2001.

The Company believes it would be able to fully utilize its $172.0 million
of net deferred tax assets at December 31, 2001. In order to fully utilize its
net operating loss carryforwards prior to their expiration dates, however, the
Company would be required to execute certain tax planning strategies during
2002 including selling certain assets obtained in connection with a previous
purchase business combination with significant built-in gains for tax purposes
which would be triggered in the event of a sale. Such a transaction would not
only generate significant levels of taxable income, but would also increase the
limitation on the utilization of the net operating loss carryforward acquired
in connection with a previous purchase business combination. As a result, the Company eliminated
the $26.0 million valuation allowance against its gross deferred tax assets
during 2001.

There are significant assumptions underlying the valuation of the
Companys net deferred tax assets that are susceptible to possible change in
the near term. In the event the Company cannot implement the tax planning
strategies contemplated above, the Company may not be able to utilize its net
operating loss carryforwards prior to

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their expiration date. In addition, in the
event the Company does not generate sufficient levels of future taxable income,
the Company may not be able to utilize its net operating loss carryforwards
prior to their expiration date or may not be able to realize other net deferred
tax assets related to timing difference between reported financial statement
income (loss) and taxable income (loss). If the Company determines in the
future that it cannot fully utilize its net deferred tax assets, it would be
required to establish a valuation allowance against that portion of its net
deferred tax assets estimated not to be realizable.

Capital Securities

Dividend expense on the Capital Securities was $9.8 million for the year
ended December 31, 2001 as compared to $9.0 million for 2000.

Deferred dividends associated with our agreement with the FRB, as
previously discussed or discussed elsewhere herein, were $14.1 million at
December 31, 2001 as compared to $4.3 million at December 31, 2000.

Balance Sheet Analysis

Our total assets were $875.5 million at December 31, 2002 as compared to
$4.0 billion at December 31, 2001 and $5.4 billion at December 31, 2000. The
decrease in total assets from 2001 to 2002 was primarily due to the sale of Bay
Views retail banking assets to U.S. Bank, N.A. on November 1, 2002. The
decrease in total assets from 2000 to 2001 was primarily due to loan and lease
sales and paydowns, sales of investment securities, a decline in cash and
short-term investments as we utilized these funds to reduce borrowings during
2001 and the revaluation of our franchise-related assets, partially offset by
loan and lease originations.

Securities

Our securities activities are primarily conducted by Bay View Bank. Bay
View Bank has historically purchased securities to supplement our loan
production. The majority of the securities purchased are high-quality
mortgage-backed securities, including securities issued by GNMA, Fannie Mae and
Freddie Mac and senior tranches of private issue collateralized mortgage
obligations, or CMOs. In addition to these securities, we also hold retained
interests in loan and lease securitizations and hold investment securities such
as U.S. government agency notes and other short-term securities. The following
table illustrates our securities portfolio as of the dates indicated:

|                            |                                  |   |                        |        |      |   |         |         |  |   |         |         | 
|--------------------------- | -------------------------------- | - | ---------------------- | ------ | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                            |                                  |   | At December 31,       
|                            |                                  |   |                       
|                            |                                  |   | 2002                   |        | 2001 |   | 2000   
|                            |                                  |   |                        |        |      |   |        
|                            |                                  |   | (Dollars in thousands)
|Available-for-sale          |                                  |   |                        |        |      |   |         |         |  |   |         |        
|Investment
securities (1)   |                                  | $ | 38,137                 |        |      | $ | 98,980  |         |  | $ | 33,009  |        
|Mortgage-backed securities: |                                  |   |                        |        |      |   |         |         |  |   |         |        
|                            | GNMA, Fannie Mae and Freddie
Mac |   |                        | 31,431 |      |   |         | 166,761 |  |   |         | 341     | 
|                            | CMOs                             |   |                        | 1,085  |      |   |         | 103,430 |  |   |         | 237     | 
|                            | Other financial intermediaries   |   |                        |       |      |   |         | 8,700   |  |   |         |        | 
|                            |                                  |   |                        |        |      |   |         |         |  |   |         |        
|Total                       |                                  | $ | 70,653                 |        |      | $ | 377,871 |         |  | $ | 33,587  |        
|                            |                                  |   |                        |        |      |   |         |         |  |   |         |        
|Held-to-maturity            |                                  |   |                        |        |      |   |         |         |  |   |         |        
|Investment
securities (1)   |                                  | $ |                       |        |      | $ |        |         |  | $ |        |        
|Mortgage-backed securities: |                                  |   |                        |        |      |   |         |         |  |   |         |        
|                            | GNMA, Fannie Mae and Freddie
Mac |   |                        |       |      |   |         |        |  |   |         | 627,300 | 
|                            | CMOs                             |   |                        |       |      |   |         |        |  |   |         | 2,923   | 
|                            | Other financial intermediaries   |   |                        |       |      |   |         |        |  |   |         | 11,827  | 
|                            |                                  |   |                        |        |      |   |         |         |  |   |         |        
|Total                       |                                  | $ |                       |        |      | $ |        |         |  | $ | 642,050 |        
|                            |                                  |   |                        |        |      |   |         |         |  |   |         |        



|(1) |  | See Note 5 to our Consolidated Financial Statements, Investment
Securities, at Item 8, Financial Statements and Supplementary Data for
further detail on our investment portfolio.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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During the second quarter of 2001, we transferred our remaining
held-to-maturity securities totaling $631.7 million to available-for-sale. As
a result of the transfer and subsequent sales of securities from our
held-to-maturity
portfolio, combined with our adoption of liquidation basis accounting, we do
not intend to hold any securities as held-to-maturity in the foreseeable
future. In accordance with liquidation basis accounting, our investment
securities will continue to be classified as available-for-sale and marked to
their net realizable values through income as liquidation basis adjustments.

We sold $180.1 million of mortgage-backed securities and $74.8 million of
other investment securities, primarily trust preferred and asset-backed
securities, during 2002. Gross gains of $1.2 million were realized on the
sales. The sales were offset by purchases of $60.5 million of mortgage-backed
securities and $55.9 million of asset-backed securities during the year. On
September 30, 2002, we securitized and sold $453.2 million of auto loans and
retained an interest in this securitization with an initial balance of $23.2
million. In addition, we wrote-off $4.9 million of franchise securitization
residual assets upon our adoption of liquidation basis accounting, primarily as
a result of further deterioration in the franchise loans underlying the
securities.

During 2001, we sold $378.8 million of mortgage-backed securities,
including $334.0 million of GNMA securities, and $19.7 million of Sallie Mae
floating-rate bonds during 2001. The sales were partially offset by purchases
of $83.2 million of GNMA mortgage-backed securities and $105.7 million of
Fannie Mae and private-label mortgage-backed securities during the year. In
addition, we also purchased $48.1 million of trust preferred securities, $19.7
million of Sallie Mae floating-rate bonds which were subsequently sold, $16.0
million of asset-backed securities, $10.0 million of Federal Home Loan Bank
callable notes, $10.0 million of Freddie Mac structured notes and $14.3 million
in other investment securities. Also during 2001, we revalued our retained
interests in loan and lease securitizations by $12.6 million. The revaluation
established a new cost basis for our retained interests in loan and lease
securitizations.

During 2000, we purchased $327.8 million of GNMA securities and $35.3
million of Federal Home Loan Bank callable notes for our held-to-maturity
portfolio. In addition, we completed an on-balance sheet franchise loan
securitization during the second quarter of 2000. This transaction initially
generated $264.2 million in asset-backed securities held-to-maturity and $12.1
million in retained interests classified as available-for-sale. Under the
provisions of Statement No. 133, we transferred these franchise-related
asset-backed securities to available-for-sale and sold them in December 2000 as
a result of declining spreads on these fixed-rate securities. We also
transferred $231.0 million of mortgage-backed securities to our
available-for-sale portfolio in connection with our adoption of Statement No.
133 on October 1, 2000. We sold $108.2 million of GNMA securities and $131.7
million of private-label mortgage-backed securities from our available-for-sale
portfolio during 2000. Additionally, we revalued franchise-related retained
interests in loan and lease securitizations by $26.3 million during 2000.

We do not maintain a trading portfolio. As discussed above, in accordance
with liquidation basis accounting, adjustments to the net realizable value of
our securities are recorded as gains or losses through income as liquidation
basis adjustments. We recognized net gains of $2.0 million related to
mark-to-market adjustments, which were previously recorded as other
comprehensive income, on our investment securities upon our adoption of
liquidation basis accounting effective September 30, 2002. We subsequently
recorded net losses of $253,000 related to mark-to-market adjustments on our
investment securities during the fourth quarter of 2002. Unrealized gains of
$523,000 and $10,000 on securities classified as available-for-sale were
included in stockholders equity (net of tax) at December 31, 2001 and 2000,
respectively.

Prior to our adoption of liquidation basis accounting and the transfer of
our stockholders equity to net assets in liquidation effective September 30,
2002, we did not hold any securities that were issued by a single party which
exceeded 10% of our stockholders equity balance, excluding securities issued
by the U.S. government or U.S. government agencies and corporations.

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Mortgage-backed securities pose risks not associated with fixed maturity bonds, primarily related to the ability of the borrower to prepay the underlying loan with or without penalty. This risk, known as prepayment risk, may cause the
mortgage-backed securities to remain outstanding for a period of time different from that assumed at the time of purchase. When interest rates decline, prepayments generally tend to increase, causing the average expected remaining maturity of the
mortgage-backed securities to decline. Conversely, if interest rates rise, prepayments tend to decrease, lengthening the average expected remaining maturity of the mortgage-backed securities. The following table illustrates the remaining
contractual principal maturities and weighted-average yields on our mortgage-backed securities held at December 31, 2002. The weighted-average yield is computed using the net realizable value of our available-for-sale securities. Expected
remaining maturities of mortgage-backed securities will generally differ from their contractual maturities because borrowers may have the right to prepay obligations with or without penalties.



|                     |                                  |   |                        |    |            |  |           |      |       |   |                  |       |                    |  |      |      |   |   |           |        |  |  |      |      |  
|-------------------- | -------------------------------- | - | ---------------------- | -- | ---------- |  | --------- | ---- | ----- | - | ---------------- | ----- | ------------------ |  | ---- | ---- | - | - | --------- | ------ |  |  | ---- | ---- | -
|                     |                                  |   |                        |    |            |  |           |      |       |   | After            |       | After             
|                     |                                  |   |                        |    |            |  |           |      |       |   | One Year Through |       | Five Years Through
|                     |                                  |   | Within One Year        |    | Five Years |  | Ten Years
|                     |                                  |   |                        |    |            |  |          
|                     |                                  |   |                        |    |            |  | Weighted- |      |       |   |                  |       | Weighted-          |  |      |      |   |   | Weighted-
|                     |                                  |   |                        |    |            |  | Average   |      |       |   |                  |       | Average            |  |      |      |   |   | Average  
|                     |                                  |   | Amount                 |    | Yield      |  | Amount    |      | Yield |   | Amount           |       | Yield             
|                     |                                  |   |                        |    |            |  |           |      |       |   |                  |       |                   
|                     |                                  |   | (Dollars in thousands)
|Available-for-sale:  |                                  |   |                        |    |            |  |           |      |       |   |                  |       |                    |  |      |      |   |   |           |        |  |  |      |     
|                     | GNMA, Fannie Mae and Freddie
Mac |   | $                      | 43 |            |  |           | 9.37 | %     |   | $                | 5,178 |                    |  |      | 6.80 | % |   | $         | 26,210 |  |  |      | 6.54 | %
|                     | CMOs                             |   |                        |   |            |  |           |     |       |   |                  |      |                    |  |      |     |   |   |           |       |  |  |      |     |  
|                     | Other financial intermediaries   |   |                        |   |            |  |           |     |       |   |                  |      |                    |  |      |     |   |   |           |       |  |  |      |     |  
|                     |                                  |   |                        |    |            |  |           |      |       |   |                  |       |                    |  |      |      |   |   |           |        |  |  |      |      |  
|Net realizable value |                                  | $ | 43                     |    |            |  | 9.37      | %    |       | $ | 5,178            |       |                    |  | 6.80 | %    |   | $ | 26,210    |        |  |  | 6.54 | %   
|                     |                                  |   |                        |    |            |  |           |      |       |   |                  |       |                    |  |      |      |   |   |           |        |  |  |      |      |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                     |                                  |   |                        |       |       |  |           |      |       |   |        |        |           |  |      |      |  
|-------------------- | -------------------------------- | - | ---------------------- | ----- | ----- |  | --------- | ---- | ----- | - | ------ | ------ | --------- |  | ---- | ---- | -
|                     |                                  |   | After Ten Years        |       | Total
|                     |                                  |   |                        |       |      
|                     |                                  |   |                        |       |       |  | Weighted- |      |       |   |        |        | Weighted-
|                     |                                  |   |                        |       |       |  | Average   |      |       |   |        |        | Average  
|                     |                                  |   | Amount                 |       | Yield |  | Amount    |      | Yield
|                     |                                  |   |                        |       |       |  |           |      |      
|                     |                                  |   | (Dollars in thousands)
|Available-for-sale:  |                                  |   |                        |       |       |  |           |      |       |   |        |        |           |  |      |     
|                     | GNMA, Fannie Mae and Freddie
Mac |   | $                      |      |       |  |           |     |       |   | $      | 31,431 |           |  |      | 6.58 | %
|                     | CMOs                             |   |                        | 1,085 |       |  |           | 3.37 | %     |   |        | 1,085  |           |  |      | 3.37 | %
|                     | Other financial intermediaries   |   |                        |      |       |  |           |     |       |   |        |       |           |  |      |     |  
|                     |                                  |   |                        |       |       |  |           |      |       |   |        |        |           |  |      |      |  
|Net realizable value |                                  | $ | 1,085                  |       |       |  | 3.37      | %    |       | $ | 32,516 |        |           |  | 6.48 | %   
|                     |                                  |   |                        |       |       |  |           |      |       |   |        |        |           |  |      |      |  

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Loans and Leases

Loan and Lease Portfolio Composition

Our loan and lease portfolio has historically reflected the activity of
our two business segments, or platforms. The Retail Platform consisted of
single-family real estate loans, home equity loans and lines of credit, and
auto loans and leases. The Commercial Platform included multi-family and
commercial real estate loans, franchise loans, asset-based loans, factoring
loans, commercial leases and business loans. The following table shows the
composition of our loan and lease portfolio, excluding the allowance
for loan and lease losses at December 31, 1998 through
December 31, 2001 and based on historical
platforms, as of the dates indicated:



|                                                                                |                                                                                 |   |                        |         |       |       |        |   |       |           |         |  |       |      |        |   |           |         |        |       |       |  |   |           |         |  |       |      |   |   |           |           |  |       |      |  
|------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | - | ---------------------- | ------- | ----- | ----- | ------ | - | ----- | --------- | ------- |  | ----- | ---- | ------ | - | --------- | ------- | ------ | ----- | ----- |  | - | --------- | ------- |  | ----- | ---- | - | - | --------- | --------- |  | ----- | ---- | -
|                                                                                |                                                                                 |   | At December 31,       
|                                                                                |                                                                                 |   |                       
|                                                                                |                                                                                 |   | 2002                   |         | 2001  |       | 2000   |   | 1999  |           | 1998   
|                                                                                |                                                                                 |   |                        |         |       |       |        |   |       |           |         | 
|                                                                                |                                                                                 |   |                        |         | % of  |       |        |   | % of  |           |         |  | % of  |      |        |   | % of      |         |        |       | % of 
|                                                                                |                                                                                 |   | Amount                 |         | Total |       | Amount |   | Total |           | Amount  |  | Total |      | Amount |   | Total     |         | Amount |       | Total
|                                                                                |                                                                                 |   |                        |         |       |       |        |   |       |           |         |  |       |      |        |   |           |         |        |       |       | 
|                                                                                |                                                                                 |   | (Dollars in thousands)
|Loans and Leases Receivable:                                                    |                                                                                
|Retail Platform:                                                                |                                                                                
|                                                                                | Single-family mortgage loans                                                    |   | $                      |        |       |       |       | % |       | $         | 277,288 |  |       | 11.6 | %      |   | $         | 392,047 |        |       | 12.5  |  |   | $         | 940,235 |  |       | 21.6 | % |   | $         | 1,515,413 |  |       | 36.2 | %
|                                                                                | High loan-to-value home equity loans
and lines of credit                        |   |                        |        |       |       |       |   |       |           | 12,238  |  |       | 0.5  |        |   |           | 100,573 |        |       | 3.2   |  |   |           | 434,254 |  |       | 10.0 |   |   |           | 483,793   |  |       | 11.6 |  
|                                                                                | Other home equity loans and lines of credit                                     |   |                        |        |       |       |       |   |       |           | 132,381 |  |       | 5.5  |        |   |           | 202,324 |        |       | 6.4   |  |   |           | 214,422 |  |       | 4.9  |   |   |           | 139,004   |  |       | 3.3  |  
|                                                                                | Auto loans (1)                                                                  |   |                        | 142,357 |       |       | 45.8   |   |       |           | 444,607 |  |       | 18.5 |        |   |           | 287,020 |        |       | 9.1   |  |   |           | 496,901 |  |       | 11.4 |   |   |           | 546,806   |  |       | 13.0 |  
|                                                                                |                                                                                 |   |                        |         |       |       |        |   |       |           |         |  |       |      |        |   |           |         |        |       |       |  |   |           |         |  |       |      |   |   |           |           |  |      
|Total retail loans                                                              |                                                                                 |   | 142,357                |         |       | 45.8  |        |   |       | 866,514   |         |  | 36.1  |      |        |   | 981,964   |         |        | 31.2  |       |  |   | 2,085,812 |         |  | 47.9  |      |   |   | 2,685,016 |           |  | 64.1  |     
|Commercial Platform:                                                            |                                                                                
|                                                                                | Multi-family mortgage loans                                                     |   |                        | 2,443   |       |       | 0.8    |   |       |           | 697,339 |  |       | 29.0 |        |   |           | 611,484 |        |       | 19.4  |  |   |           | 622,835 |  |       | 14.3 |   |   |           | 1,015,980 |  |       | 24.2 |  
|                                                                                | Commercial mortgage loans                                                       |   |                        | 7,712   |       |       | 2.5    |   |       |           | 289,093 |  |       | 12.0 |        |   |           | 339,764 |        |       | 10.8  |  |   |           | 365,712 |  |       | 8.4  |   |   |           | 338,220   |  |       | 8.1  |  
|                                                                                | Franchise loans                                                                 |   |                        | 46,928  |       |       | 15.1   |   |       |           | 160,072 |  |       | 6.7  |        |   |           | 779,922 |        |       | 24.8  |  |   |           | 952,243 |  |       | 21.9 |   |   |           |          |  |       | 0.0  |  
|                                                                                | Asset-based loans, syndicated loans,
factored
receivables and commercial leases |   |                        | 104,362 |       |       | 33.5   |   |       |           | 310,070 |  |       | 12.9 |        |   |           | 353,362 |        |       | 11.2  |  |   |           | 254,671 |  |       | 5.8  |   |   |           | 113,210   |  |       | 2.7  |  
|                                                                                | Business loans                                                                  |   |                        | 7,212   |       |       | 2.3    |   |       |           | 79,883  |  |       | 3.3  |        |   |           | 81,365  |        |       | 2.6   |  |   |           | 72,977  |  |       | 1.7  |   |   |           | 39,039    |  |       | 0.9  |  
|                                                                                |                                                                                 |   |                        |         |       |       |        |   |       |           |         |  |       |      |        |   |           |         |        |       |       |  |   |           |         |  |       |      |   |   |           |           |  |       |     
|Total commercial loans and leases                                               |                                                                                 |   | 168,657                |         |       | 54.2  |        |   |       | 1,536,457 |         |  | 63.9  |      |        |   | 2,165,897 |         |        | 68.8  |       |  |   | 2,268,438 |         |  | 52.1  |      |   |   | 1,506,449 |           |  | 35.9  |     
|Loans and leases before premiums and
discounts and deferred fees and costs, net |                                                                                 |   | 311,014                |         |       | 100.0 | %      |   |       | 2,402,971 |         |  | 100.0 | %    |        |   | 3,147,861 |         |        | 100.0 | %     |  |   | 4,354,250 |         |  | 100.0 | %    |   |   | 4,191,465 |           |  | 100.0 | %   
|                                                                                |                                                                                 |   |                        |         |       |       |        |   |       |           |         |  |       |      |        |   |           |         |        |       |       |  |   |           |         |  |       |      |   |   |           |           |  |      
|Premiums and discounts and deferred fees
and costs, net                         |                                                                                 |   |                       |         |       |       |        |   |       | 14,215    |         |  |       |      |        |   | 22,878    |         |        |       |       |  |   | 59,404    |         |  |       |      |   |   | 45,209    |           |  |       |     
|                                                                                |                                                                                 |   |                        |         |       |       |        |   |       |           |         |  |       |      |        |   |           |         |        |       |       |  |   |           |         |  |       |      |   |   |           |           | 
|Loans
and leases receivable (2)                                                 |                                                                                 | $ | 311,014                |         |       |       |        |   | $     | 2,417,186 |         |  |       |      |        | $ | 3,170,739 |         |        |       |       |  | $ | 4,413,654 |         |  |       |      |   | $ | 4,236,674 |           |  |       |     
|                                                                                |                                                                                 |   |                        |         |       |       |        |   |       |           |         |  |       |      |        |   |           |         |        |       |       |  |   |           |         |  |       |      |   |   |           |           | 



|(1) |  | Auto loan totals exclude auto-related operating lease assets.                                                                                                                                                                                                                                                                                                                              
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | All loans and leases are classified as held-for-sale at December 31,
2002. Total loans and leases at December 31, 2001 include franchise loans
classified as held-for-sale totaling $40.6 million. Total loans and
leases at December 31, 2000 include franchise loans and single-family
mortgage loans classified as held-for-sale totaling $336.3 million and
$8.9 million, respectively.

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The decrease in loans and leases receivable in 2002, as compared to 2001
was primarily due to the impact of loan sales throughout 2002. During 2002, we
completed the sale of approximately $2.0 billion of loans. The loans sold
consisted of $859.6 million of multi-family mortgage loans, $207.7 million of
commercial real estate loans, $157.4 million of home equity loans, $139.4
million of single-family loans, $67.8 million of business loans, $60.6 million
of franchise loans, $50.8 million of factored receivables, $21.1 million of
commercial leases and $2.7 million of consumer loans. Additionally, we
securitized and sold $453.2 million of our auto loans. Our loans and leases
receivable was also impacted by the June 2002 settlement agreement with JP
Morgan Chase Bank which resulted in the removal of approximately $12 million in
nonaccruing franchise loans from our consolidated balance sheet and loan
payoffs and amortization during the year.

Our exposure to higher-risk franchise assets was further reduced during
the year to $46.9 million at December 31, 2002 from $160.1 million at December
31, 2001. In connection with the Plan, our entire loans and leases receivable
is classified as held-for-sale at December 31, 2002.

The decrease in retail and commercial loans and leases in 2001, as
compared to 2000, was primarily due to loan sales effected throughout the year
as well as loan payoffs and amortization. We sold $488.2 million of franchise
loans, $142.8 million of home equity loans, which included approximately $90.0
million of high loan-to-value home equity loans, and $7.0 million of commercial
loans during 2001.

The following table illustrates the composition of our fixed- and
adjustable-rate loan and lease portfolio (before premiums and discounts,
deferred fees and costs and the allowance for losses on loans and
leases at December 31, 2001 and 2000) as of the dates indicated:

|                                  |             |   |                        |         |      |   |           |           |  |   |           |           | 
|--------------------------------- | ----------- | - | ---------------------- | ------- | ---- | - | --------- | --------- |  | - | --------- | --------- | 
|                                  |             |   | At December 31,       
|                                  |             |   |                       
|                                  |             |   | 2002                   |         | 2001 |   | 2000     
|                                  |             |   |                        |         |      |   |          
|                                  |             |   | (Dollars in thousands)
|Fixed-rate loans and leases:      |             |   |                        |         |      |   |           |           |  |   |           |          
|                                  | Mortgage    |   | $                      | 766     |      |   | $         | 176,346   |  |   | $         | 256,059   | 
|                                  | Home Equity |   |                        |        |      |   |           | 76,776    |  |   |           | 228,321   | 
|                                  | Auto        |   |                        | 142,358 |      |   |           | 444,607   |  |   |           | 287,020   | 
|                                  | Commercial  |   |                        | 1,699   |      |   |           | 97,846    |  |   |           | 105,777   | 
|                                  | Franchise   |   |                        | 46,928  |      |   |           | 120,752   |  |   |           | 490,634   | 
|                                  | Business    |   |                        | 7,211   |      |   |           | 79,883    |  |   |           | 81,365    | 
|                                  |             |   |                        |         |      |   |           |           |  |   |           |           | 
|                                  |             |   | 198,962                |         |      |   | 996,210   |           |  |   | 1,449,176 |          
|Adjustable-rate loans and leases: |             |   |                        |         |      |   |           |           |  |   |           |          
|                                  | Mortgage    |   |                        | 9,389   |      |   |           | 1,087,374 |  |   |           | 1,087,236 | 
|                                  | Home Equity |   |                        |        |      |   |           | 67,843    |  |   |           | 74,576    | 
|                                  | Commercial  |   |                        | 102,663 |      |   |           | 212,224   |  |   |           | 247,585   | 
|                                  | Franchise   |   |                        |        |      |   |           | 39,320    |  |   |           | 289,288   | 
|                                  |             |   |                        |         |      |   |           |           |  |   |           |           | 
|                                  |             |   | 112,052                |         |      |   | 1,406,761 |           |  |   | 1,698,685 |          
|                                  |             |   |                        |         |      |   |           |           |  |   |           |           | 
|Total                             |             | $ | 311,014                |         |      | $ | 2,402,971 |           |  | $ | 3,147,861 |          
|                                  |             |   |                        |         |      |   |           |           |  |   |           |           | 

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The following table illustrates the remaining contractual maturity
distribution of our fixed- and adjustable-rate loan and lease portfolio at December 31, 2002:

|                                  |            |   |                        |        |            |   |            |        |       |   |         |         |  |   |         |         | 
|--------------------------------- | ---------- | - | ---------------------- | ------ | ---------- | - | ---------- | ------ | ----- | - | ------- | ------- |  | - | ------- | ------- | 
|                                  |            |   | At December 31, 2002  
|                                  |            |   |                       
|                                  |            |   |                        |        |            |   | After One  |        |       |   |         |         |  |   |        
|                                  |            |   |                        |        |            |   | Year       |        |       |   |         |         |  |   |        
|                                  |            |   | One Year               |        | Through    |   | After Five |        |       |   |        
|                                  |            |   | or Less                |        | Five Years |   | Years      |        | Total
|                                  |            |   |                        |        |            |   |            |        |      
|                                  |            |   | (Dollars in thousands)
|Fixed-rate loans and leases:      |            |   |                        |        |            |   |            |        |       |   |         |         |  |   |         |        
|                                  | Mortgage   |   | $                      | 67     |            |   | $          | 671    |       |   | $       | 28      |  |   | $       | 766     | 
|                                  | Auto       |   |                        | 826    |            |   |            | 13,672 |       |   |         | 127,860 |  |   |         | 142,358 | 
|                                  | Commercial |   |                        | 1,699  |            |   |            |       |       |   |         |        |  |   |         | 1,699   | 
|                                  | Franchise  |   |                        | 26     |            |   |            | 8,586  |       |   |         | 38,316  |  |   |         | 46,928  | 
|                                  | Business   |   |                        | 83     |            |   |            | 482    |       |   |         | 6,646   |  |   |         | 7,211   | 
|                                  |            |   |                        |        |            |   |            |        |       |   |         |         |  |   |         |         | 
|                                  |            |   | 2,701                  |        |            |   | 23,411     |        |       |   | 172,850 |         |  |   | 198,962 |        
|Adjustable-rate loans and leases: |            |   |                        |        |            |   |            |        |       |   |         |         |  |   |         |        
|                                  | Mortgage   |   |                        | 241    |            |   |            | 960    |       |   |         | 8,188   |  |   |         | 9,389   | 
|                                  | Commercial |   |                        | 82,100 |            |   |            | 20,563 |       |   |         |        |  |   |         | 102,663 | 
|                                  |            |   |                        |        |            |   |            |        |       |   |         |         |  |   |         |         | 
|                                  |            |   | 82,341                 |        |            |   | 21,523     |        |       |   | 8,188   |         |  |   | 112,052 |        
|                                  |            |   |                        |        |            |   |            |        |       |   |         |         |  |   |         |         | 
|Total                             |            | $ | 85,042                 |        |            | $ | 44,934     |        |       | $ | 181,038 |         |  | $ | 311,014 |        
|                                  |            |   |                        |        |            |   |            |        |       |   |         |         |  |   |         |         | 

Loan and Lease Originations and Purchases

The following table illustrates loans and leases, including operating
lease assets, originated and purchased for the years indicated:

|                                |                    |                                                                                 |  |                                 |  |      |         |         |         |   |         |         |         |   |           |           |         |  |  |  |  | 
|------------------------------- | ------------------ | ------------------------------------------------------------------------------- |  | ------------------------------- |  | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | - | --------- | --------- | ------- |  |  |  |  | 
|                                |                    |                                                                                 |  | For the Year Ended December 31,
|                                |                    |                                                                                 |  |                                 |  |      |         |        
|                                |                    |                                                                                 |  | 2002                            |  | 2001 |         | 2000    |         |   |         |        
|                                |                    |                                                                                 |  |                                 |  |      |         |         |         |   |         |        
|                                |                    |                                                                                 |  | (Dollars in thousands)         
|Loan and Lease Production:      |                    |                                                                                 |  |                                 |  |      |         |         |         |   |         |         |         |   |           |          
|                                | Originations:      |                                                                                 |  |                                 |  |      |         |         |         |   |         |         |         |   |           |           |        
|                                |                    | Auto
loans and leases (1)                                                       |  |                                 |  |      |         | $       | 314,731 |   |         | $       | 323,619 |   |           | $         | 403,336 | 
|                                |                    | Home equity loans and lines of credit                                           |  |                                 |  |      |         |         | 87,452  |   |         |         | 94,026  |   |           |           | 71,883  | 
|                                |                    | Multi-family and commercial mortgage loans                                      |  |                                 |  |      |         |         | 217,788 |   |         |         | 245,152 |   |           |           | 168,520 | 
|                                |                    | Franchise
loans (2)                                                             |  |                                 |  |      |         |         |        |   |         |         |        |   |           |           | 299,878 | 
|                                |                    | Bankers
Mutual multi-family loans (2) (3)                                       |  |                                 |  |      |         |         |        |   |         |         |        |   |           |           | 220,146 | 
|                                |                    | Asset-based loans, syndicated loans, factored
receivables and commercial leases |  |                                 |  |      |         |         | 29,658  |   |         |         | 62,513  |   |           |           | 150,545 | 
|                                |                    | Business loans                                                                  |  |                                 |  |      |         |         | 36,590  |   |         |         | 60,310  |   |           |           | 67,078  | 
|                                |                    |                                                                                 |  |                                 |  |      |         |         |         |   |         |         |         |   |           |           |         | 
|                                | Total originations |                                                                                 |  |                                 |  |      |         | 686,219 |         |   |         | 785,620 |         |   |           | 1,381,386 |        
|                                |                    |                                                                                 |  |                                 |  |      |         |         |         |   |         |         |         |   |           |           |         | 
|                                | Purchases:         |                                                                                 |  |                                 |  |      |         |         |         |   |         |         |         |   |           |           |        
|                                |                    | Home
equity loans and lines of credit                                           |  |                                 |  |      |         |         |        |   |         |         | 12,933  |   |           |           | 826     | 
|                                |                    | Auto
loans (4)                                                                  |  |                                 |  |      |         |         |        |   |         |         |        |   |           |           | 25,017  | 
|                                |                    | Mortgage loans                                                                  |  |                                 |  |      |         |         |        |   |         |         |        |   |           |           | 2,006   | 
|                                |                    |                                                                                 |  |                                 |  |      |         |         |         |   |         |         |         |   |           |           |         | 
|                                | Total purchases    |                                                                                 |  |                                 |  |      |         |        |         |   |         | 12,933  |         |   |           | 27,849    |        
|                                |                    |                                                                                 |  |                                 |  |      |         |         |         |   |         |         |         |   |           |           |         | 
|Total loan and lease production |                    |                                                                                 |  |                                 |  | $    | 686,219 |         |         | $ | 798,553 |         |         | $ | 1,409,235 |          
|                                |                    |                                                                                 |  |                                 |  |      |         |         |         |   |         |         |         |   |           |           |         | 



|(1) |  | Includes auto-related operating lease assets totaling $114.6 million for
2000, which is not included in our total loan and lease portfolio in
accordance with GAAP.                                          
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Effective September 30, 2000, our franchise lending division was shut
down. Effective June 30, 2000, substantially all of the assets and
liabilities of Bankers Mutual were sold.                            
|   
|(3) |  | 100% of Bankers Mutual
multi-family mortgage loans were originated and sold through seller-servicer
programs administered by Fannie Mae and Freddie Mac.                                                     
|   
|(4) |  | Auto loan and lease purchases for the year ended December 31, 2000
included $22.2 million related to the repurchase of loans as a result of
exercising the cleanup call on our 1997 auto loan securitization.

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Prior to the approval of the Plan and the sale of Bay View Banks retail
banking assets to U.S. Bank, our loan and lease origination and purchase
activity during 2002 and 2001 were consistent with our strategy of growing our
core retail and commercial banking businesses. We focused our loan origination
efforts on high-quality consumer and commercial loans including multi-family
and commercial mortgage loans. During 2000, our loan and lease origination and
purchase activity was primarily focused on consumer and commercial assets which
provided higher risk-adjusted yields compared to the traditional mortgage-based
assets. We ceased originating multi-family and commercial mortgage loans in
August 2002 subsequent to the Washington Mutual transaction. The home equity
loans and commercial and business loans (excluding factored receivables and
asset-based loans) are part of the retail business assumed by U.S. Bank. We
ceased originating franchise loans during 2000 with the shutdown of our
franchise loan production unit.

Credit Quality

We define nonperforming assets as nonaccrual loans and leases, real estate
owned, defaulted mortgage-backed securities and other repossessed assets. We
define nonaccrual loans and leases as loans and leases 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 and
leases less than 90 days delinquent 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 and leases.

The following table illustrates our nonperforming assets as of the dates
indicated:

|                            |                        |                 |        |      |  |      |        |      |  |      |         |  |  |   |        |  |  |   |        | 
|--------------------------- | ---------------------- | --------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------- |  |  | - | ------ |  |  | - | ------ | 
|                            |                        | At December 31,
|                            |                        |                
|                            |                        | 2002            |        | 2001 |  | 2000 |        | 1999 |  | 1998
|                            |                        |                 |        |      |  |      |        |      |  |     
|                            | (Dollars in thousands)
|Nonaccrual loans and leases |                        | $               | 24,683 |      |  | $    | 79,722 |      |  | $    | 99,608  |  |  | $ | 22,918 |  |  | $ | 14,700 | 
|Real estate owned           |                        |                 | 2,402  |      |  |      | 9,462  |      |  |      | 1,041   |  |  |   | 2,467  |  |  |   | 2,666  | 
|Other repossessed assets    |                        |                 | 183    |      |  |      | 633    |      |  |      | 524     |  |  |   | 554    |  |  |   | 654    | 
|                            |                        |                 |        |      |  |      |        |      |  |      |         |  |  |   |        |  |  |   |        | 
|Nonperforming assets        |                        | $               | 27,268 |      |  | $    | 89,817 |      |  | $    | 101,173 |  |  | $ | 25,939 |  |  | $ | 18,020 | 
|                            |                        |                 |        |      |  |      |        |      |  |      |         |  |  |   |        |  |  |   |        | 

The decrease in total nonperforming assets at December 31, 2002, as
compared to December 31, 2001, was primarily due to decreases in nonaccruing
franchise loans, commercial real estate loans, single-family and multi-family
mortgage loans and factored receivables, primarily resulting from loan sales.
Additionally, total nonperforming assets declined due to mark-to-market
valuation adjustments of $16.4 million associated with our adoption of
liquidation basis accounting, the removal of the $12 million in nonperforming
franchise loans related to the JP Morgan Chase settlement and the sale of
approximately $6.3 million in franchise real estate owned. Nonperforming
assets excluding franchise-related assets were $6.3 million at December 31,
2002, as compared to $20.2 million at December 31, 2001, while non-franchise
nonaccrual loans and leases were $5.9 million at December 31, 2002 as compared
to $17.5 million at December 31, 2001.

Interest on nonaccrual loans and leases that was not recorded in income
was 5.9 million for the year ended December 31, 2002. Actual interest that we
recognized on these nonaccrual loans and leases was not significant in 2002.

The decrease in total nonperforming assets in 2001, as compared to 2000,
was primarily due to the declining balances of our mortgage loan and home
equity loan portfolios, primarily high loan-to-value home equity loans,
combined with resolution of specific franchise problem credits during 2001.
Non-franchise nonaccrual loans and leases decreased to $17.5 million at
December 31, 2001 from $28.8 million at December 31, 2000. The increase in
real estate owned was primarily due to the foreclosure of certain franchise
properties. Franchise real estate owned totaled $7.3 million at December 31,
2001.

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The following table illustrates nonperforming assets and nonperforming
assets as a percentage of consolidated assets based on historical platforms:

|                          |                                                          |   |                                                                   |        |      |  |      |      |   |  |  |  |  |  |  |  |  |   |        |        |  |  |  |  |  |  |      |      |   |  |  |  |  |   |         |        |  |  |  |  |  |  |      |      |  
|------------------------- | -------------------------------------------------------- | - | ----------------------------------------------------------------- | ------ | ---- |  | ---- | ---- | - |  |  |  |  |  |  |  |  | - | ------ | ------ |  |  |  |  |  |  | ---- | ---- | - |  |  |  |  | - | ------- | ------ |  |  |  |  |  |  | ---- | ---- | -
|                          |                                                          |   | Nonperforming Assets as a Percentage of Consolidated Total Assets
|                          |                                                          |   |                                                                  
|                          |                                                          |   | At December 31,                                                  
|                          |                                                          |   |                                                                  
|                          |                                                          |   | 2002                                                              |        | 2001 |  | 2000
|                          |                                                          |   |                                                                   |        |      |  |     
|                          |                                                          |   | (Dollars in thousands)                                           
|Retail Platform:          |                                                          |   |                                                                   |        |      |  |      |      |   |  |  |  |  |  |  |  |  |   |        |        |  |  |  |  |  |  |      |      |   |  |  |  |  |   |         |        |  |  |  |  |  |  |      |     
|                          | Single-family mortgage                                   |   | $                                                                 |       |      |  |      | 0.00 | % |  |  |  |  |  |  |  |  |   | $      | 2,455  |  |  |  |  |  |  |      | 0.06 | % |  |  |  |  |   | $       | 4,599  |  |  |  |  |  |  |      | 0.09 | %
|                          | Home equity loans and lines
of credit                    |   |                                                                   |       |      |  |      | 0.00 |   |  |  |  |  |  |  |  |  |   |        | 470    |  |  |  |  |  |  |      | 0.01 |   |  |  |  |  |   |         | 3,919  |  |  |  |  |  |  |      | 0.07 |  
|                          | Auto                                                     |   |                                                                   | 284    |      |  |      | 0.03 |   |  |  |  |  |  |  |  |  |   |        | 1,034  |  |  |  |  |  |  |      | 0.03 |   |  |  |  |  |   |         | 706    |  |  |  |  |  |  |      | 0.01 |  
|                          |                                                          |   |                                                                   |        |      |  |      |      |   |  |  |  |  |  |  |  |  |   |        |        |  |  |  |  |  |  |      |      |   |  |  |  |  |   |         |        |  |  |  |  |  |  |      |     
|Total Retail Platform     |                                                          |   | 284                                                               |        |      |  | 0.03 |      |   |  |  |  |  |  |  |  |  |   | 3,959  |        |  |  |  |  |  |  | 0.10 |      |   |  |  |  |  |   | 9,224   |        |  |  |  |  |  |  | 0.17 |     
|Commercial Platform:      |                                                          |   |                                                                   |        |      |  |      |      |   |  |  |  |  |  |  |  |  |   |        |        |  |  |  |  |  |  |      |      |   |  |  |  |  |   |         |        |  |  |  |  |  |  |      |     
|                          | Multi-family mortgage                                    |   |                                                                   | 84     |      |  |      | 0.01 |   |  |  |  |  |  |  |  |  |   |        | 67     |  |  |  |  |  |  |      |     |   |  |  |  |  |   |         | 337    |  |  |  |  |  |  |      | 0.01 |  
|                          | Commercial real estate                                   |   |                                                                   | 948    |      |  |      | 0.11 |   |  |  |  |  |  |  |  |  |   |        | 7,822  |  |  |  |  |  |  |      | 0.19 |   |  |  |  |  |   |         | 12,025 |  |  |  |  |  |  |      | 0.23 |  
|                          | Franchise loans                                          |   |                                                                   | 21,005 |      |  |      | 2.40 |   |  |  |  |  |  |  |  |  |   |        | 69,583 |  |  |  |  |  |  |      | 1.74 |   |  |  |  |  |   |         | 71,790 |  |  |  |  |  |  |      | 1.34 |  
|                          | Asset-based loans, factoring
loans and commercial leases |   |                                                                   | 4,850  |      |  |      | 0.55 |   |  |  |  |  |  |  |  |  |   |        | 8,003  |  |  |  |  |  |  |      | 0.20 |   |  |  |  |  |   |         | 6,565  |  |  |  |  |  |  |      | 0.12 |  
|                          | Business loans                                           |   |                                                                   | 97     |      |  |      | 0.01 |   |  |  |  |  |  |  |  |  |   |        | 383    |  |  |  |  |  |  |      | 0.01 |   |  |  |  |  |   |         | 1,232  |  |  |  |  |  |  |      | 0.02 |  
|                          |                                                          |   |                                                                   |        |      |  |      |      |   |  |  |  |  |  |  |  |  |   |        |        |  |  |  |  |  |  |      |      |   |  |  |  |  |   |         |        |  |  |  |  |  |  |      |     
|Total Commercial Platform |                                                          |   | 26,984                                                            |        |      |  | 3.08 |      |   |  |  |  |  |  |  |  |  |   | 85,858 |        |  |  |  |  |  |  | 2.14 |      |   |  |  |  |  |   | 91,949  |        |  |  |  |  |  |  | 1.72 |     
|                          |                                                          |   |                                                                   |        |      |  |      |      |   |  |  |  |  |  |  |  |  |   |        |        |  |  |  |  |  |  |      |      |   |  |  |  |  |   |         |        |  |  |  |  |  |  |      |     
|Total                     |                                                          | $ | 27,268                                                            |        |      |  | 3.11 | %    |   |  |  |  |  |  |  |  |  | $ | 89,817 |        |  |  |  |  |  |  | 2.24 | %    |   |  |  |  |  | $ | 101,173 |        |  |  |  |  |  |  | 1.89 | %   
|                          |                                                          |   |                                                                   |        |      |  |      |      |   |  |  |  |  |  |  |  |  |   |        |        |  |  |  |  |  |  |      |      |   |  |  |  |  |   |         |        |  |  |  |  |  |  |      |     

The following table illustrates loans and leases delinquent 60 days or
more as a percentage of gross loans and leases based on historical platforms:

|                    |  |                                                                |        |      |  |      |      |   |  |  |  |  |  |                        |        |  |  |  |      |   |  |  |  |  |  |   |        |  |  |  |      |   |  |  |  | 
|------------------- |  | -------------------------------------------------------------- | ------ | ---- |  | ---- | ---- | - |  |  |  |  |  | ---------------------- | ------ |  |  |  | ---- | - |  |  |  |  |  | - | ------ |  |  |  | ---- | - |  |  |  | 
|                    |  | Loans and Leases Delinquent 60 Days or More as a Percentage of
|                    |  | Gross Loans and Leases                                        
|                    |  |                                                               
|                    |  | At December 31,                                               
|                    |  |                                                               
|                    |  | 2002                                                           |        | 2001 |  | 2000
|                    |  |                                                                |        |      |  |     
|                    |  |                                                                |        |      |  |      |      |   |  |  |  |  |  | (Dollars in thousands) |        |  |  |  |      |   |  |  |  |  |  |   |        |  |  | 
|Retail Platform     |  | $                                                              | 272    |      |  |      | 0.09 | % |  |  |  |  |  | $                      | 7,802  |  |  |  | 0.32 | % |  |  |  |  |  | $ | 15,139 |  |  |  | 0.48 | %
|Commercial Platform |  |                                                                | 17,481 |      |  |      | 5.62 |   |  |  |  |  |  |                        | 62,221 |  |  |  | 2.58 |   |  |  |  |  |  |   | 68,648 |  |  |  | 2.16 |  
|                    |  |                                                                |        |      |  |      |      |   |  |  |  |  |  |                        |        |  |  |  |      |   |  |  |  |  |  |   |        |  |  |  |      |  
|Total               |  | $                                                              | 17,753 |      |  |      | 5.71 | % |  |  |  |  |  | $                      | 70,023 |  |  |  | 2.90 | % |  |  |  |  |  | $ | 83,787 |  |  |  | 2.64 | %
|                    |  |                                                                |        |      |  |      |      |   |  |  |  |  |  |                        |        |  |  |  |      |   |  |  |  |  |  |   |        |  |  |  |      |  

Allowance for Loan and Lease Losses (ALLL)

Upon our adoption of liquidation basis accounting as of September 30,
2002, we reallocated the balance of the ALLL as mark-to-market adjustments to
individual loans and leases and groups of homogeneous loans in liquidation.
(See Note 2 to the Consolidated Financial Statements, Plan of Dissolution and
Stockholder Liquidity, at Item 8, Financial Statements and Supplementary
Data, for a discussion of mark-to-market valuation adjustments to the loan
portfolio).

Prior to this reallocation, we used the process described below to
evaluate the loan portfolio and determine the adequacy of the allowance for
loan and lease losses consistent with going concern basis accounting.

Credit risk and potential loss are inherent in the lending process. The
purpose of the ALLL is to absorb losses that are probable and estimable in our
loan and lease portfolio. The ALLL is augmented through charges to earnings
called provisions. Known losses are charged to the ALLL. Management seeks to
reduce credit risk and therefore potential loss by administering established
lending policies and underwriting procedures combined with continuous
monitoring of the portfolio.

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The adequacy of the ALLL is formally evaluated on a quarterly basis. As
discussed in more detail below, specific credits and the portfolio in general
are evaluated by several methods incorporating historical performance,
collateral protection, cash flow and analysis of current economic conditions.
This evaluation culminates with a judgment on the probability of collection
based on existing and probable near-term events. The underwriting of new
credits may be changed or modified depending on the results of these on-going
evaluations. Discontinued lending operations receive the same scrutiny as
on-going operations but do not have the additional risk inherent in accepting
new business.

After the quarterly evaluations are completed and the various requirements
are tabulated, any deficiency is covered through provisions to the ALLL.
Through the budget process, these provisions are estimated for the entire year
and adjusted after the quarterly evaluations if necessary. This entire process
of evaluating the adequacy of the ALLL is subjective and judgmental. In
accordance with our methodology, this process consists of three major
components as described below:



| | 1. | Allowance for loans and leases that are individually evaluated.These
loans and leases are generally larger commercial or income-producing real
estate loans or leases that are evaluated on an individual basis at least
quarterly in accordance with our internal grading processes and smaller
homogeneous loans that have been adversely graded. Loans adversely graded
receive a specific allowance allocation predicated on the individual
analysis using the various techniques mentioned above. Pass credits
within each loan category receive a general allowance component consistent
with the evaluation of the factors within that portfolio. Loans
considered impaired receive further testing as required under Statement of
Financial Accounting Standards No. 114, Accounting by Creditors for
Impairment of a Loan, and any resulting permanent impairment is charged
off to the ALLL. These grades and the specific allowance allocations are
routinely reviewed for accuracy through an independent review process and
by the banks regulatory agencies.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. | Allowance for groups of homogeneous loans and leases that currently
exhibit no identifiable weaknesses and are collectively evaluated. The
smaller balance homogeneous loans and leases generally consist of
single-family mortgage loans and consumer loans, including auto loans,
home equity loans and lines of credit and unsecured personal loans. The
larger loans and leases generally consist of commercial or
income-producing real estate loans and leases that are grouped into pools
with common characteristics. An allowance factor is derived that is an
estimate of the probable losses that are inherent in these pools. These
factors are based primarily on the historical loss experience tracked over
various time periods up to three years with specific attention given to
recent trend analysis. Other factors including delinquency, adverse
classification trends, and industry experience are also evaluated. The
resulting allowance is the sum of the allocations in each category.                                                            
|
| | 3. | Unallocated Allowance.The third component is to absorb losses not
provided for by the other two components. Other factors come into play
that may have an impact on loan losses. These include, but are not
limited to, changes in economic conditions in areas where we lend money,
increased risk in lending into new areas with new products, and timing
difference between the receipt and evaluation of loan data. Another
important risk that this component takes into consideration is the general
level of imprecision involved with any ALLL analysis process. The first
two components are driven primarily by historical factors and evaluation
of existing and near-term events. While these components are believed to
be adequate under existing conditions, they remain subjective and
judgmental. The unallocated portion of the ALLL is managements best
effort to ensure that the overall allowance appropriately reflects the
probable losses inherent in the loan and lease portfolio.                                                                 

The ALLL at September 30, 2002 of $28.9 million was reallocated as
mark-to-market adjustments to individual loans and leases and groups of
homogeneous loans in liquidation. The ALLL was $49.8 million at December 31,
2001 and $73.7 million at December 31, 2000. The decrease in the ALLL before
reallocation, as compared to the ALLL balance at December 31, 2001, was
primarily related to net charge-offs in excess of loan loss provision expense
during 2002. In addition, the ALLL decreased as we transferred and
subsequently sold loans from our held-for-investment portfolio to our
held-for-sale portfolio during the first nine months of 2002. The transfer of
loans from held-for-investment to held-for-sale during the first nine months
2002 resulted in a $10.7 million reduction in

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the ALLL related to the sale and
payoff of multi-family mortgage, commercial real estate, auto and franchise and
other commercial loans.

The decrease in the ALLL at December 31, 2001, as compared to December 31,
2000, was primarily related to the decrease in loans held-for-investment during
2001 due to loans transferred from held-for-investment to held-for-sale and
subsequently sold. The transfer of loans from held-for-investment to
held-for-sale resulted in a $53.6 million reduction to the allowance for loan
and lease losses related to mark-to-market adjustments on these loans,
consisting of $48.8 million in net reductions related to franchise loans and
$4.8 million related to the sale of home equity loans during 2001.

The following table illustrates the allowance for loan and lease losses
for the periods indicated:

|                                                                                                                                      |                                                                                 |   |                        |         |                                 |   |         |         |      |   |         |         |   |   |         |         |   |   |         |        |  
|------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | - | ---------------------- | ------- | ------------------------------- | - | ------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | - | - | ------- | ------ | -
|                                                                                                                                      |                                                                                 |   | For the Nine           |         |                                 |   |         |         |      |   |         |         |   |   |         |         |   |   |        
|                                                                                                                                      |                                                                                 |   | Months Ended           |         |                                 |   |         |         |      |   |         |         |   |   |         |         |   |   |        
|                                                                                                                                      |                                                                                 |   | September 30,          |         | For the Year Ended December 31,
|                                                                                                                                      |                                                                                 |   |                        |         |                                
|                                                                                                                                      |                                                                                 |   | 2002                   |         | 2001                            |   | 2000    |         | 1999 |   | 1998   
|                                                                                                                                      |                                                                                 |   |                        |         |                                 |   |         |         |      |   |        
|                                                                                                                                      |                                                                                 |   | (Dollars in thousands)
|Beginning balance                                                                                                                     |                                                                                 | $ | 49,791                 |         |                                 | $ | 73,738  |         |      | $ | 52,161  |         |   | $ | 45,405  |         |   | $ | 38,458  |       
|Allowance
related to acquisitions (1)                                                                                                 |                                                                                 |   |                       |         |                                 |   |        |         |      |   |        |         |   |   | 8,256   |         |   |   | 11,374  |       
|Transfers of loans to held-for-sale                                                                                                   |                                                                                 |   | (10,658                | )       |                                 |   | (53,606 | )       |      |   | (15,210 | )       |   |   | (2,656  | )       |   |   |        |       
|Charge-offs:                                                                                                                          |                                                                                 |   |                        |         |                                 |   |         |         |      |   |         |         |   |   |         |         |   |   |         |       
|                                                                                                                                      | Mortgage                                                                        |   |                        |        |                                 |   |         | (1,488  | )    |   |         | (422    | ) |   |         | (827    | ) |   |         | (2,480 | )
|                                                                                                                                      | Home equity loans and lines of credit                                           |   |                        | (1,309  | )                               |   |         | (10,296 | )    |   |         | (18,014 | ) |   |         | (19,568 | ) |   |         | (7,152 | )
|                                                                                                                                      | Auto                                                                            |   |                        | (3,696  | )                               |   |         | (3,809  | )    |   |         | (2,953  | ) |   |         | (7,674  | ) |   |         | (8,604 | )
|                                                                                                                                      | Asset-based loans, syndicated loans,
factored receivables and commercial
leases |   |                        | (6,987  | )                               |   |         | (9,397  | )    |   |         | (4,425  | ) |   |         | (3,176  | ) |   |         | (828   | )
|                                                                                                                                      | Franchise                                                                       |   |                        | (11,363 | )                               |   |         | (24,197 | )    |   |         | (1,128  | ) |   |         |        |   |   |         |       |  
|                                                                                                                                      | Business
(2)                                                                    |   |                        | (416    | )                               |   |         | (2,509  | )    |   |         | (7,926  | ) |   |         |        |   |   |         |       |  
|                                                                                                                                      |                                                                                 |   |                        |         |                                 |   |         |         |      |   |         |         |   |   |         |         |   |   |         |       
|                                                                                                                                      |                                                                                 |   | (23,771                | )       |                                 |   | (51,696 | )       |      |   | (34,868 | )       |   |   | (31,245 | )       |   |   | (19,064 | )     
|Recoveries:                                                                                                                           |                                                                                 |   |                        |         |                                 |   |         |         |      |   |         |         |   |   |         |         |   |   |         |       
|                                                                                                                                      | Mortgage                                                                        |   |                        |        |                                 |   |         | 283     |      |   |         | 218     |   |   |         | 607     |   |   |         | 2,290  |  
|                                                                                                                                      | Home
equity loans and lines of credit (3)                                       |   |                        | 464     |                                 |   |         | 4,602   |      |   |         | 3,157   |   |   |         | 1,530   |   |   |         | 456    |  
|                                                                                                                                      | Auto                                                                            |   |                        | 1,039   |                                 |   |         | 1,526   |      |   |         | 1,488   |   |   |         | 1,722   |   |   |         | 2,599  |  
|                                                                                                                                      | Asset-based loans, syndicated loans,
factored
receivables and commercial leases |   |                        | 1,220   |                                 |   |         | 2,479   |      |   |         | 1,366   |   |   |         | 231     |   |   |         | 178    |  
|                                                                                                                                      | Franchise                                                                       |   |                        | 126     |                                 |   |         | 196     |      |   |         | 2,826   |   |   |         |        |   |   |         |       |  
|                                                                                                                                      | Business                                                                        |   |                        | 38      |                                 |   |         | 379     |      |   |         |        |   |   |         |        |   |   |         |       |  
|                                                                                                                                      |                                                                                 |   |                        |         |                                 |   |         |         |      |   |         |         |   |   |         |         |   |   |         |       
|                                                                                                                                      |                                                                                 |   | 2,887                  |         |                                 |   | 9,465   |         |      |   | 9,055   |         |   |   | 4,090   |         |   |   | 5,523   |       
|Net charge-offs                                                                                                                       |                                                                                 |   | (20,884                | )       |                                 |   | (42,231 | )       |      |   | (25,813 | )       |   |   | (27,155 | )       |   |   | (13,541 | )     
|Provision for loan and lease losses                                                                                                   |                                                                                 |   | 10,700                 |         |                                 |   | 71,890  |         |      |   | 62,600  |         |   |   | 28,311  |         |   |   | 9,114   |       
|Reallocation of allowance as mark-to-market
adjustments to individual loans and
leases and
groups of homogeneous loans in liquidation |                                                                                 |   | (28,949                | )       |                                 |   |        |         |      |   |        |         |   |   |        |         |   |   |        |       
|                                                                                                                                      |                                                                                 |   |                        |         |                                 |   |         |         |      |   |         |         |   |   |         |         |   |   |         |       
|Ending balance                                                                                                                        |                                                                                 | $ |                       |         |                                 | $ | 49,791  |         |      | $ | 73,738  |         |   | $ | 52,161  |         |   | $ | 45,405  |       
|                                                                                                                                      |                                                                                 |   |                        |         |                                 |   |         |         |      |   |         |         |   |   |         |         |   |   |         |       
|Net charge-offs to average total loans and
leases (annualized)                                                                        |                                                                                 |   | 1.29                   | %       |                                 |   | 1.51    | %       |      |   | 0.65    | %       |   |   | 0.61    | %       |   |   | 0.32    | %     
|                                                                                                                                      |                                                                                 |   |                        |         |                                 |   |         |         |      |   |         |         |   |   |         |         |   |   |         |       



|(1) |  | We acquired America First Eureka Holdings in January 1998, Franchise
Mortgage Acceptance Company in November 1999 and Goodman Factors, Inc. in
February 2000.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Charge-offs for the year ended December 31, 2000 include $7.9 million in
FMAC-originated funeral home loans.                                                 
|   
|(3) |  | 2001 amount includes a $2.6 million recovery on sale of charged-off high
loan-to-value home equity loans totaling $45.0 million.                             

Due to the substantial liquidation of our loan portfolios, the Company
expects a decrease in future charge-off levels.

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Deposits

The following table illustrates deposits as of the dates indicated:

|                                                        |  |                        |         |       |  |      |  |  |  |        |      |       |  |  |  |  |  |        |           |       |  |  |  |  |  |  |      |   |  |  |  |  |  |   |           |  |  |  |  |  |  |  |      |  
|------------------------------------------------------- |  | ---------------------- | ------- | ----- |  | ---- |  |  |  | ------ | ---- | ----- |  |  |  |  |  | ------ | --------- | ----- |  |  |  |  |  |  | ---- | - |  |  |  |  |  | - | --------- |  |  |  |  |  |  |  | ---- | -
|                                                        |  | At December 31,       
|                                                        |  |                       
|                                                        |  | 2002                   |         | 2001  |  | 2000
|                                                        |  |                        |         |       |  |      |  |  |  |        |      |       |  | 
|                                                        |  | Amount                 |         | Rates |  |      |  |  |  | Amount |      | Rates |  |  |  |  |  | Amount |           | Rates
|                                                        |  |                        |         |       |  |      |  |  |  |        |      |       |  |  |  |  |  |        |           |      
|                                                        |  | (Dollars in thousands)
|Transaction accounts                                    |  | $                      |        |       |  |      |  |  |  |        |     |       |  |  |  |  |  | $      | 1,950,699 |       |  |  |  |  |  |  | 1.48 | % |  |  |  |  |  | $ | 1,608,499 |  |  |  |  |  |  |  | 3.59 | %
|Retail certificates of deposit                          |  |                        |        |       |  |      |  |  |  |        |     |       |  |  |  |  |  |        | 1,284,228 |       |  |  |  |  |  |  | 3.53 |   |  |  |  |  |  |   | 1,872,562 |  |  |  |  |  |  |  | 6.01 |  
|                                                        |  |                        |         |       |  |      |  |  |  |        |      |       |  |  |  |  |  |        |           |       |  |  |  |  |  |  |      |   |  |  |  |  |  |   |           |  |  |  |  |  |  |  |      |  
|Total retail deposits                                   |  |                        |        |       |  |      |  |  |  |        |     |       |  |  |  |  |  |        | 3,234,927 |       |  |  |  |  |  |  | 2.29 |   |  |  |  |  |  |   | 3,481,061 |  |  |  |  |  |  |  | 4.89 |  
|Brokered certificates of deposit                        |  |                        | 224,189 |       |  |      |  |  |  |        | 2.35 | %     |  |  |  |  |  |        |          |       |  |  |  |  |  |  |     |   |  |  |  |  |  |   | 265,251   |  |  |  |  |  |  |  | 6.86 |  
|                                                        |  |                        |         |       |  |      |  |  |  |        |      |       |  |  |  |  |  |        |           |       |  |  |  |  |  |  |      |   |  |  |  |  |  |   |           |  |  |  |  |  |  |  |      |  
|Total                                                   |  | $                      | 224,189 |       |  |      |  |  |  |        | 2.35 | %     |  |  |  |  |  | $      | 3,234,927 |       |  |  |  |  |  |  | 2.29 | % |  |  |  |  |  | $ | 3,746,312 |  |  |  |  |  |  |  | 5.03 | %
|                                                        |  |                        |         |       |  |      |  |  |  |        |      |       |  |  |  |  |  |        |           |       |  |  |  |  |  |  |      |   |  |  |  |  |  |   |           |  |  |  |  |  |  |  |      |  
|Transaction accounts as a
percentage of retail deposits |  |                        |         |       |  |      |  |  |  |        |     | %     |  |  |  |  |  |        |           |       |  |  |  |  |  |  | 60.3 | % |  |  |  |  |  |   |           |  |  |  |  |  |  |  | 46.2 | %
|                                                        |  |                        |         |       |  |      |  |  |  |        |      |       |  |  |  |  |  |        |           |       |  |  |  |  |  |  |      |   |  |  |  |  |  |   |           |  |  |  |  |  |  |  |      |  

During the second quarter of 2002, we began acquiring brokered
certificates of deposit to provide additional liquidity in anticipation of
funding the U.S. Bank sale transaction. As previously discussed, on November
1, 2002, we completed a sale of the Banks retail banking assets to U.S. Bank,
N.A., a wholly-owned subsidiary of U.S. Bancorp. U.S. Bank, N.A. assumed the
Banks retail deposits totaling $3.307 billion, its branches and service center
operations, and purchased $327.7 million of loans.

The decrease in total deposits at December 31, 2001, as compared to
December 31, 2000, was primarily due to maturities of higher-cost certificates
of deposit, including brokered certificates of deposit, partially offset by an
increase in lower-cost transaction accounts.

Retail certificates of deposit of $100,000 or more, by time remaining
until maturity, were as follows:

|                               |  |                        |   |      |  |   |         | 
|------------------------------ |  | ---------------------- | - | ---- |  | - | ------- | 
|                               |  | At December 31,       
|                               |  |                       
|                               |  | 2002                   |   | 2001
|                               |  |                        |   |     
|                               |  | (Dollars in thousands)
|Three months or less           |  | $                      |  |      |  | $ | 161,340 | 
|Over three through six months  |  |                        |  |      |  |   | 82,345  | 
|Over six through twelve months |  |                        |  |      |  |   | 96,759  | 
|Over twelve months             |  |                        |  |      |  |   | 14,574  | 
|                               |  |                        |   |      |  |   |         | 
|Total                          |  | $                      |  |      |  | $ | 355,018 | 
|                               |  |                        |   |      |  |   |         | 

Our brokered certificates of deposit outstanding at December 31, 2002
ranged in amounts from $2.9 million to $19.0 million and are all scheduled to
mature within three months or less.

Borrowings

Beginning in 2001, we significantly reduced our borrowings by completely
eliminating short-term borrowings, including collateralized advances from the
Federal Home Loan Bank of San Francisco, warehouse lines and securities sold
under agreements to repurchase, and paying off outstanding subordinated debt.
Our remaining borrowings include capital securities and other borrowings
related to the financing secured by our auto lease contractual cash flows.

On December 31, 2001, we completed a financing secured by the contractual
cash flows of our auto operating lease portfolio. The transaction was recorded
as a secured financing in accordance with Statement of Financial Accounting
Standards No. 13, Accounting for Leases and resulted in an increase in other
borrowings of $136.5

56



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million at an imputed interest rate of 5.25%. There have
been no new auto leases originated since June 2000 and therefore, the auto
operating lease cash flows decrease monthly and are scheduled to conclude in
November 2005.

In October 2000, we replaced our $500 million franchise loan-related
warehouse line with a $170 million warehouse line used solely to finance
franchise loans held at the parent company that expired March 31, 2001. This
warehouse line was extended and fully paid off in the third quarter of 2001.
Our other warehouse line of $100 million, which was established to fund Bankers
Mutual multi-family loan production, was terminated following the sale of
substantially all of the assets and certain liabilities of Bankers Mutual
during the second quarter of 2000.

On August 18, 1999, Bay View Bank issued $50 million of 10% Subordinated
Notes, which mature in August 2009, a portion of which was used to partially
finance the acquisition of FMAC. In December 1998, we issued $90 million in
Capital Securities yielding 9.76%, which mature on December 31, 2028. A
portion of the proceeds from the Capital Securities were used to redeem our $50
million of 8.42% Senior Debentures which matured on June 1, 1999 and the
remainder for general corporate purposes. In August 1997, we issued $100
million of 9.125% Subordinated Notes, which mature on August 15, 2007, a
portion of which was used to partially finance the acquisition of America First
Eureka Holdings. On December 9, 2002, the Bank redeemed the entire $50 million
of its outstanding 10% Subordinated Notes. Additionally, on November 29, 2002,
we prepaid the entire $100 million of our 9.125% Subordinated Notes at a
premium of 4.563%.

The following table illustrates outstanding borrowings as of the dates
indicated:

|                                                          |  |                        |         |      |  |      |         |  |  |   |           | 
|--------------------------------------------------------- |  | ---------------------- | ------- | ---- |  | ---- | ------- |  |  | - | --------- | 
|                                                          |  | At December 31,       
|                                                          |  |                       
|                                                          |  | 2002                   |         | 2001 |  | 2000
|                                                          |  |                        |         |      |  |     
|                                                          |  | (Dollars in thousands)
|Advances from the Federal Home Loan
Bank of San Francisco |  | $                      |        |      |  | $    |        |  |  | $ | 804,837   | 
|Securities sold under agreements to
repurchase            |  |                        |        |      |  |      |        |  |  |   | 103,241   | 
|Warehouse lines                                           |  |                        |        |      |  |      |        |  |  |   | 94,134    | 
|Subordinated Notes, net                                   |  |                        |        |      |  |      | 149,632 |  |  |   | 149,567   | 
|Other borrowings                                          |  |                        | 61,969  |      |  |      | 137,536 |  |  |   | 1,664     | 
|Capital Securities                                        |  |                        | 90,000  |      |  |      | 90,000  |  |  |   | 90,000    | 
|                                                          |  |                        |         |      |  |      |         |  |  |   |           | 
|Total                                                     |  | $                      | 151,969 |      |  | $    | 377,168 |  |  | $ | 1,243,443 | 
|                                                          |  |                        |         |      |  |      |         |  |  |   |           | 

The lower borrowing level at December 31, 2002, as compared to December
31, 2001, was primarily due to the pay-off of our outstanding subordinated
debt, as discussed above, combined with a decrease in other borrowings related
to the declining balance of the financing secured by our auto lease contractual
cash flows.

The lower borrowing level at December 31, 2001, as compared to December
31, 2000, was primarily due to a reduction in Federal Home Loan Bank advances
resulting from prepayments of $614 million combined with $191 million in net
maturities that were not renewed, reduction in securities sold under agreements
to repurchase and the pay-off of the warehouse line related to franchise loans.
These reductions were partially offset by an increase in other borrowings
related to the December 31, 2001 financing secured by our auto lease
contractual cash flows.

We are
currently in the process of negotiating a revolving line of credit
facility to finance BVACs current portfolio of automotive loans and its future
originations of automotive loans. At December 31, 2002, the Company had
brokered deposits outstanding which provided a significant source of funding
for BVACs lending operations. This revolving line of credit is intended to
replace the maturing brokered deposits. BVAC intends to periodically
securitize and sell its production of automotive loans in order to repay the
line of credit. There can be no assurances that the Company will be successful
in obtaining this financing.

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Short-term borrowings are defined as borrowings due within one year or
less. The following table illustrates our short-term borrowings as of the
dates indicated:

|                                                                                        |  |                 |  |  |  |                        |   |      |  |      |   |   |  |   |         |  
|--------------------------------------------------------------------------------------- |  | --------------- |  |  |  | ---------------------- | - | ---- |  | ---- | - | - |  | - | ------- | -
|                                                                                        |  | At December 31,
|                                                                                        |  |                
|                                                                                        |  |                 |  |  |  | 2002                   |   | 2001 |  | 2000
|                                                                                        |  |                 |  |  |  |                        |   |      |  |     
|                                                                                        |  |                 |  |  |  | (Dollars in thousands)
|Advances from the Federal Home Loan
Bank of San Francisco                               |  |                 |  |  |  | $                      |  |      |  | $    |  |   |  | $ | 530,437 |  
|Securities sold under agreements to
repurchase                                          |  |                 |  |  |  |                        |  |      |  |      |  |   |  |   | 103,241 |  
|Warehouse lines                                                                         |  |                 |  |  |  |                        |  |      |  |      |  |   |  |   | 94,134  |  
|                                                                                        |  |                 |  |  |  |                        |   |      |  |      |   |   |  |   |         |  
|Total                                                                                   |  |                 |  |  |  | $                      |  |      |  | $    |  |   |  | $ | 727,812 |  
|                                                                                        |  |                 |  |  |  |                        |   |      |  |      |   |   |  |   |         |  
|Weighted-average interest rate of
total short-term borrowings
outstanding at period end |  |                 |  |  |  |                        |  | %    |  |      |  | % |  |   | 6.58    | %
|                                                                                        |  |                 |  |  |  |                        |   |      |  |      |   |   |  |   |         |  

The following table illustrates the maximum outstanding balance for each
type of short-term borrowing at any month end during 2002, 2001 and 2000, and
the average balances and weighted-average interest rates on short-term
borrowings for those years:

|                                                                                          |  |                         |        |      |  |      |         |   |  |   |           |  
|----------------------------------------------------------------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------- | - |  | - | --------- | -
|                                                                                          |  | Year Ended December 31,
|                                                                                          |  |                        
|                                                                                          |  | 2002                    |        | 2001 |  | 2000
|                                                                                          |  |                         |        |      |  |     
|                                                                                          |  | (Dollars in thousands) 
|Advances from the Federal Home
Loan Bank of San Francisco                                 |  | $                       | 84,000 |      |  | $    | 512,700 |   |  | $ | 772,700   |  
|Securities sold under agreements
to repurchase                                            |  | $                       |       |      |  | $    |        |   |  | $ | 448,660   |  
|Warehouse lines                                                                           |  | $                       |       |      |  | $    | 93,768  |   |  | $ | 355,316   |  
|Average amount of total
short-term borrowings
outstanding during the year                 |  | $                       | 68,000 |      |  | $    | 445,430 |   |  | $ | 1,137,662 |  
|Weighted-average interest rate of
total short-term borrowings
outstanding during the year |  |                         | 1.91   | %    |  |      | 5.75    | % |  |   | 6.59      | %

Liquidity

The objective of our liquidity management program is to ensure that funds
are available in a timely manner to meet the loan demand of our auto finance
business, BVAC, and to service other liabilities as they come due, without
causing an undue amount of cost or risk, and without causing a disruption to
normal operating conditions. Liquid assets, as defined by us, include cash and
cash equivalents in excess of the minimum levels necessary to carry out normal
business operations, federal funds sold, commercial paper and other short-term
investments.

Prior to the assumption of our retail deposits by U.S. Bank on November 1,
2002, our retail deposits and ability to borrow from the Federal Home Loan Bank
of San Francisco had been our principal source of liquidity. With our
stockholders authorization of the Companys Plan on October 3, 2002 and
completion of the U.S. Bank transaction, our sources of liquidity have been
limited. Since the U.S. Bank transaction, we have relied upon the proceeds
from our liquidation and the disposition of our assets to fund the loan demand
of BVAC; repay maturing brokered certificates of deposit and other liabilities; and to meet other
working capital needs.

On September 6, 2000, the Bank entered into an agreement with the OCC, in
which the Bank may not declare or distribute dividends without the prior
consent of the Office of the Comptroller of the Currency. On September 29,
2000, the Company entered into an agreement with the FRB of San Francisco in
which the Company is required to obtain the prior consent of the FRB of San
Francisco in order to pay common stock dividends and disburse distributions
associated with our Capital Securities.

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On December 31, 2002, following approval by the FRB of San Francisco, we
paid cumulative deferred distributions, interest on the deferred distributions
and the current quarterly distribution on our Capital Securities.
We will continue to be required to obtain approval from the FRB of San
Francisco for future quarterly distributions until such time as the agreement
is terminated.

At December 31, 2002, we had cash and cash equivalents of $223 million.
At this same date, we had $465 million of obligations for brokered certificates
of deposit, borrowings, the Capital Securities, and other liabilities. The
funding to repay these obligations will be generated from proceeds from the
disposition of remaining assets. In addition, we are in the process of
negotiating a revolving line of credit facility to finance BVACs current
portfolio of automotive loans and its future originations of auto loans. At
December 31, 2002, the outstanding brokered deposits provided a significant
source of funding for BVACs lending operations. This revolving line of credit
is intended to replace the maturing brokered deposits. BVAC intends to
periodically securitize and sell its production of automotive loans in order to
repay the line of credit. There can be no assurances that the Company will be
successful in obtaining this financing.

To assist you in analyzing our liquidity, you should review our
Consolidated Statements of Cash Flows at Item 8. Financial Statements and
Supplementary Data.

Capital Resources

Management seeks to maintain adequate capital to support credit risks, and
to ensure that Bay View Capital Corporation and Bay View Bank are in compliance
with all regulatory capital guidelines. With the adoption of liquidation basis
accounting effective September 30, 2002, our stockholders equity was
transferred to net assets in liquidation. Our net assets in liquidation
totaled $410.1 million at December 31, 2002 or $6.43 in net assets in
liquidation per outstanding share based on 63,747,157 diluted shares in
liquidation.

At December 31, 2001, stockholders equity and tangible stockholders
equity, which excludes intangible assets, was $336.2 million and $212.6
million, respectively.

The following table illustrates the reconciliation of our stockholders
equity to tangible stockholders equity as of the dates indicated:

|                                                |  |                           |         |      |  |   |          |  
|----------------------------------------------- |  | ------------------------- | ------- | ---- |  | - | -------- | -
|                                                |  | At December 31,          
|                                                |  |                          
|                                                |  | 2002                      |         | 2001
|                                                |  |                           |         |     
|                                                |  | (Dollars in thousands,   
|                                                |  | except per share amounts)
|Stockholders equity                            |  | $                         |        |      |  | $ | 336,187  |  
|Intangible assets                               |  |                           |        |      |  |   | (123,573 | )
|                                                |  |                           |         |      |  |   |          |  
|Tangible stockholders equity                   |  | $                         |        |      |  | $ | 212,614  |  
|                                                |  |                           |         |      |  |   |          |  
|Book value per share                            |  | $                         |        |      |  | $ | 5.37     |  
|                                                |  |                           |         |      |  |   |          |  
|Tangible book value per share                   |  | $                         |        |      |  | $ | 3.40     |  
|                                                |  |                           |         |      |  |   |          |  
|Net assets in liquidation                       |  | $                         | 410,064 |      |  |   |          |  
|                                                |  |                           |         |      |  |   |          |  
|Net assets in liquidation per outstanding share |  | $                         | 6.43    |      |  |   |          |  
|                                                |  |                           |         |      |  |   |          |  

Bay View Bank is subject to various regulatory capital guidelines
administered by the OCC. Under these capital guidelines, the minimum total
risk-based capital ratio and Tier 1 risk-based capital ratio requirements are
8.00% and 4.00%, respectively, of risk-weighted assets and certain off-balance
sheet items. The minimum Tier 1 leverage ratio requirement is 4.00% of
quarterly average assets, as adjusted.

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Additionally, the Federal Deposit Insurance Corporation Improvement Act of
1991 defines five capital tiers: well-capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized, depending upon the capital level of the institution. Each
federal banking agency, including the Office of the Comptroller of the
Currency, is required to implement prompt corrective actions for
undercapitalized institutions that it regulates.

Bay View Banks regulatory capital levels at December 31, 2002 exceeded
both the minimum requirements as well as the requirements necessary to be
considered well-capitalized as illustrated in the following table:

|                  |  |        |  |             |  |             |         |       |  |  |       |   |  |  |  |  |  |                        |  |                  |  |   |        |  |  |  |      |   |  |        |  |       |  |  |  |  |  |   |         |  |  |  |       |  
|----------------- |  | ------ |  | ----------- |  | ----------- | ------- | ----- |  |  | ----- | - |  |  |  |  |  | ---------------------- |  | ---------------- |  | - | ------ |  |  |  | ---- | - |  | ------ |  | ----- |  |  |  |  |  | - | ------- |  |  |  | ----- | -
|                  |  |        |  |             |  |             |         |       |  |  |       |   |  |  |  |  |  | Minimum                |  | Well-Capitalized
|                  |  | Actual |  | Requirement |  | Requirement
|                  |  |        |  |             |  |            
|                  |  |        |  |             |  | Amount      |         | Ratio |  |  |       |   |  |  |  |  |  | Amount                 |  | Ratio            |  |   |        |  |  |  |      |   |  | Amount |  | Ratio
|                  |  |        |  |             |  |             |         |       |  |  |       |   |  |  |  |  |  |                        |  |                  |  |   |        |  |  |  |      |   |  |        |  |      
|                  |  |        |  |             |  |             |         |       |  |  |       |   |  |  |  |  |  | (Dollars in thousands) |  |                  |  |   |        |  |  |  |      |   |  |       
|Tier 1 leverage   |  |        |  |             |  | $           | 499,891 |       |  |  | 21.25 | % |  |  |  |  |  |                        |  |                  |  | $ | 94,114 |  |  |  | 4.00 | % |  |        |  |       |  |  |  |  |  | $ | 117,643 |  |  |  | 5.00  | %
|Tier 1 risk-based |  |        |  |             |  | $           | 499,891 |       |  |  | 71.24 | % |  |  |  |  |  |                        |  |                  |  | $ | 28,068 |  |  |  | 4.00 | % |  |        |  |       |  |  |  |  |  | $ | 42,102  |  |  |  | 6.00  | %
|Total risk-based  |  |        |  |             |  | $           | 499,891 |       |  |  | 71.24 | % |  |  |  |  |  |                        |  |                  |  | $ | 56,136 |  |  |  | 8.00 | % |  |        |  |       |  |  |  |  |  | $ | 70,170  |  |  |  | 10.00 | %

On December 9, 2002, Bay View Bank redeemed the entire $50 million of its
outstanding Subordinated Notes which, prior to its redemption, qualified as
Tier 2 capital for both Bay View Bank and Bay View Capital Corporation
regulatory capital purposes, subject to certain limitations.

Similarly, Bay View Capital Corporation is subject to various regulatory
capital guidelines administered by the Board of Governors of the Federal
Reserve. The capital guidelines provide definitions of regulatory capital
ratios and the methods of calculating capital and each ratio for bank holding
companies. The federal banking agencies require a minimum ratio of qualifying
total risk-based capital to risk-adjusted assets of 8% and a minimum ratio of
Tier 1 capital to risk-adjusted assets of 4%. In addition to the risk-based
guidelines, federal banking regulators require banking organizations to
maintain a minimum amount of Tier 1 capital to total average assets, referred
to as the leverage ratio. For a banking organization rated in the highest of
the five categories used by regulators to rate banking organizations, the
minimum leverage ratio of Tier 1 capital to total average assets is 3%. For
organizations not rated in the highest of the five categories, the regulations
advise an additional cushion of at least 100 basis points. In addition to
these uniform risk-based capital guidelines and leverage ratios that apply
across the industry, the regulators have the discretion to set individual
minimum capital requirements for specific institutions at rates significantly
above the minimum guidelines and ratios.

At December 31, 2002, Bay View Capital Corporations regulatory capital
levels exceeded the requirements necessary to be considered adequately
capitalized as illustrated in the following table:

|                  |  |        |  |             |  |        |         |       |  |                        |       |   |  |        |  |       |  |         |        |  |  |  |      |  
|----------------- |  | ------ |  | ----------- |  | ------ | ------- | ----- |  | ---------------------- | ----- | - |  | ------ |  | ----- |  | ------- | ------ |  |  |  | ---- | -
|                  |  |        |  |             |  |        |         |       |  |                        |       |   |  |        |  |       |  | Minimum
|                  |  | Actual |  | Requirement
|                  |  |        |  |             |  |        |         |       |  |                        |       |  
|                  |  |        |  |             |  | Amount |         | Ratio |  |                        |       |   |  | Amount |  | Ratio
|                  |  |        |  |             |  |        |         |       |  |                        |       |   |  |        |  |      
|                  |  |        |  |             |  |        |         |       |  | (Dollars in thousands) |       |   |  |       
|Tier 1 leverage   |  |        |  |             |  | $      | 500,055 |       |  |                        | 20.96 | % |  |        |  |       |  | $       | 95,440 |  |  |  | 4.00 | %
|Tier 1 risk-based |  |        |  |             |  | $      | 500,055 |       |  |                        | 67.47 | % |  |        |  |       |  | $       | 29,644 |  |  |  | 4.00 | %
|Total risk-based  |  |        |  |             |  | $      | 500,055 |       |  |                        | 67.47 | % |  |        |  |       |  | $       | 59,288 |  |  |  | 8.00 | %

On November 29, 2002, Bay View Capital Corporation prepaid the entire $100
million of its outstanding Subordinated Notes which, prior to its redemption,
qualified as Tier 2 capital for Bay View Capital Corporation regulatory capital
purposes, subject to certain limitations.

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Stock Repurchase Program

Our outstanding shares of common stock were 62,947,396 at December 31,
2002 and 62,579,129 at December 31, 2001. The outstanding shares in
liquidation (including potential dilutive common shares) used for computing net
assets in liquidation per outstanding share were 63,747,157 shares. Primarily
as a result of our rights offering during 2001, the weighted-average shares
outstanding (including potential dilutive common shares) used for computing
earnings per diluted share increased to 50.9 million shares for the year ended
December 31, 2001 as compared to 32.6 million shares for the year ended
December 31, 2000.

In August 1998, our Board of Directors authorized the repurchase of up to
$50 million in shares of our common stock. We repurchased 460,000 shares of
our common stock during 1999. We did not repurchase any shares of our common
stock during 2000, 2001 and 2002. In November 1999, all of our treasury shares
were reissued in conjunction with the acquisition of FMAC. At December 31,
2002, we had approximately $17.6 million in remaining authorization available
for future share repurchases. Pursuant to our agreement with the FRB of San
Francisco, we must obtain prior written approval before repurchasing shares.

Impact of Inflation and Changing Prices

Our consolidated financial statements presented herein have been prepared
in accordance with GAAP, which generally require 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 financial institution are
monetary in nature, interest rates have a more significant impact on a
financial institution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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Asset/Liability Management

Prior to our adoption of liquidation basis accounting, the objective of
our asset and liability management activities has historically been to improve
our earnings by adjusting the type and mix of assets and liabilities to
effectively address changing conditions and risks. Through overall management
of our balance sheet and by controlling various risks, we sought to optimize
our financial returns within safe and sound parameters. Our operating
strategies for attaining this objective included managing net interest margin
through appropriate risk/return pricing of assets and liabilities and
emphasizing growth in retail deposits, as a percentage of interest-bearing
liabilities, to reduce our cost of funds. Our strategy included originating
and purchasing quality assets with higher risk-adjusted yields and selling
assets with lower risk-adjusted yields or repricing characteristics that do not
meet our objectives for interest rate risk. We also sought to improve earnings
by controlling noninterest expense, enhancing noninterest income and utilizing
improved information systems to facilitate our analysis of the profitability of
our business platforms. We also used risk management instruments to modify
interest rate characteristics of certain assets or liabilities to hedge against
our exposure to interest rate fluctuations, reducing the effects these
fluctuations might have on associated cash flows or values. In adopting the
Plan, our use of risk management instruments will be limited to hedging BVACs
auto loan production against exposure to rising interst rates. These risk
management instruments, also referred to as derivative instruments, include
interest rate option contracts, commonly referred to as caps. Derivative
financial instruments involve, to varying degrees, elements of credit risk.
Credit risk is defined as the possibility of sustaining a loss because other
parties to the financial instrument fail to perform in accordance with the
terms of the contract. Finally, we performed internal analyses to measure,
evaluate and monitor risk.

Interest Rate Risk

Interest rate risk is the most significant market risk impacting the
Company. Interest rate risk occurs when interest rate sensitive assets and
liabilities do not reprice simultaneously and in equal volumes. A key
objective of asset and liability management is to manage interest rate risk
associated with changing asset and liability cash flows and values and market
interest rate movements. Management provides oversight of our interest rate
risk management process and recommends policy guidelines regarding exposure to
interest rates for approval by our Board of Directors. Adherence to these
policies is monitored on an ongoing basis, and decisions related to the
management of interest rate exposure are made when appropriate in accordance
with our policies.

Financial institutions are subject to interest rate risk to the degree
that interest-bearing liabilities reprice or mature on a different basis and at
different times than interest-earning assets. Our strategy has been to reduce
the sensitivity of our earnings to interest rate fluctuations by more closely
matching the effective maturities or repricing characteristics of our assets
and liabilities. Certain assets and liabilities, however, may react in
different degrees to changes in market interest rates. Further, interest rates
on certain types of assets and liabilities may fluctuate prior to changes in
market interest rates, while rates on other types may lag behind.
Additionally, certain assets, such as adjustable rate mortgages, have features,
including payment and rate caps, which restrict changes in their interest
rates. We consider the anticipated effects of these factors when implementing
our interest rate risk management objectives.

Caps

Interest rate caps are option contracts that limit the cap holders risk
associated with an increase in interest rates. If rates go above a specified
interest rate (strike price or cap rate), the cap holder is entitled to receive
cash payments equal to the excess of the market rate over the strike price
multiplied by the notional amount. We had interest rate caps with notional
amounts of $100.0 million at December 31, 2002 and $180.0 million at December
31, 2001. Our interest rate caps had cap rates at 7.00% and a cap index based
on either the one- or three-month LIBOR rate. These caps are reported at their
fair value with realized and unrealized gains and losses charged to earnings
when incurred. The fair value of our interest rate caps was $0 and $5,000 at
December 31, 2002 and December 31, 2001, respectively.

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Other types of market risk also affect us in the normal course of our
business activities. The impact on us resulting from other market risks is
deemed immaterial and no separate disclosure of quantitative information
related to such market risks is deemed necessary. We do not maintain a
portfolio of trading securities and do not intend to engage in such activities
in the foreseeable future.

Adoption of Statement No. 133

On October 1, 2000, we adopted Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities. The
standard required us to recognize all derivative instruments on the balance
sheet at fair value. The accounting treatment for subsequent changes in the
fair value of the derivative instruments depends on the use of the derivative.
The adoption of this standard resulted in an after-tax charge to operations of
approximately $1.2 million. The adoption also established new assets and
liabilities on the balance sheet representing the fair value of our derivative
instruments. Effective with the adoption of Statement No.133, the derivative
instruments above are not treated as hedge instruments and are being carried at
fair value, with changes in such fair value charged or credited to earnings.

Interest Rate Sensitivity

Our monitoring activities related to managing interest rate risk include
both interest rate sensitivity gap analysis and the use of a simulation
model. While traditional gap analysis provides a simple picture of the
interest rate risk embedded in the balance sheet, it provides only a static
view of interest rate sensitivity at a specific point in time and does not
measure the potential volatility in forecasted results relating to changes in
market interest rates over time. Accordingly, we combine the use of gap
analysis with the use of a simulation model which provides a dynamic assessment
of interest rate sensitivity.

The interest rate sensitivity gap is defined as the difference between the
amount of interest-earning assets anticipated to reprice within a specific time
period and the amount of interest-bearing liabilities anticipated to reprice
within that same time period. A gap is considered positive when the amount of
interest rate sensitive assets repricing within a specific time period exceeds
the amount of interest-bearing liabilities repricing within that same time
period. Positive cumulative gaps suggest that earnings will increase when
interest rates rise. Negative cumulative gaps suggest that earnings will
increase when interest rates fall.

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The following table illustrates our combined asset and liability repricing
as of December 31, 2002:

|                                             |                                  |   |                  |         |              |   |                        |   |       |   |         |   |  |   |         |   |  |   |         |         | 
|-------------------------------------------- | -------------------------------- | - | ---------------- | ------- | ------------ | - | ---------------------- | - | ----- | - | ------- | - |  | - | ------- | - |  | - | ------- | ------- | 
|                                             |                                  |   | Repricing Period
|                                             |                                  |   |                 
|                                             |                                  |   | Under            |         | Over         |   | Over                   |   | Over  |   |         |   | 
|                                             |                                  |   | One              |         | One to Three |   | Three to Five          |   | Five  |   |         |   | 
|                                             |                                  |   | Year             |         | Years        |   | Years                  |   | Years |   | Total  
|                                             |                                  |   |                  |         |              |   |                        |   |       |   |        
|                                             |                                  |   |                  |         |              |   | (Dollars in thousands) |   |       |   |        
|Assets                                       |                                  |   |                  |         |              |   |                        |   |       |   |         |   |  |   |         |   |  |   |         |        
|Cash and investments                         |                                  | $ | 225,306          |         |              | $ | 26,661                 |   |       | $ | 82      |   |  | $ | 22      |   |  | $ | 252,071 |        
|Loans
and leases (1)                         |                                  |   | 280,231          |         |              |   | 172,739                |   |       |   | 27,626  |   |  |   | 21,423  |   |  |   | 502,019 |        
|                                             |                                  |   |                  |         |              |   |                        |   |       |   |         |   |  |   |         |   |  |   |         |        
|Total interest rate sensitive assets         |                                  | $ | 505,537          |         |              | $ | 199,400                |   |       | $ | 27,708  |   |  | $ | 21,445  |   |  | $ | 754,090 |        
|                                             |                                  |   |                  |         |              |   |                        |   |       |   |         |   |  |   |         |   |  |   |         |        
|Liabilities                                  |                                  |   |                  |         |              |   |                        |   |       |   |         |   |  |   |         |   |  |   |         |        
|Deposits:                                    |                                  |   |                  |         |              |   |                        |   |       |   |         |   |  |   |         |   |  |   |         |        
|                                             | Brokered certificates of deposit |   |                  | 224,189 |              |   |                        |  |       |   |         |  |  |   |         |  |  |   |         | 224,189 | 
|Borrowings
(2)                               |                                  |   | 19,838           |         |              |   | 40,425                 |   |       |   | 1,706   |   |  |   | 90,000  |   |  |   | 151,969 |        
|                                             |                                  |   |                  |         |              |   |                        |   |       |   |         |   |  |   |         |   |  |   |         |        
|Total interest rate sensitive liabilities    |                                  | $ | 244,027          |         |              | $ | 40,425                 |   |       | $ | 1,706   |   |  | $ | 90,000  |   |  | $ | 376,158 |        
|                                             |                                  |   |                  |         |              |   |                        |   |       |   |         |   |  |   |         |   |  |   |         |        
|Repricing gap-positive (negative)            |                                  | $ | 261,510          |         |              | $ | 158,975                |   |       | $ | 26,002  |   |  | $ | (68,555 | ) |  | $ | 377,932 |        
|                                             |                                  |   |                  |         |              |   |                        |   |       |   |         |   |  |   |         |   |  |   |         |        
|Cumulative repricing gap-positive (negative) |                                  | $ | 261,510          |         |              | $ | 420,485                |   |       | $ | 446,487 |   |  | $ | 377,932 |   |  |   |         |        
|                                             |                                  |   |                  |         |              |   |                        |   |       |   |         |   |  |   |         |   |  |   |         |        



|(1) |  | Based on assumed annual prepayment and amortization rates which
approximate our historical experience.
|--- |  | ------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes Capital Securities.                                                                          

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The simulation model discussed above also provides our management with the
ability to simulate our net interest income. In order to measure, at December
31, 2002, the sensitivity of our forecasted net interest income to changing
interest rates over a one year time horizon, both rising and falling interest
rate scenario were projected and compared to a base market interest rate
forecast derived from the current treasury yield curve. For the rising and
falling interest rate scenarios, the base market interest rate forecast was
increased, on an instantaneous and sustained basis, by 100 to 300 basis points
and decreased by 100 and 200 basis points. Our liquidation, as set forth in
the Plan, has resulted in an asset liability management focus on monetization
of our remaining assets and liabilities and has preempted our historical asset
and liability management strategies. This monetization of assets has increased
the sensitivity of our net interest income to changes in interest rates by
increasing the balance of cash equivalents. The short-term maturities of these
instruments make their yield very responsive to changes in interest rates over
the one-year time horizon. The extremely low level of prevailing interest
rates at December 31, 2002 also increased the rate sensitivity of our interest
income under the hypothetical interest rate shock scenarios used in the
simulation model. The low level of prevailing rates caused the 100 basis point
increments used in our hypothetical interest rate shock scenarios to be
proportionately larger than they would be in an environment of higher rates.
At December 31, 2002, our net interest income related to these hypothetical
changes in market interest rates was outside of our policy guidelines, for the
reasons discussed above, as illustrated in the following table:

|                                                    |  |                     |  |  |  |         |        |    |  |  |  |         |  |   |        |    |  |         |  |  |  |   |        |         |  |  |  |  |  |         |        |   |  |  |  |  |  |   |        |  
|--------------------------------------------------- |  | ------------------- |  |  |  | ------- | ------ | -- |  |  |  | ------- |  | - | ------ | -- |  | ------- |  |  |  | - | ------ | ------- |  |  |  |  |  | ------- | ------ | - |  |  |  |  |  | - | ------ | -
|                                                    |  | Net Interest Income
|                                                    |  |                    
|Projected effect:                                   |  |                     |  |  |  | -200 bp |        |    |  |  |  | -100 bp |  |   |        |    |  | +100 bp |  |  |  |   |        | +200 bp |  |  |  |  |  | +300 bp
|                                                    |  |                     |  |  |  |         |        |    |  |  |  |         |  |   |        |    |  |         |  |  |  |   |        |         |  |  |  |  |  |        
|Net interest income                                 |  |                     |  |  |  | $       | 22,272 |    |  |  |  |         |  | $ | 24,026 |    |  |         |  |  |  | $ | 27,777 |         |  |  |  |  |  | $       | 29,476 |   |  |  |  |  |  | $ | 31,081 |  
|% Increase (decrease) from
base net interest income |  |                     |  |  |  |         | (11.97 | )% |  |  |  |         |  |   | (5.04  | )% |  |         |  |  |  |   | 9.78   | %       |  |  |  |  |  |         | 16.50  | % |  |  |  |  |  |   | 22.84  | %
|Policy guideline                                    |  |                     |  |  |  | ±       | 8.00   | %  |  |  |  |         |  | ± | 5.00   | %  |  |         |  |  |  | ± | 5.00   | %       |  |  |  |  |  | ±       | 8.00   | % |  |  |  |  |  | ± | 15.00  | %

One application of our simulation model measures the impact of market
interest rate changes on the net present value of estimated cash flows from our
assets and liabilities, defined as our market value of equity. This analysis
assesses the changes in market values of interest rate sensitive financial
instruments that would occur in response to an instantaneous and sustained
increase in market interest rates of 100 to 300 basis points or a decrease of
100 and 200 basis points. The sharp decline in our asset base, as a result of
completed asset dispositions, combined with the buildup of net assets in
liquidation, has produced a substantial deleveraging of our balance sheet.
This has reduced our interest rate sensitivity, as measured by the sensitivity
of the market value of equity to changes in interest rates.
Monetization of loans, investment securities and other long-term assets has
further reduced this measure of interest rate sensitivity. At December 31,
2002, our market value of equity exposure related to these
changes in market interest rates was within our policy guidelines as
illustrated in the following table:

|                                                                                |  |                           |         |   |  |  |  |         |  |   |         |   |  |         |  |  |  |   |         |         |  |  |  |  |  |         |         |    |  |  |  |  |  |   |         |   
|------------------------------------------------------------------------------- |  | ------------------------- | ------- | - |  |  |  | ------- |  | - | ------- | - |  | ------- |  |  |  | - | ------- | ------- |  |  |  |  |  | ------- | ------- | -- |  |  |  |  |  | - | ------- | --
|                                                                                |  | Market Value of Equity(1)
|                                                                                |  |                          
|Projected effect:                                                               |  | -200 bp                   |         |   |  |  |  | -100 bp |  |   |         |   |  | +100 bp |  |  |  |   |         | +200 bp |  |  |  |  |  | +300 bp
|                                                                                |  |                           |         |   |  |  |  |         |  |   |         |   |  |         |  |  |  |   |         |         |  |  |  |  |  |        
|Market
value of equity                                                          |  | $                         | 410,611 |   |  |  |  |         |  | $ | 409,797 |   |  |         |  |  |  | $ | 405,832 |         |  |  |  |  |  | $       | 403,182 |    |  |  |  |  |  | $ | 400,186 |   
|Change
in market value of equity as
a percentage of base market
value of equity |  |                           | 0.52    | % |  |  |  |         |  |   | 0.32    | % |  |         |  |  |  |   | (0.65   | )%      |  |  |  |  |  |         | (1.30   | )% |  |  |  |  |  |   | (2.03   | )%
|Policy guideline                                                                |  | ±                         | 15.00   | % |  |  |  |         |  | ± | 7.00    | % |  |         |  |  |  | ± | 7.00    | %       |  |  |  |  |  | ±       | 15.00   | %  |  |  |  |  |  | ± | 22.00   | % 

(1) In connection with
our adoption of liquidation basis accounting, stockholders equity
was transferred to net assets in liquidation.

The computation of prospective effects of hypothetical interest rate
changes are based on numerous assumptions, including relative levels of market
interest rates, asset prepayments and deposit decay, and should not be relied
upon as indicative of actual results. Further, the computations do not
contemplate any actions we may undertake in response to changes in interest
rates. Actual amounts may differ from those projections set forth above should
market conditions vary from the underlying assumptions used.

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Item 8. Financial Statements and Supplementary Data

Bay View Capital Corporation and Subsidiaries
Consolidated Statement of Net Assets (Liquidation Basis) as of
December 31, 2002 and
Consolidated Statement of Financial Condition (Going Concern Basis)
as of December 31, 2001

|                                                                                                                       |                                                                         |                                                              |         |                        |                     |                   |           |           |      |  
|---------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------------------------------------------------ | ------- | ---------------------- | ------------------- | ----------------- | --------- | --------- | ---- | -
|                                                                                                                       |                                                                         |                                                              |         | December 31, 2002      |                     | December 31, 2001
|                                                                                                                       |                                                                         |                                                              |         |                        |                     |                  
|                                                                                                                       |                                                                         |                                                              |         | Liquidation Basis      | Going Concern Basis
|                                                                                                                       |                                                                         |                                                              |         |                        |                    
|                                                                                                                       |                                                                         |                                                              |         | (Dollars in thousands)
|ASSETS                                                                                                                 |                                                                         |                                                              |         |                        |                     |                   |           |          
|Cash and cash equivalents:                                                                                             |                                                                         |                                                              |         |                        |                     |                   |           |          
|                                                                                                                       | Cash and due from depository institutions                               |                                                              | $       | 71,611                 |                     |                   | $         | 357,008   |     
|                                                                                                                       | Short-term investments                                                  |                                                              |         | 151,684                |                     |                   |           | 164,380   |     
|                                                                                                                       |                                                                         |                                                              |         |                        |                     |                   |           |           |     
|                                                                                                                       |                                                                         |                                                              | 223,295 |                        |                     |                   | 521,388   |          
|Securities available-for-sale:                                                                                         |                                                                         |                                                              |         |                        |                     |                   |           |          
|                                                                                                                       | Investment securities                                                   |                                                              |         | 38,137                 |                     |                   |           | 98,980    |     
|                                                                                                                       | Mortgage-backed securities                                              |                                                              |         | 32,516                 |                     |                   |           | 278,891   |     
|Loans and leases held-for-sale                                                                                         |                                                                         |                                                              | 311,014 |                        |                     |                   | 40,608    |          
|Loans and leases held-for-investment, net of allowance for loan and lease
losses of $49.8 million at December 31, 2001 |                                                                         |                                                              |        |                        |                     |                   | 2,326,787 |          
|Investment in operating lease assets, net                                                                              |                                                                         |                                                              | 191,005 |                        |                     |                   | 339,349   |          
|Investment in stock of the Federal Home Loan Bank of San Francisco                                                     |                                                                         |                                                              | 16,075  |                        |                     |                   | 24,157    |          
|Investment in stock of the Federal Reserve Bank                                                                        |                                                                         |                                                              | 13,659  |                        |                     |                   | 11,866    |          
|Real estate owned, net                                                                                                 |                                                                         |                                                              | 2,402   |                        |                     |                   | 9,462     |          
|Premises and equipment, net                                                                                            |                                                                         |                                                              | 1,327   |                        |                     |                   | 13,145    |          
|Intangible assets                                                                                                      |                                                                         |                                                              |        |                        |                     |                   | 123,573   |          
|Income taxes, net                                                                                                      |                                                                         |                                                              |        |                        |                     |                   | 174,360   |          
|Other assets                                                                                                           |                                                                         |                                                              | 46,115  |                        |                     |                   | 51,539    |          
|                                                                                                                       |                                                                         |                                                              |         |                        |                     |                   |           |           |     
|Total assets                                                                                                           |                                                                         | $                                                            | 875,545 |                        |                     | $                 | 4,014,105 |          
|                                                                                                                       |                                                                         |                                                              |         |                        |                     |                   |           |           |     
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                   |                                                                         |                                                              |         |                        |                     |                   |           |          
|Deposits:                                                                                                              |                                                                         |                                                              |         |                        |                     |                   |           |          
|                                                                                                                       | Transaction accounts                                                    |                                                              | $       |                       |                     |                   | $         | 1,950,699 |     
|                                                                                                                       | Retail certificates of deposit                                          |                                                              |         |                       |                     |                   |           | 1,284,228 |     
|                                                                                                                       | Brokered certificates of deposit                                        |                                                              |         | 224,189                |                     |                   |           |          |     
|                                                                                                                       |                                                                         |                                                              |         |                        |                     |                   |           |           |     
|                                                                                                                       |                                                                         |                                                              | 224,189 |                        |                     |                   | 3,234,927 |          
|Subordinated Notes, net                                                                                                |                                                                         |                                                              |        |                        |                     |                   | 149,632   |          
|Other borrowings                                                                                                       |                                                                         |                                                              | 61,969  |                        |                     |                   | 137,536   |          
|Income taxes, net                                                                                                      |                                                                         |                                                              | 8,646   |                        |                     |                   |          |          
|Deferred gain                                                                                                          |                                                                         |                                                              | 12,817  |                        |                     |                   |          |          
|Other liabilities                                                                                                      |                                                                         |                                                              | 23,907  |                        |                     |                   | 65,823    |          
|Reserve for estimated costs during the period of liquidation                                                           |                                                                         |                                                              | 43,953  |                        |                     |                   |          |          
|                                                                                                                       |                                                                         |                                                              |         |                        |                     |                   |           |           |     
|Total liabilities                                                                                                      |                                                                         |                                                              | 375,481 |                        |                     |                   | 3,587,918 |          
|                                                                                                                       |                                                                         |                                                              |         |                        |                     |                   |           |           |     
|Guaranteed Preferred Beneficial Interest in our Junior
Subordinated Debentures (Capital Securities)                  |                                                                         |                                                              | 90,000  |                        |                     |                   | 90,000    |          
|Stockholders equity:                                                                                                  |                                                                         |                                                              |         |                        |                     |                   |           |          
|                                                                                                                       | Series preferred stock; authorized, 7,000,000 shares; outstanding, none |                                                              |         |                       |                     |                   |           |          |     
|                                                                                                                       | Common stock ($.01 par value); authorized, 80,000,000 shares;           |                                                              |         |                        |                     |                   |           |           |     
|                                                                                                                       | issued, 2002  62,989,743 shares; 2001  62,627,980 shares;             |                                                              |         |                        |                     |                   |           |           |     
|                                                                                                                       | outstanding, 2002  62,947,396 shares; 2001  62,579,129 shares         |                                                              |         |                       |                     |                   |           | 626       |     
|                                                                                                                       | Additional paid-in capital                                              |                                                              |         |                       |                     |                   |           | 595,258   |     
|                                                                                                                       | Accumulated deficit                                                     |                                                              |         |                       |                     |                   |           | (258,047  | )   
|                                                                                                                       | Treasury stock, at cost; 2001  48,851 shares                           |                                                              |         |                       |                     |                   |           | (808      | )   
|                                                                                                                       | Accumulated other comprehensive income (loss):                          |                                                              |         |                        |                     |                   |           |           |     
|                                                                                                                       |                                                                         | Unrealized gain on securities available-for-sale, net of tax |         |                        |                    |                   |           |           | 523  |  
|                                                                                                                       |                                                                         | Minimum pension liability adjustment, net of tax             |         |                        |                    |                   |           |           | (294 | )
|                                                                                                                       | Debt of Employee Stock Ownership Plan                                   |                                                              |         |                       |                     |                   |           | (1,071    | )   
|                                                                                                                       |                                                                         |                                                              |         |                        |                     |                   |           |           |     
|Total stockholders equity                                                                                             |                                                                         |                                                              |        |                        |                     |                   | 336,187   |          
|                                                                                                                       |                                                                         |                                                              |         |                        |                     |                   |           |           |     
|Total liabilities and stockholders equity                                                                             |                                                                         | $                                                            | 465,481 |                        |                     | $                 | 4,014,105 |          
|                                                                                                                       |                                                                         |                                                              |         |                        |                     |                   |           |           |     
|Net assets in liquidation                                                                                              |                                                                         | $                                                            | 410,064 |                        |                     |                   |           |          
|                                                                                                                       |                                                                         |                                                              |         |                        |                     |                   |           |          

The accompanying notes are an integral
part of these consolidated financial statements.

66



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Bay View Capital Corporation and Subsidiaries
Consolidated Statement of Changes in Net Assets in Liquidation (Liquidation Basis)

|                                                      |  |                        |         |   | 
|----------------------------------------------------- |  | ---------------------- | ------- | - | 
|                                                      |  | For the Three         
|                                                      |  | Months Ended          
|                                                      |  | December 31, 2002     
|                                                      |  |                       
|                                                      |  | (Dollars in thousands)
|Net assets in liquidation, September 30, 2002         |  | $                      | 413,675 |  
|Pre-tax loss from operations                          |  |                        | (6,124  | )
|Changes in estimated values of assets and liabilities |  |                        | (2,761  | )
|Income tax benefit                                    |  |                        | 4,886   |  
|Other changes in net assets in liquidation            |  |                        | 388     |  
|                                                      |  |                        |         |  
|Net assets in liquidation, December 31, 2002          |  | $                      | 410,064 |  
|                                                      |  |                        |         |  

The accompanying notes are an integral
part of these consolidated financial statements.

67



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Bay View Capital Corporation and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income (Loss)

|                                                                                             |                                                      |                                                        |                                                  |                   |        |                                 |          |         |        |   |          |         |         | 
|-------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ------------------------------------------------------ | ------------------------------------------------ | ----------------- | ------ | ------------------------------- | -------- | ------- | ------ | - | -------- | ------- | ------- | 
|                                                                                             |                                                      |                                                        |                                                  | For the Nine      |        |                                 |          |         |        |   |          |        
|                                                                                             |                                                      |                                                        |                                                  | Months Ended      |        |                                 |          |         |        |   |          |        
|                                                                                             |                                                      |                                                        |                                                  | September 30,     |        | For the Year Ended December 31,
|                                                                                             |                                                      |                                                        |                                                  |                   |        |                                
|                                                                                             |                                                      |                                                        |                                                  | 2002              |        | 2001                            |          | 2000   
|                                                                                             |                                                      |                                                        |                                                  |                   |        |                                 |          |        
|                                                                                             |                                                      |                                                        |                                                  | Liquidation Basis |        | Going Concern Basis            
|                                                                                             |                                                      |                                                        |                                                  |                   |        |                                
|                                                                                             |                                                      |                                                        | (Dollars in thousands, except per share amounts)
|Interest income:                                                                             |                                                      |                                                        |                                                  |                   |        |                                 |          |         |        |   |          |        
|                                                                                             | Interest on loans and leases                         |                                                        | $                                                | 122,208           |        |                                 | $        | 243,163 |        |   | $        | 360,203 |        
|                                                                                             | Interest on mortgage-backed securities               |                                                        |                                                  | 8,314             |        |                                 |          | 31,695  |        |   |          | 60,923  |        
|                                                                                             | Interest and dividends on investment securities      |                                                        |                                                  | 14,717            |        |                                 |          | 27,887  |        |   |          | 39,066  |        
|                                                                                             |                                                      |                                                        |                                                  |                   |        |                                 |          |         |        |   |          |        
|                                                                                             |                                                      |                                                        | 145,239                                          |                   |        |                                 | 302,745  |         |        |   | 460,192  |        
|Interest expense:                                                                            |                                                      |                                                        |                                                  |                   |        |                                 |          |         |        |   |          |        
|                                                                                             | Interest on deposits                                 |                                                        |                                                  | 44,509            |        |                                 |          | 135,736 |        |   |          | 176,602 |        
|                                                                                             | Interest on borrowings                               |                                                        |                                                  | 4,413             |        |                                 |          | 29,900  |        |   |          | 103,282 |        
|                                                                                             | Interest on Senior Debentures and Subordinated Notes |                                                        |                                                  | 11,146            |        |                                 |          | 14,861  |        |   |          | 14,868  |        
|                                                                                             |                                                      |                                                        |                                                  |                   |        |                                 |          |         |        |   |          |        
|                                                                                             |                                                      |                                                        | 60,068                                           |                   |        |                                 | 180,497  |         |        |   | 294,752  |        
|Net interest income                                                                          |                                                      |                                                        | 85,171                                           |                   |        |                                 | 122,248  |         |        |   | 165,440  |        
|Provision for losses on loans and leases                                                     |                                                      |                                                        | 10,700                                           |                   |        |                                 | 71,890   |         |        |   | 62,600   |        
|                                                                                             |                                                      |                                                        |                                                  |                   |        |                                 |          |         |        |   |          |        
|Net interest income after provision for losses on loans and leases                           |                                                      |                                                        | 74,471                                           |                   |        |                                 | 50,358   |         |        |   | 102,840  |        
|Noninterest income:                                                                          |                                                      |                                                        |                                                  |                   |        |                                 |          |         |        |   |          |        
|                                                                                             | Leasing income                                       |                                                        |                                                  | 56,188            |        |                                 |          | 92,305  |        |   |          | 97,207  |        
|                                                                                             | Loan fees and charges                                |                                                        |                                                  | 3,571             |        |                                 |          | 5,542   |        |   |          | 8,284   |        
|                                                                                             | Loan servicing income                                |                                                        |                                                  | 663               |        |                                 |          | 4,077   |        |   |          | 5,804   |        
|                                                                                             | Account fees                                         |                                                        |                                                  | 5,858             |        |                                 |          | 7,947   |        |   |          | 7,863   |        
|                                                                                             | Sales commissions                                    |                                                        |                                                  | 5,247             |        |                                 |          | 5,906   |        |   |          | 5,399   |        
|                                                                                             | Gain (loss) on sale of assets and liabilities, net   |                                                        |                                                  | 18,625            |        |                                 |          | (10,547 | )      |   |          | (52,606 | )      
|                                                                                             | Other, net                                           |                                                        |                                                  | 1,413             |        |                                 |          | 1,939   |        |   |          | 4,691   |        
|                                                                                             |                                                      |                                                        |                                                  |                   |        |                                 |          |         |        |   |          |        
|                                                                                             |                                                      |                                                        | 91,565                                           |                   |        |                                 | 107,169  |         |        |   | 76,642   |        
|Noninterest expense:                                                                         |                                                      |                                                        |                                                  |                   |        |                                 |          |         |        |   |          |        
|                                                                                             | General and administrative:                          |                                                        |                                                  |                   |        |                                 |          |         |        |   |          |         |        
|                                                                                             |                                                      | Compensation and employee benefits                     |                                                  |                   | 47,704 |                                 |          |         | 74,727 |   |          |         | 74,856  | 
|                                                                                             |                                                      | Occupancy and equipment                                |                                                  |                   | 13,466 |                                 |          |         | 20,331 |   |          |         | 23,301  | 
|                                                                                             |                                                      | Professional services                                  |                                                  |                   | 10,808 |                                 |          |         | 16,198 |   |          |         | 12,570  | 
|                                                                                             |                                                      | Marketing                                              |                                                  |                   | 3,875  |                                 |          |         | 4,706  |   |          |         | 3,743   | 
|                                                                                             |                                                      | Data processing                                        |                                                  |                   | 2,696  |                                 |          |         | 4,410  |   |          |         | 4,281   | 
|                                                                                             |                                                      | Deposit insurance premiums and regulatory fees         |                                                  |                   | 5,424  |                                 |          |         | 9,300  |   |          |         | 1,612   | 
|                                                                                             |                                                      | Postage, telephone & travel                            |                                                  |                   | 4,492  |                                 |          |         | 8,027  |   |          |         | 9,527   | 
|                                                                                             |                                                      | Prepayment penalty fees                                |                                                  |                   |       |                                 |          |         | 8,231  |   |          |         |        | 
|                                                                                             |                                                      | Other, net                                             |                                                  |                   | 4,536  |                                 |          |         | 9,357  |   |          |         | 6,828   | 
|                                                                                             |                                                      | General and administrative  franchise loan production |                                                  |                   |       |                                 |          |         |       |   |          |         | 15,561  | 
|                                                                                             |                                                      | General and administrative  Bankers Mutual            |                                                  |                   |       |                                 |          |         |       |   |          |         | 6,311   | 
|                                                                                             |                                                      |                                                        |                                                  |                   |        |                                 |          |         |        |   |          |        
|                                                                                             |                                                      |                                                        | 93,001                                           |                   |        |                                 | 155,287  |         |        |   | 158,590  |        
|                                                                                             | Other noninterest expense:                           |                                                        |                                                  |                   |        |                                 |          |         |        |   |          |         |        
|                                                                                             |                                                      | Litigation settlement expense                          |                                                  |                   | 13,100 |                                 |          |         |       |   |          |         |        | 
|                                                                                             |                                                      | Restructuring expenses                                 |                                                  |                   |       |                                 |          |         | 6,935  |   |          |         | 9,213   | 
|                                                                                             |                                                      | Revaluation of franchise-related assets                |                                                  |                   |       |                                 |          |         | 70,146 |   |          |         | 101,894 | 
|                                                                                             |                                                      | Leasing expenses                                       |                                                  |                   | 43,984 |                                 |          |         | 86,120 |   |          |         | 69,350  | 
|                                                                                             |                                                      | Real estate owned operations, net                      |                                                  |                   | 956    |                                 |          |         | 2,085  |   |          |         | 65      | 
|                                                                                             |                                                      | Provision for losses on real estate owned              |                                                  |                   | 266    |                                 |          |         | 2,936  |   |          |         |        | 
|                                                                                             |                                                      | Amortization of intangible assets                      |                                                  |                   | 993    |                                 |          |         | 11,280 |   |          |         | 11,158  | 
|                                                                                             |                                                      | Amortization of intangible assets  franchise          |                                                  |                   |       |                                 |          |         |       |   |          |         | 9,608   | 
|                                                                                             |                                                      | Write-off of intangible assets  franchise             |                                                  |                   |       |                                 |          |         |       |   |          |         | 192,622 | 
|                                                                                             |                                                      |                                                        |                                                  |                   |        |                                 |          |         |        |   |          |        
|                                                                                             |                                                      |                                                        | 152,300                                          |                   |        |                                 | 334,789  |         |        |   | 552,500  |        
|Income (loss) from operations                                                                |                                                      |                                                        | 13,736                                           |                   |        |                                 | (177,262 | )       |        |   | (373,018 | )      
|Adjustment for liquidation basis                                                             |                                                      |                                                        | 266,510                                          |                   |        |                                 |         |         |        |   |         |        
|                                                                                             |                                                      |                                                        |                                                  |                   |        |                                 |          |         |        |   |          |        
|Income (loss) before income tax expense (benefit)                                            |                                                      |                                                        | 280,246                                          |                   |        |                                 | (177,262 | )       |        |   | (373,018 | )      
|Income tax expense (benefit)                                                                 |                                                      |                                                        | 181,792                                          |                   |        |                                 | (85,866  | )       |        |   | (55,810  | )      
|Dividends on Capital Securities                                                              |                                                      |                                                        | 7,873                                            |                   |        |                                 | 9,774    |         |        |   | 8,989    |        
|                                                                                             |                                                      |                                                        |                                                  |                   |        |                                 |          |         |        |   |          |        
|Income (loss) before cumulative effect of change in accounting principle                     |                                                      |                                                        | 90,581                                           |                   |        |                                 | (101,170 | )       |        |   | (326,197 | )      
|Cumulative effect of change in accounting principle, net of
applicable taxes of $2.3 million |                                                      |                                                        | (18,920                                          | )                 |        |                                 |         |         |        |   |         |        
|                                                                                             |                                                      |                                                        |                                                  |                   |        |                                 |          |         |        |   |          |        
|Net income (loss)                                                                            |                                                      | $                                                      | 71,661                                           |                   |        | $                               | (101,170 | )       |        | $ | (326,197 | )      
|                                                                                             |                                                      |                                                        |                                                  |                   |        |                                 |          |         |        |   |          |        

68



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Bay View Capital Corporation and
SubsidiariesConsolidated Statements of Operations and Comprehensive Income
(Loss)  (continued)

|                                                                                             |                                                                                                                                         |   |                                                  |   |                                 |   |          |      |   |   |          |     | 
|-------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------- | - | ------------------------------------------------ | - | ------------------------------- | - | -------- | ---- | - | - | -------- | --- | 
|                                                                                             |                                                                                                                                         |   | For the Nine                                     |   |                                 |   |          |      |   |   |         
|                                                                                             |                                                                                                                                         |   | Months Ended                                     |   |                                 |   |          |      |   |   |         
|                                                                                             |                                                                                                                                         |   | September 30,                                    |   | For the Year Ended December 31,
|                                                                                             |                                                                                                                                         |   |                                                  |   |                                
|                                                                                             |                                                                                                                                         |   | 2002                                             |   | 2001                            |   | 2000    
|                                                                                             |                                                                                                                                         |   |                                                  |   |                                 |   |         
|                                                                                             |                                                                                                                                         |   | Liquidation Basis                                |   | Going Concern Basis            
|                                                                                             |                                                                                                                                         |   |                                                  |   |                                
|                                                                                             |                                                                                                                                         |   | (Dollars in thousands, except per share amounts)
|Basic earnings (loss) per share before cumulative effect of change
in accounting principle   |                                                                                                                                         | $ | 1.44                                             |   |                                 | $ | (1.99    | )    |   | $ | (10.00   | )  
|Cumulative effect of change in accounting principle, net                                     |                                                                                                                                         |   | (0.30                                            | ) |                                 |   |         |      |   |   |         |    
|                                                                                             |                                                                                                                                         |   |                                                  |   |                                 |   |          |      |   |   |          |    
|Net basic earnings (loss) per share                                                          |                                                                                                                                         | $ | 1.14                                             |   |                                 | $ | (1.99    | )    |   | $ | (10.00   | )  
|                                                                                             |                                                                                                                                         |   |                                                  |   |                                 |   |          |      |   |   |          |    
|Diluted earnings (loss) per share before cumulative effect of change
in accounting principle |                                                                                                                                         | $ | 1.43                                             |   |                                 | $ | (1.99    | )    |   | $ | (10.00   | )  
|Cumulative effect of change in accounting principle, net                                     |                                                                                                                                         |   | (0.30                                            | ) |                                 |   |         |      |   |   |         |    
|                                                                                             |                                                                                                                                         |   |                                                  |   |                                 |   |          |      |   |   |          |    
|Net diluted earnings (loss) per share                                                        |                                                                                                                                         | $ | 1.13                                             |   |                                 | $ | (1.99    | )    |   | $ | (10.00   | )  
|                                                                                             |                                                                                                                                         |   |                                                  |   |                                 |   |          |      |   |   |          |    
|Weighted-average basic shares outstanding                                                    |                                                                                                                                         |   | 62,724                                           |   |                                 |   | 50,873   |      |   |   | 32,634   |    
|                                                                                             |                                                                                                                                         |   |                                                  |   |                                 |   |          |      |   |   |          |    
|Weighted-average diluted shares outstanding                                                  |                                                                                                                                         |   | 63,135                                           |   |                                 |   | 50,873   |      |   |   | 32,634   |    
|                                                                                             |                                                                                                                                         |   |                                                  |   |                                 |   |          |      |   |   |          |    
|Net income (loss)                                                                            |                                                                                                                                         | $ | 71,661                                           |   |                                 | $ | (101,170 | )    |   | $ | (326,197 | )  
|Other comprehensive income, net of tax:                                                      |                                                                                                                                         |   |                                                  |   |                                 |   |          |      |   |   |          |    
|                                                                                             | Change in unrealized gain or loss on securities available-for-sale,
net of tax expense of $362 and $214 for 2001 and 2000, respectively |   |                                                  |  |                                 |   |          | 513  |   |   |          | 303 | 
|                                                                                             | Minimum pension liability adjustment, net of tax benefit of $207 for 2001                                                               |   |                                                  |  |                                 |   |          | (294 | ) |   |          |    | 
|                                                                                             |                                                                                                                                         |   |                                                  |   |                                 |   |          |      |   |   |          |    
|Other comprehensive income                                                                   |                                                                                                                                         |   |                                                 |   |                                 |   | 219      |      |   |   | 303      |    
|                                                                                             |                                                                                                                                         |   |                                                  |   |                                 |   |          |      |   |   |          |    
|Comprehensive income (loss)                                                                  |                                                                                                                                         | $ | 71,661                                           |   |                                 | $ | (100,951 | )    |   | $ | (325,894 | )  
|                                                                                             |                                                                                                                                         |   |                                                  |   |                                 |   |          |      |   |   |          |    

The accompanying notes are an integral
part of these consolidated financial
statements.

69



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##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Consolidated Statements of Stockholders Equity



|                                                                                               |  |                                                  |        |        |  |           |      |         |  |              |     |            |  |          |          |   |  |          |          |    
|---------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ------ | ------ |  | --------- | ---- | ------- |  | ------------ | --- | ---------- |  | -------- | -------- | - |  | -------- | -------- | ---
|                                                                                               |  |                                                  |        |        |  |           |      |         |  |              |     |            |  |          |          |   |  | Retained
|                                                                                               |  | Number                                           |        |        |  |           |      |         |  |              |     | Additional |  | Earnings
|                                                                                               |  | of Shares                                        |        | Common |  | Preferred |      | Paid-in |  | (Accumulated
|                                                                                               |  | Issued                                           |        | Stock  |  | Stock     |      | Capital |  | Deficit)    
|                                                                                               |  |                                                  |        |        |  |           |      |         |  |             
|                                                                                               |  | (Dollars in thousands, except per share amounts)
|Balance at December 31, 1999                                                                   |  |                                                  | 32,629 |        |  | $         | 326  |         |  | $            |    |            |  | $        | 455,964  |   |  | $        | 179,100  | (1)
|Exercise of stock options, including tax benefits                                              |  |                                                  | 11     |        |  |           |     |         |  |              |    |            |  |          | 94       |   |  |          |         |    
|Distribution of restricted shares                                                              |  |                                                  |       |        |  |           |     |         |  |              |    |            |  |          | (13      | ) |  |          |         |    
|Cash dividends declared ($0.30 per share)                                                      |  |                                                  |       |        |  |           |     |         |  |              |    |            |  |          |         |   |  |          | (9,780   | )  
|Unrealized gain on securities available-for-sale,
net of tax                                   |  |                                                  |       |        |  |           |     |         |  |              |    |            |  |          |         |   |  |          |         |    
|Repayment of debt                                                                              |  |                                                  |       |        |  |           |     |         |  |              |    |            |  |          |         |   |  |          |         |    
|Net loss                                                                                       |  |                                                  |       |        |  |           |     |         |  |              |    |            |  |          |         |   |  |          | (326,197 | )  
|                                                                                               |  |                                                  |        |        |  |           |      |         |  |              |     |            |  |          |          |   |  |          |          |    
|Balance at December 31, 2000                                                                   |  |                                                  | 32,640 |        |  |           | 326  |         |  |              |    |            |  |          | 456,045  |   |  |          | (156,877 | )  
|Exercise of stock options, including tax benefits                                              |  |                                                  | 20     |        |  |           |     |         |  |              |    |            |  |          | 94       |   |  |          |         |    
|Distribution of directors retirement plan shares                                              |  |                                                  | 10     |        |  |           |     |         |  |              |    |            |  |          | 73       |   |  |          |         |    
|Distribution of restricted shares                                                              |  |                                                  |       |        |  |           |     |         |  |              |    |            |  |          | (273     | ) |  |          |         |    
|Proceeds from issuance of common stock, net of
expenses of $2.0 million                        |  |                                                  | 23,967 |        |  |           | 240  |         |  |              |    |            |  |          | 107,760  |   |  |          |         |    
|Proceeds from issuance of 5,991,369 shares of
preferred stock, net of expenses of $1.1 million |  |                                                  |       |        |  |           |     |         |  |              | 60  |            |  |          | 26,340   |   |  |          |         |    
|Conversion of preferred stock to common stock                                                  |  |                                                  | 5,991  |        |  |           | 60   |         |  |              | (60 | )          |  |          |         |   |  |          |         |    
|Expense recognized on stock options with below
market strike price                             |  |                                                  |       |        |  |           |     |         |  |              |    |            |  |          | 5,219    |   |  |          |         |    
|Unrealized gain on securities available-for-sale,
net of tax                                   |  |                                                  |       |        |  |           |     |         |  |              |    |            |  |          |         |   |  |          |         |    
|Minimum pension liability adjustment, net of tax                                               |  |                                                  |       |        |  |           |     |         |  |              |    |            |  |          |         |   |  |          |         |    
|Change in debt of ESOP                                                                         |  |                                                  |       |        |  |           |     |         |  |              |    |            |  |          |         |   |  |          |         |    
|Net loss                                                                                       |  |                                                  |       |        |  |           |     |         |  |              |    |            |  |          |         |   |  |          | (101,170 | )  
|                                                                                               |  |                                                  |        |        |  |           |      |         |  |              |     |            |  |          |          |   |  |          |          |    
|Balance at December 31, 2001                                                                   |  |                                                  | 62,628 |        |  |           | 626  |         |  |              |    |            |  |          | 595,258  |   |  |          | (258,047 | )  
|Exercise of stock options, including tax benefits                                              |  |                                                  | 121    |        |  |           | 2    |         |  |              |    |            |  |          | 568      |   |  |          |         |    
|Distribution of directors retirement plan shares                                              |  |                                                  | 24     |        |  |           |     |         |  |              |    |            |  |          | 165      |   |  |          |         |    
|Exercise of stock warrants                                                                     |  |                                                  | 45     |        |  |           |     |         |  |              |    |            |  |          | 212      |   |  |          |         |    
|Expense recognized on stock options with below
market strike price                             |  |                                                  |       |        |  |           |     |         |  |              |    |            |  |          | 4,033    |   |  |          |         |    
|Change in debt of ESOP                                                                         |  |                                                  |       |        |  |           |     |         |  |              |    |            |  |          |         |   |  |          |         |    
|Net income                                                                                     |  |                                                  |       |        |  |           |     |         |  |              |    |            |  |          |         |   |  |          | 71,661   |    
|Other                                                                                          |  |                                                  |       |        |  |           |     |         |  |              |    |            |  |          |         |   |  |          | 5        |    
|Liquidation adjustment on securities
available-for-sale, net of tax                            |  |                                                  |       |        |  |           |     |         |  |              |    |            |  |          |         |   |  |          |         |    
|Liquidation adjustment on pension liability                                                    |  |                                                  |       |        |  |           |     |         |  |              |    |            |  |          |         |   |  |          |         |    
|Transfer of stockholders equity to net assets in
liquidation                                  |  |                                                  |       |        |  |           | (628 | )       |  |              |    |            |  |          | (600,236 | ) |  |          | 186,381  |    
|                                                                                               |  |                                                  |        |        |  |           |      |         |  |              |     |            |  |          |          |   |  |          |          |    
|Balance at September 30, 2002                                                                  |  |                                                  | 62,818 |        |  | $         |     |         |  | $            |    |            |  | $        |         |   |  | $        |         |    
|                                                                                               |  |                                                  |        |        |  |           |      |         |  |              |     |            |  |          |          |   |  |          |          |    

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                                               |  |                                                  |        |            |  |                |      |                 |  |               |      |         |  |   |        |   |  |   |          |  
|---------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ------ | ---------- |  | -------------- | ---- | --------------- |  | ------------- | ---- | ------- |  | - | ------ | - |  | - | -------- | -
|                                                                                               |  |                                                  |        |            |  | Unrealized     |      |                 |  |               |      |         |  |   |        |   |  |  
|                                                                                               |  |                                                  |        |            |  | Gain (Loss) on |      |                 |  |               |      | Debt of |  |   |        |  
|                                                                                               |  |                                                  |        |            |  | Securities     |      | Minimum Pension |  | Employee      |      |         |  |  
|                                                                                               |  |                                                  |        |            |  | Available-for- |      | Liability       |  | Stock         |      | Total  
|                                                                                               |  | Treasury                                         |        | Sale,      |  | Adjustment,    |      | Ownership       |  | Stockholders'
|                                                                                               |  | Stock                                            |        | Net of Tax |  | Net of Tax     |      | Plan            |  | Equity       
|                                                                                               |  |                                                  |        |            |  |                |      |                 |  |              
|                                                                                               |  | (Dollars in thousands, except per share amounts)
|Balance at December 31, 1999                                                                   |  | $                                                | (1,094 | )          |  | $              | (293 | )               |  | $             |     |         |  | $ | (2,809 | ) |  | $ | 631,194  |  
|Exercise of stock options, including tax benefits                                              |  |                                                  |       |            |  |                |     |                 |  |               |     |         |  |   |       |   |  |   | 94       |  
|Distribution of restricted shares                                                              |  |                                                  | 13     |            |  |                |     |                 |  |               |     |         |  |   |       |   |  |   |         |  
|Cash dividends declared ($0.30 per share)                                                      |  |                                                  |       |            |  |                |     |                 |  |               |     |         |  |   |       |   |  |   | (9,780   | )
|Unrealized gain on securities available-for-sale,
net of tax                                   |  |                                                  |       |            |  |                | 303  |                 |  |               |     |         |  |   |       |   |  |   | 303      |  
|Repayment of debt                                                                              |  |                                                  |       |            |  |                |     |                 |  |               |     |         |  |   | 2,235  |   |  |   | 2,235    |  
|Net loss                                                                                       |  |                                                  |       |            |  |                |     |                 |  |               |     |         |  |   |       |   |  |   | (326,197 | )
|                                                                                               |  |                                                  |        |            |  |                |      |                 |  |               |      |         |  |   |        |   |  |   |          |  
|Balance at December 31, 2000                                                                   |  |                                                  | (1,081 | )          |  |                | 10   |                 |  |               |     |         |  |   | (574   | ) |  |   | 297,849  |  
|Exercise of stock options, including tax benefits                                              |  |                                                  |       |            |  |                |     |                 |  |               |     |         |  |   |       |   |  |   | 94       |  
|Distribution of directors retirement plan shares                                              |  |                                                  |       |            |  |                |     |                 |  |               |     |         |  |   |       |   |  |   | 73       |  
|Distribution of restricted shares                                                              |  |                                                  | 273    |            |  |                |     |                 |  |               |     |         |  |   |       |   |  |   |         |  
|Proceeds from issuance of common stock, net of
expenses of $2.0 million                        |  |                                                  |       |            |  |                |     |                 |  |               |     |         |  |   |       |   |  |   | 108,000  |  
|Proceeds from issuance of 5,991,369 shares of
preferred stock, net of expenses of $1.1 million |  |                                                  |       |            |  |                |     |                 |  |               |     |         |  |   |       |   |  |   | 26,400   |  
|Conversion of preferred stock to common stock                                                  |  |                                                  |       |            |  |                |     |                 |  |               |     |         |  |   |       |   |  |   |         |  
|Expense recognized on stock options with below
market strike price                             |  |                                                  |       |            |  |                |     |                 |  |               |     |         |  |   |       |   |  |   | 5,219    |  
|Unrealized gain on securities available-for-sale,
net of tax                                   |  |                                                  |       |            |  |                | 513  |                 |  |               |     |         |  |   |       |   |  |   | 513      |  
|Minimum pension liability adjustment, net of tax                                               |  |                                                  |       |            |  |                |     |                 |  |               | (294 | )       |  |   |       |   |  |   | (294     | )
|Change in debt of ESOP                                                                         |  |                                                  |       |            |  |                |     |                 |  |               |     |         |  |   | (497   | ) |  |   | (497     | )
|Net loss                                                                                       |  |                                                  |       |            |  |                |     |                 |  |               |     |         |  |   |       |   |  |   | (101,170 | )
|                                                                                               |  |                                                  |        |            |  |                |      |                 |  |               |      |         |  |   |        |   |  |   |          |  
|Balance at December 31, 2001                                                                   |  |                                                  | (808   | )          |  |                | 523  |                 |  |               | (294 | )       |  |   | (1,071 | ) |  |   | 336,187  |  
|Exercise of stock options, including tax benefits                                              |  |                                                  |       |            |  |                |     |                 |  |               |     |         |  |   |       |   |  |   | 570      |  
|Distribution of directors retirement plan shares                                              |  |                                                  |       |            |  |                |     |                 |  |               |     |         |  |   |       |   |  |   | 165      |  
|Exercise of stock warrants                                                                     |  |                                                  |       |            |  |                |     |                 |  |               |     |         |  |   |       |   |  |   | 212      |  
|Expense recognized on stock options with below
market strike price                             |  |                                                  |       |            |  |                |     |                 |  |               |     |         |  |   |       |   |  |   | 4,033    |  
|Change in debt of ESOP                                                                         |  |                                                  |       |            |  |                |     |                 |  |               |     |         |  |   | 1,071  |   |  |   | 1,071    |  
|Net income                                                                                     |  |                                                  |       |            |  |                |     |                 |  |               |     |         |  |   |       |   |  |   | 71,661   |  
|Other                                                                                          |  |                                                  |       |            |  |                |     |                 |  |               |     |         |  |   |       |   |  |   | 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                                  |  |                                                  | 808    |            |  |                |     |                 |  |               |     |         |  |   |       |   |  |   | (413,675 | )
|                                                                                               |  |                                                  |        |            |  |                |      |                 |  |               |      |         |  |   |        |   |  |   |          |  
|Balance at September 30, 2002                                                                  |  | $                                                |       |            |  | $              |     |                 |  | $             |     |         |  | $ |       |   |  | $ |         |  
|                                                                                               |  |                                                  |        |            |  |                |      |                 |  |               |      |         |  |   |        |   |  |   |          |  



|(1) |  | Substantially restricted.
|--- |  | -------------------------

The accompanying notes are an integral
part of these consolidated financial statements.

70



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##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Consolidated Statements of Cash Flows

|                                                                                                                                                     |                                                                              |  |                                 |  |  |   |           |          |      |   |          |         |   |   |           |           |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- |  | ------------------------------- |  |  | - | --------- | -------- | ---- | - | -------- | ------- | - | - | --------- | --------- | -
|                                                                                                                                                     |                                                                              |  | For the Year Ended December 31,
|                                                                                                                                                     |                                                                              |  |                                
|                                                                                                                                                     |                                                                              |  |                                 |  |  |   | 2002      |          | 2001 |   | 2000    
|                                                                                                                                                     |                                                                              |  |                                 |  |  |   |           |          |      |   |         
|                                                                                                                                                     |                                                                              |  | (Dollars in thousands)         
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                                                                 |                                                                              |  |                                 |  |  |   |           |          |      |   |          |         |   |   |           |          
|Net income (loss) and certain changes in net assets in liquidation                                                                                   |                                                                              |  |                                 |  |  | $ | 67,662    |          |      | $ | (101,170 | )       |   | $ | (326,197  | )        
|Adjustments to reconcile net income (loss) to net cash
provided by operating activities:                                                             |                                                                              |  |                                 |  |  |   |           |          |      |   |          |         |   |   |           |          
|                                                                                                                                                     | Amortization of intangible assets                                            |  |                                 |  |  |   |           | 993      |      |   |          | 11,280  |   |   |           | 20,766    |  
|                                                                                                                                                     | Write-off
of intangible assets  franchise                                   |  |                                 |  |  |   |           |         |      |   |          |        |   |   |           | 192,622   |  
|                                                                                                                                                     | Origination of loans and leases held-for-sale                                |  |                                 |  |  |   |           |         |      |   |          |        |   |   |           | (520,023  | )
|                                                                                                                                                     | Proceeds from securitizations and/or sales of loans and leases held-for-sale |  |                                 |  |  |   |           |         |      |   |          |        |   |   |           | 1,459,558 |  
|                                                                                                                                                     | Provision for losses on loans and leases and real estate owned               |  |                                 |  |  |   |           | 11,118   |      |   |          | 74,826  |   |   |           | 62,600    |  
|                                                                                                                                                     | Depreciation and amortization of premises and equipment                      |  |                                 |  |  |   |           | 3,110    |      |   |          | 4,751   |   |   |           | 8,617     |  
|                                                                                                                                                     | Depreciation and amortization of investment in operating lease assets        |  |                                 |  |  |   |           | 44,452   |      |   |          | 56,960  |   |   |           | 69,350    |  
|                                                                                                                                                     | Accretion of retained interests in securitizations                           |  |                                 |  |  |   |           | (1,087   | )    |   |          | (1,947  | ) |   |           | (5,213    | )
|                                                                                                                                                     | Amortization of premiums, net of discount accretion                          |  |                                 |  |  |   |           | 5,278    |      |   |          | 11,685  |   |   |           | 11,981    |  
|                                                                                                                                                     | Non-cash compensation expense                                                |  |                                 |  |  |   |           | 4,033    |      |   |          |        |   |   |           |          |  
|                                                                                                                                                     | Revaluation of franchise-related assets                                      |  |                                 |  |  |   |           |         |      |   |          | 70,146  |   |   |           | 101,894   |  
|                                                                                                                                                     | (Gain) loss on sale of assets and liabilities, net                           |  |                                 |  |  |   |           | (18,706  | )    |   |          | 10,547  |   |   |           | 52,606    |  
|                                                                                                                                                     | Decrease (increase) in other assets                                          |  |                                 |  |  |   |           | 165,812  |      |   |          | (54,251 | ) |   |           | (81,424   | )
|                                                                                                                                                     | Decrease in other liabilities                                                |  |                                 |  |  |   |           | (11,036  | )    |   |          | (7,504  | ) |   |           | (37,833   | )
|                                                                                                                                                     | Decrease in reserve for estimated costs during the period of liquidation     |  |                                 |  |  |   |           | (8,573   | )    |   |          |        |   |   |           |          |  
|                                                                                                                                                     | Adjustment for liquidation basis                                             |  |                                 |  |  |   |           | (263,749 | )    |   |          |        |   |   |           |          |  
|                                                                                                                                                     | Cumulative effect of change in accounting principle, net of taxes            |  |                                 |  |  |   |           | 18,920   |      |   |          |        |   |   |           |          |  
|                                                                                                                                                     | Other, net                                                                   |  |                                 |  |  |   |           | 734      |      |   |          | 1,852   |   |   |           | 54        |  
|                                                                                                                                                     |                                                                              |  |                                 |  |  |   |           |          |      |   |          |         |   |   |           |          
|Net cash provided by operating activities                                                                                                            |                                                                              |  |                                 |  |  |   | 18,961    |          |      |   | 77,175   |         |   |   | 1,009,358 |          
|                                                                                                                                                     |                                                                              |  |                                 |  |  |   |           |          |      |   |          |         |   |   |           |          
|CASH FLOWS FROM INVESTING ACTIVITIES                                                                                                                 |                                                                              |  |                                 |  |  |   |           |          |      |   |          |         |   |   |           |          
|Acquisition of assets/subsidiaries, net of cash and cash equivalents paid                                                                            |                                                                              |  |                                 |  |  |   |          |          |      |   |         |         |   |   | (24,294   | )        
|Proceeds from the sale of substantially all of the assets and certain
liabilities
of Bankers Mutual, net of cash and cash equivalents sold           |                                                                              |  |                                 |  |  |   |          |          |      |   |         |         |   |   | 30,879    |          
|Net decrease (increase) in loans and leases resulting from originations,
net of repayments                                                           |                                                                              |  |                                 |  |  |   | 115,811   |          |      |   | 131,079  |         |   |   | (164,239  | )        
|Purchases of loans and leases, net                                                                                                                   |                                                                              |  |                                 |  |  |   |          |          |      |   | (12,933  | )       |   |   | (27,849   | )        
|Purchases of mortgage-backed securities                                                                                                              |                                                                              |  |                                 |  |  |   | (60,499   | )        |      |   | (188,869 | )       |   |   | (327,840  | )        
|Purchases of investment securities                                                                                                                   |                                                                              |  |                                 |  |  |   | (78,480   | )        |      |   | (118,152 | )       |   |   | (48,070   | )        
|Principal payments on mortgage-backed securities                                                                                                     |                                                                              |  |                                 |  |  |   | 138,448   |          |      |   | 174,255  |         |   |   | 99,717    |          
|Principal payments on investment securities                                                                                                          |                                                                              |  |                                 |  |  |   | 47,413    |          |      |   | 20,121   |         |   |   | 7,444     |          
|Proceeds from securitizations and/or sales of loans and leases held-for-sale
excluding $326.0 million net loan sale to U.S. Bank on November 1, 2002 |                                                                              |  |                                 |  |  |   | 1,690,902 |          |      |   | 539,859  |         |   |   |          |          
|Proceeds from sale of mortgage-backed securities available-for-sale                                                                                  |                                                                              |  |                                 |  |  |   | 181,772   |          |      |   | 392,166  |         |   |   | 239,965   |          
|Proceeds from sale of investment securities available-for-sale                                                                                       |                                                                              |  |                                 |  |  |   | 75,466    |          |      |   | 26,321   |         |   |   | 230,041   |          
|Proceeds from maturities/calls of investment securities available-for-sale                                                                           |                                                                              |  |                                 |  |  |   |          |          |      |   |         |         |   |   | 45,298    |          
|Proceeds from retained interests in securitizations                                                                                                  |                                                                              |  |                                 |  |  |   |          |          |      |   |         |         |   |   | 6,585     |          
|Proceeds from sale of real estate owned                                                                                                              |                                                                              |  |                                 |  |  |   | 6,684     |          |      |   | 4,389    |         |   |   | 6,504     |          
|Additions to premises and equipment                                                                                                                  |                                                                              |  |                                 |  |  |   | (448      | )        |      |   | (593     | )       |   |   | (3,004    | )        
|Decrease in investment in stock of the Federal Home Loan Bank
of San Francisco                                                                       |                                                                              |  |                                 |  |  |   | 8,082     |          |      |   | 16,033   |         |   |   | 37,645    |          
|(Increase) decrease in investment in stock of the Federal Reserve Bank                                                                               |                                                                              |  |                                 |  |  |   | (1,793    | )        |      |   | 7,724    |         |   |   | (6,114    | )        
|                                                                                                                                                     |                                                                              |  |                                 |  |  |   |           |          |      |   |          |         |   |   |           |          
|Net cash provided by investing activities                                                                                                            |                                                                              |  |                                 |  |  |   | 2,123,358 |          |      |   | 991,400  |         |   |   | 102,668   |          
|                                                                                                                                                     |                                                                              |  |                                 |  |  |   |           |          |      |   |          |         |   |   |           |          

71



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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,
|                                                                                                                     |                                                                     |   |                                
|                                                                                                                     |                                                                     |   | 2002                            |           |  |  |  |  | 2001 |   | 2000      
|                                                                                                                     |                                                                     |   |                                 |           |  |  |  |  |      |   |           
|                                                                                                                     |                                                                     |   | (Dollars in thousands)         
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                                 |                                                                     |   |                                 |           |  |  |  |  |      |   |            |         |     |   |            |          
|Net increase (decrease) in deposits                                                                                  |                                                                     |   | 291,545                         |           |  |  |  |  |      |   | (511,385   | )       |     |   | 16,532     |          
|Sale 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                                              |                                                                     |   | 2,490,000                       |           |  |  |  |  |      |   | 205,000    |         |     |   | 1,950,500  |          
|Repayment of advances from the Federal Home Loan Bank of San Francisco                                               |                                                                     |   | (2,490,000                      | )         |  |  |  |  |      |   | (1,008,800 | )       |     |   | (2,514,000 | )        
|Proceeds from repurchase agreements                                                                                  |                                                                     |   |                                |           |  |  |  |  |      |   |           |         |     |   | 2,103,116  |          
|Repayment of repurchase agreements                                                                                   |                                                                     |   |                                |           |  |  |  |  |      |   | (103,241   | )       |     |   | (2,017,758 | )        
|Repayment of Subordinated Debt                                                                                       |                                                                     |   | (154,563                        | )         |  |  |  |  |      |   |           |         |     |   |           |          
|Net decrease in warehouse lines outstanding                                                                          |                                                                     |   |                                |           |  |  |  |  |      |   | (94,134    | )       |     |   | (288,071   | )        
|Net increase (decrease) in other borrowings                                                                          |                                                                     |   | (75,567                         | )         |  |  |  |  |      |   | 135,872    |         |     |   | (1,630     | )        
|Proceeds from issuance of common stock                                                                               |                                                                     |   | 1,609                           |           |  |  |  |  |      |   | 108,167    |         |     |   |           |          
|Proceeds from issuance of preferred stock                                                                            |                                                                     |   |                                |           |  |  |  |  |      |   | 26,400     |         |     |   | 94         |          
|Dividends paid to preferred stockholders                                                                             |                                                                     |   | (273                            | )         |  |  |  |  |      |   |           |         |     |   |           |          
|Dividends paid to stockholders                                                                                       |                                                                     |   |                                |           |  |  |  |  |      |   |           |         |     |   | (9,780     | )        
|                                                                                                                     |                                                                     |   |                                 |           |  |  |  |  |      |   |            |         |     |   |            |          
|Net cash used in financing activities                                                                                |                                                                     |   | (2,440,412                      | )         |  |  |  |  |      |   | (1,242,121 | )       |     |   | (760,997   | )        
|                                                                                                                     |                                                                     |   |                                 |           |  |  |  |  |      |   |            |         |     |   |            |          
|Net increase (decrease) in cash and cash equivalents                                                                 |                                                                     |   | (298,093                        | )         |  |  |  |  |      |   | (173,546   | )       |     |   | 351,029    |          
|Cash and cash equivalents at beginning of year                                                                       |                                                                     |   | 521,388                         |           |  |  |  |  |      |   | 694,934    |         |     |   | 343,905    |          
|                                                                                                                     |                                                                     |   |                                 |           |  |  |  |  |      |   |            |         |     |   |            |          
|Cash and cash equivalents at end of year                                                                             |                                                                     | $ | 223,295                         |           |  |  |  |  |      | $ | 521,388    |         |     | $ | 694,934    |          
|                                                                                                                     |                                                                     |   |                                 |           |  |  |  |  |      |   |            |         |     |   |            |          
|Cash paid during the year for:                                                                                       |                                                                     |   |                                 |           |  |  |  |  |      |   |            |         |     |   |            |          
|                                                                                                                     | Interest                                                            |   | $                               | 97,803    |  |  |  |  |      |   | $          | 198,692 |     |   | $          | 293,568   |  
|                                                                                                                     | Income taxes                                                        |   | $                               | 1,771     |  |  |  |  |      |   | $          | 202     |     |   | $          | 3,468     |  
|Supplemental non-cash investing and financing activities:                                                            |                                                                     |   |                                 |           |  |  |  |  |      |   |            |         |     |   |            |          
|                                                                                                                     | Loans transferred to real estate owned                              |   | $                               | 387       |  |  |  |  |      |   | $          | 16,494  |     |   | $          | 5,151     |  
|                                                                                                                     | Loans transferred from held-for-investment to held-for-sale         |   | $                               | 2,289,672 |  |  |  |  |      |   | $          | 328,402 | (1) |   | $          | 1,323,531 |  
|                                                                                                                     | Loans securitized and transferred to securities held-to-maturity    |   | $                               |          |  |  |  |  |      |   | $          |        |     |   | $          | 268,172   |  
|                                                                                                                     | Loans securitized and transferred to securities available-for-sale  |   | $                               | 22,638    |  |  |  |  |      |   | $          |        |     |   | $          |          |  
|                                                                                                                     | Securities transferred from held-to-maturity to available-for-sale  |   | $                               |          |  |  |  |  |      |   | $          | 631,663 |     |   | $          | 496,324   |  
|                                                                                                                     | Conversion of preferred stock to common stock                       |   | $                               |          |  |  |  |  |      |   | $          | 26,400  |     |   | $          |          |  
|The acquisitions of assets/subsidiaries involved the following:                                                      |                                                                     |   |                                 |           |  |  |  |  |      |   |            |         |     |   |            |          
|                                                                                                                     | Fair value of assets acquired, other than cash and cash equivalents |   | $                               |          |  |  |  |  |      |   | $          |        |     |   | $          | (15,294   | )
|                                                                                                                     | Goodwill                                                            |   |                                 |          |  |  |  |  |      |   |            |        |     |   |            | (9,000    | )
|                                                                                                                     |                                                                     |   |                                 |           |  |  |  |  |      |   |            |         |     |   |            |          
|                                                                                                                     | Net cash and cash equivalents paid                                  |   | $                               |          |  |  |  |  |      |   | $          |        |     |   | $          | (24,294   | )
|                                                                                                                     |                                                                     |   |                                 |           |  |  |  |  |      |   |            |         |     |   |            |          



|(1) |  | Net of loans transferred from held-for-sale to held-for-investment.
|--- |  | -------------------------------------------------------------------

The accompanying notes are an integral
part of these consolidated financial statements.

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Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2002

Note 1. Basis of Presentation

The information provided in the consolidated financial statements reflects
the Companys adoption of liquidation basis accounting effective September 30,
2002 in accordance with accounting principles generally accepted in the United
States of America (GAAP). Liquidation basis accounting requires the Company
to value its assets at their estimated net realizable values and its
liabilities to include accruals for estimated costs associated with carrying
out the plan of dissolution and stockholder liquidity. The consolidated
statement of financial condition as of December 31, 2001, the consolidated
statements of operations and comprehensive income (loss) for the years ended
December 31, 2001 and 2000, the consolidated statement of stockholders
equity for the years ended December 31, 2001 and 2000, and the
consolidated statements of cash flows for the years ended
December 31, 2001 and 2000 have been prepared using
the historical cost (going concern) basis of accounting on which the Company
has previously reported its financial position and results of operations.

The consolidated financial statements include the accounts of Bay View
Capital Corporation (the Company), a bank holding company incorporated under
the laws of the state of Delaware, and our wholly owned subsidiaries: Bay View
Bank, N.A. (the Bank), a national bank; 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; and FMAC Franchise Receivables Corporation, a
California corporation. Bay View Bank includes its wholly owned subsidiaries:
Bay View Acceptance Corporation (BVAC), a Nevada corporation; Bay View
Commercial Finance Group, a California corporation; XBVBKRS, Inc., formerly
Bankers Mutual, a California corporation; MoneyCare, Inc., a California
corporation; and Bay View Auxiliary Corporation, a California corporation. On
June 22, 2001, we completed the stock sale by Bay View Bank of the legal entity
Bay View Franchise Mortgage Acceptance Company (BVFMAC) and its related
servicing platform. On December 31, 2001, in connection with the financing
secured by our auto lease cash flows, LFS-BV, formerly a subsidiary of Bay View
Acceptance Corporation, was merged into Bay View Bank. All significant
intercompany accounts and transactions have been eliminated.

On November 1, 2002, the Company completed the sale of the Banks 57
full-service branches throughout the San Francisco Bay Area to U.S. Bank, N.A.
Through BVAC, the Bank continues to operate its auto loan production business
in 17 states. In 2003, we intend to transfer BVAC from the Bank to the
Company, subject to regulatory approval. The Company believes this will allow for a full
liquidation of the Bank while BVAC continues to originate new loans and expand
geographically throughout the liquidation period ending September 2005. The
Company intends to spin off BVAC to stockholders or sell it at the end of the
liquidation period.

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Note 2. Plan of Dissolution and Stockholder Liquidity

On October 3, 2002, a special meeting of Bay View Capital Corporation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, N.A. 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 have been valued at their estimated net realizable values
and liabilities include 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 $6.43 in
net assets in liquidation per outstanding share based on 63,747,157 diluted
shares in liquidation.

The Plan outlines the steps necessary to fully 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 are to be sold in an orderly
manner and the liabilities and expenses are to be paid, including the
outstanding debt of both the Company and the Bank and the Capital Securities.
Once these transactions have been completed, the Company intends to distribute
the net proceeds of the asset sales to its stockholders.

On November 1, 2002, the Company completed the U.S. Bank transaction. At
the closing of the transaction, U.S. Bank paid Bay View 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. Bay View Bank paid to U.S. Bank at
the closing an amount equal to the deposits being assumed by U.S. Bank of
approximately $3.307 billion, less the amounts payable by U.S. Bank to Bay View
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 million of 9-1/8% 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 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 adjustments totaling $266.5 million
related to the mark-to-market valuation of 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:



| |  | $463.5 million deposit premium, which was calculated as 14% of non-brokered retail deposits based on October average
deposit levels plus $5 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 adjustment 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;

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| |  | $8.8 million in charges related to the prepayment of the Companys and Bay View 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.                                                                

For the quarter ended December 31, 2002, the Company recorded an
additional $2.8 million net pre-tax adjustment related to mark-to-market
valuation of its assets and liabilities. The valuation adjustment was
primarily due to a decrease in the market value of the loan portfolio.

Under liquidation basis accounting, the Company has estimated future
liabilities associated with carrying out the Plan. The Company has not
reflected any future revenues and expenses of an operating nature, as such
income and expenses will be recognized when realized.

Included in the accounting policies below are the assumptions used in the
valuation of assets and liabilities of the Company reflecting the change to
liquidation basis accounting.

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 consolidated statements of financial condition 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.

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, our 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. We have no compensating balance
arrangements or lines of credit with banks. Bay View Bank is required to
maintain reserves against customer deposits by keeping balances with the
Federal Reserve Bank of San Francisco in a noninterest-earning cash account.
Cash balances for Bay View Bank held in reserve at the Federal Reserve Bank of
San Francisco totaled approximately $0 and $2.0 million at December 31, 2002
and 2001, respectively. The average required reserve balance for Bay View Bank
totaled $1.5 million in 2002 and $519,000 in 2001.

Securities

Under liquidation basis accounting, all securities are classified as
available-for-sale and reported at net realizable value. Valuations are
determined from published information or quotes by registered securities
brokers. Securities for which quotes are not readily available are valued
based on the present value of discounted estimated future cash flows.
Adjustments to net realizable value, if any, are recorded on a quarterly basis
in earnings through the adjustment for liquidation basis. Interest on
securities continues to be accrued as income to the extent considered
collectible.

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Retained interests and asset-backed securities related to our loan and
lease securitizations are classified as securities available-for-sale. We are
not aware of an active market for the purchase and sale of these retained
interests at this time, and accordingly, we
estimated the net realizable value of the retained interests by calculating the
present value of the estimated expected future cash flows to be received, using
managements best estimates of the key assumptions, including credit losses,
prepayment speeds, and discount rates commensurate with the risks involved. We
wrote-off the entire balance of our retained interest in franchise loan
securitizations totaling $4.9 million upon our adoption of liquidation basis
accounting. We recorded impairment charges relating to retained
interests of $12.6 million and $26.3 million for the years ended December
31, 2001 and 2000, respectively. We do not have a trading portfolio.

Historically, securities classified as held-to-maturity were recorded at
amortized cost, adjusted for the amortization of premiums and accretion of
discounts, because we had the ability and intent to hold these securities to
maturity. Securities that were held to meet investment objectives such as
interest rate risk and liquidity management, but which may be sold as necessary
to implement management strategies, were classified as available-for-sale and
reported at fair value. Fair value for these securities was obtained as
described above.

Securities were identified as either available-for-sale or
held-to-maturity at purchase and accounted for accordingly. Unrealized losses
on securities held-to-maturity were realized and charged against earnings when
it was determined that a decline in value which was other than temporary had
occurred. Net unrealized gains and losses on securities available-for-sale
were excluded from earnings and reported, net of applicable income taxes, as a
separate component of stockholders equity. Gains and losses on sales of
securities were recorded in earnings at the time of sale and were determined by
the difference between the net sale proceeds and the amortized cost of the
security, using the specific identification method.

Discounts and premiums on securities were amortized into interest income
using a method approximating the effective interest method over the estimated
life of the security, adjusted for actual prepayments.

Loans and Leases

Under the liquidation basis accounting, we classify all loans and leases
as held-for-sale and report them at net realizable value. Net realizable value
for these loans and leases is 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, are recorded on a quarterly basis as a charge 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 have not
changed.

Prior to September 30, 2002, loans and leases that we 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 loan and lease 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 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 we had the ability and the
intent to hold these loans and leases for the foreseeable future. Generally, we discontinue
interest accruals on loans and leases 90 days or more past due. Interest
income on nonaccrual loans and leases is generally recognized on a cash basis
when received.

We charge fees for originating loans and leases at the time the loan or
lease is granted. We recognize these origination fees, 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

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deferred origination fees is
discontinued on nonperforming loans and leases. When a loan or lease is paid
off, unamortized net deferred origination fees are included in interest income
at that time. When a loan or lease is sold, unamortized net deferred
origination fees are included in the gain or loss on the sale.

Impairment of a loan occurs when, based on current information and events,
it is probable that we will be unable to collect all amounts due according to
the contractual terms of the loan agreement. We consider nonperforming loans
and troubled debt restructurings as impaired loans. Nonperforming loans are
defined as loans 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. We also designate loans less than 90 days delinquent as
nonperforming when the full collection of principal and/or interest is doubtful. Troubled debt restructurings are loans
which have been modified based upon interest rate concessions and/or payment
concessions. Homogeneous loans are collectively evaluated on an aggregate
basis for impairment. We historically considered our single-family residential
and consumer loans, including auto and home equity loans, as homogeneous loans.
Impaired loans are 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 is collateral dependent. Our impaired real estate-based
loans are generally measured based on the fair value of the collateral because
they are collateral dependent. We generally recognize 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 Loan and Lease Losses

Effective September 30, 2002, the balance of the allowance for loan and
lease losses was reallocated as mark-to-mark adjustments to individual loans
and leases and groups of homogeneous loans as part of the adoption of
liquidation basis accounting.

Prior to September 30, 2002, the allowance for loan and lease losses was
established through a provision charged to expense and was maintained at a
level that we believed was sufficient to cover estimated probable losses in the
portfolio. In determining the level of the allowance for loan and lease
losses, we evaluated specific credits and the portfolio in general using
several methods that included historical performance, collateral values, cash
flows and analysis of current economic conditions. This evaluation culminated
with a judgment on the probability of collection based on existing and probable
near term events. The underwriting of new credits may have been changed or
modified depending on the results of these ongoing evaluations. Discontinued
lending operations received the same scrutiny as ongoing operations but did not
have the additional risk inherent in accepting new business. Our methodology
provided for three allowance components. The first component
represented an allowance for loans and leases that were individually evaluated. The second
component represented an allowance for groups of homogeneous loans and leases that
currently exhibited no identifiable weaknesses and were collectively evaluated.
We determined allowances for these groups of loans and leases based on factors
such as prevailing economic conditions, historical loss experience, asset
concentrations, levels and trends of classified assets, and loan and lease
delinquencies. The last component was an unallocated allowance which
was based
on factors that were not necessarily associated with a specific credit, group of
loans or leases or loan or lease category. These factors included an
evaluation of economic conditions in areas where we lend money, loan and lease
concentrations, lending policies or underwriting procedures, and trends in
delinquencies and nonperforming assets. The unallocated allowance reflected
our efforts to ensure that the overall allowance appropriately reflected the
probable losses inherent in the loan and lease portfolio.

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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, we recorded servicing assets, in accordance with Statement No.
125, 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 was recorded on a net present value basis and
was classified as an available-for-sale security at fair value. The balance of
these assets was $620,000 at December 31, 2002 and $489,000 at
December 31, 2001. Impairment charges on these servicing assets were $13.6
million and $8.8 million for the years ended December 31, 2001 and 2000,
respectively. There were no impairment charges for 2002. 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.

Investment in Operating Lease Assets

We
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 over the lease
term to its estimated residual value. This depreciation and other related
expenses, including the amortization of initial direct costs which
were deferred
and amortized over the lease term, were classified as noninterest expense.
Lease payments received were recorded as noninterest income. The net balance of
our investment in operating lease assets is reported at net realizable value in
accordance with liquidation basis accounting. Gross lease asset balances were
$340.5 million and $505.6 million at December 31, 2002 and 2001, respectively.
Accumulated depreciation and amortization related to the lease assets totaled
$122.4 million and $130.8 million at December 31, 2002 and 2001, respectively.
At December 31, 2002, future minimum lease payments to be received by us under
operating leases were $41.4 million, $18.1 million, and $3.3 million for the
years ending December 31, 2003, 2004 and 2005, respectively.

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 we adopted effective January 1, 2002. Statement No. 144, which
supersedes Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, retains the fundamental
provisions of Statement No. 121 related to the recognition and measurement of
the impairment of long-lived assets to be held and used and the measurement of
long-lived assets to be disposed of by sale. 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 automobiles 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 to the lessor 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.

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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. For those impaired leases where the estimated fair value is less
than the net book value, an impairment charge is recorded for the difference.
For the year ended December 31, 2002, the Company recorded $1.0 million in
impairment charges against approximately 4,389 of its 11,428 lease contracts
that were considered impaired and which is included in leasing expense. In
addition, since the inception of the lease portfolio in June 1998, the Company
has recorded additional monthly charges, also included in leasing expense, to
reflect increased depreciation as a result of declines in the estimated
residual values. At December 31, 2002 and 2001, the Company has provided $24.6
million and $32.7 million, respectively, in impairment and additional monthly
charges, net of losses, against its automobile operating lease portfolio which
are available to absorb anticipated future residual losses.

Real Estate Owned

Effective September 30, 2002, real estate owned is comprised of property
acquired through foreclosure and is recorded at net realizable value as of the
date of foreclosure. The difference upon foreclosure between book value and
net realizable value, if any, is expensed to adjustment for liquidation basis.
Adjustments to net realizable value, if any, are recorded on a quarterly basis
as a charge through the adjustment for liquidation basis. Revenues and other
expenses associated with real estate owned are realized and reported as a
component of noninterest expense when incurred.

Prior to September 30, 2002, real estate owned was comprised of property
acquired through foreclosure and was 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, was charged-off against
the allowance for losses on loans and leases. Thereafter, a specific valuation
allowance was established and charged to noninterest expense for adverse
changes in the fair value of the property. Revenues and other expenses
associated with real estate owned were 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. This is considered to approximate net realizable value in
accordance with liquidation basis accounting. Depreciation and amortization
are computed on the 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 all 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. See Note 9 for
additional disclosures.

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 of
Financial Accounting Standards No. 142,

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Goodwill and Other Intangible Assets,
which the Company 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.

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. We
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, we reviewed our 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.

Deferred gains

The
deferred gain represents estimated after-tax gain related to the
future sale of the automobile lending business. As this transaction
is not under contract or assured, the estimated after-tax gain is not
recognized, but rather is recorded as a deferred gain.

Reserve for Estimated Costs during the Period of Liquidation

The reserve for estimated costs during the period of liquidation include
severance payments and costs related to facility closures, investment banking
and other professional fees and estimated litigation expense and settlements.
These expense accruals are reviewed for adequacy on a quarterly basis. Changes
to the accruals, if necessary, will be recorded as adjustments in liquidation
basis in future periods.

In addition to the $51.1 million in charges related to our adoption of
liquidation basis accounting, $2.6 million was transferred from existing
restructuring accruals to the reserve for estimated costs. 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.

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 which would be payable (receivable) if
separate returns were filed.

Our 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 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.

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Risk Management Instruments

Risk management instruments, also referred to as derivative instruments,
must qualify and be designated as hedges upon their inception and must be
effective 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.

Prior to the adoption of the Plan, we used risk management instruments to
modify interest rate characteristics of certain assets or liabilities to hedge
against our exposure to interest rate fluctuations, reducing the effects these
fluctuations might have on associated cash flows or values.

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.

In connection with our use of risk management instruments, we are exposed
to potential losses (credit risk) in the event of nonperformance by the
counterparties to the agreements. We manage the credit risk associated with
our risk management instruments by adhering to a strict counterparty selection
process and by establishing maximum exposure limits with each individual
counterparty.

On October 1, 2000, we adopted 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 every derivative instrument (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. 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 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. The
standard further requires that an entity formally document, designate and
assess the effectiveness of transactions that receive hedge accounting. Upon
our adoption of Statement No. 133, we incurred a $1.2 million after-tax loss.

Stock-Based Compensation

In December 2002, the Financial Accounting Standards Board (FASB) issued
SFAS No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure, which amends SFAS No. 123, Accounting for Stock-Based
Compensation. This Statement 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 the disclosure requirements to require
prominent disclosure in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of
the method used on reported results. The disclosure requirements under this
Statement are effective for financial statements issued after December 15,
2002.

Statement No. 123 establishes 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 allows 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.

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We account for our stock-based awards to employees and directors using the
intrinsic value method of accounting in accordance with Accounting Principles
Board Opinion 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.

Had compensation cost related to our stock option awards to employees and
directors been determined under the fair value method prescribed under
Statement No. 123, our net assets in liquidation and net assets in liquidation
per share and our net income (loss) and earnings (loss) per share would have
been the pro forma amounts illustrated in the table below for the periods
indicated:

|                                     |                                                                                                   |  |                                                  |         |      |  |      |          |   |  |   |          |  
|------------------------------------ | ------------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ------- | ---- |  | ---- | -------- | - |  | - | -------- | -
|                                     |                                                                                                   |  | For the Year Ended December 31,                 
|                                     |                                                                                                   |  |                                                 
|                                     |                                                                                                   |  | 2002                                             |         | 2001 |  | 2000
|                                     |                                                                                                   |  |                                                  |         |      |  |     
|                                     |                                                                                                   |  | (Dollars in thousands, except per share amounts)
|                                     | As reported net assets in liquidation in Consolidated
Statement of Net Assets (Liquidation Basis) |  | $                                                | 410,064 |      |  |      | N/A      |   |  |   | N/A      |  
|                                     | Stock-based employee compensation expense (determined
under fair value method, net of taxes)      |  |                                                  | (4,069  | )    |  |      | N/A      |   |  |   | N/A      |  
|                                     |                                                                                                   |  |                                                  |         |      |  |      |          |   |  |   |          |  
|                                     | Pro forma net assets in liquidation, after stock based
employee compensation expense              |  | $                                                | 405,995 |      |  |      | N/A      |   |  |   | N/A      |  
|                                     |                                                                                                   |  |                                                  |         |      |  |      |          |   |  |   |          |  
|                                     | As reported net loss in Consolidated Statements of
Operations and Comprehensive Income (Loss)     |  |                                                  | N/A     |      |  | $    | (101,170 | ) |  | $ | (326,197 | )
|                                     | Stock-based employee compensation expense (determined
under fair value method, net of taxes)      |  |                                                  | N/A     |      |  |      | (2,614   | ) |  |   | (1,244   | )
|                                     |                                                                                                   |  |                                                  |         |      |  |      |          |   |  |   |          |  
|                                     | Pro forma net loss, after stock based employee
compensation expense                               |  |                                                  | N/A     |      |  | $    | (103,784 | ) |  | $ | (327,441 | )
|                                     |                                                                                                   |  |                                                  |         |      |  |      |          |   |  |   |          |  
|Net assets in liquidation per share: |                                                                                                   |  |                                                  |         |      |  |      |          |   |  |   |         
|                                     | As reported                                                                                       |  | $                                                | 6.43    |      |  |      | N/A      |   |  |   | N/A      |  
|                                     | Pro forma                                                                                         |  | $                                                | 6.37    |      |  |      | N/A      |   |  |   | N/A      |  
|Net loss per share  basic:          |                                                                                                   |  |                                                  |         |      |  |      |          |   |  |   |         
|                                     | As reported                                                                                       |  |                                                  | N/A     |      |  | $    | (1.99    | ) |  | $ | (10.00   | )
|                                     | Pro forma                                                                                         |  |                                                  | N/A     |      |  | $    | (2.04    | ) |  | $ | (10.03   | )
|Net loss per share  diluted:        |                                                                                                   |  |                                                  |         |      |  |      |          |   |  |   |         
|                                     | As reported                                                                                       |  |                                                  | N/A     |      |  | $    | (1.99    | ) |  | $ | (10.00   | )
|                                     | Pro forma                                                                                         |  |                                                  | N/A     |      |  | $    | (2.04    | ) |  | $ | (10.03   | )

Earnings Per Share

Basic earnings per share are 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 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 years ended December 31, 2001 and 2000, average dilutive potential
common shares of 34,407 and 10,681 shares, respectively, related to shares
issuable upon the exercise of options were not included in the computation
because they were anti-dilutive.

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The following table illustrates the calculation of basic and diluted
earnings (loss) per share for the periods indicated:

|                                                                                             |  |                                                  |         |                    |  |              |          |   |  |   |          |   |  |  |  | 
|-------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ------- | ------------------ |  | ------------ | -------- | - |  | - | -------- | - |  |  |  | 
|                                                                                             |  | For the Nine                                     |         |                    |  |              |          |   |  |   |          |   |  | 
|                                                                                             |  | Months Ended                                     |         | For the Year Ended
|                                                                                             |  |                                                  |         |                   
|                                                                                             |  | September 30,                                    |         | December 31,       |  | December 31, |          |   |  |  
|                                                                                             |  | 2002                                             |         | 2001               |  | 2000         |          |   |  |  
|                                                                                             |  |                                                  |         |                    |  |              |          |   |  |  
|                                                                                             |  | (Amounts in thousands, except per share amounts) |         |                    |  |             
|Income (loss) before cumulative effect of change in
accounting principle                     |  | $                                                | 90,581  |                    |  | $            | (101,170 | ) |  | $ | (326,197 | )
|Cumulative effect of change in accounting principle,
net of taxes of $2.3 million            |  |                                                  | (18,920 | )                  |  |              |         |   |  |   |         |  
|                                                                                             |  |                                                  |         |                    |  |              |          |   |  |   |          |  
|Net income (loss)                                                                            |  | $                                                | 71,661  |                    |  | $            | (101,170 | ) |  | $ | (326,197 | )
|                                                                                             |  |                                                  |         |                    |  |              |          |   |  |   |          |  
|Weighted-average basic shares outstanding                                                    |  |                                                  | 62,724  |                    |  |              | 50,873   |   |  |   | 32,634   |  
|Add: Dilutive potential common shares                                                        |  |                                                  | 411     |                    |  |              |         |   |  |   |         |  
|                                                                                             |  |                                                  |         |                    |  |              |          |   |  |   |          |  
|Weighted-average diluted shares outstanding                                                  |  |                                                  | 63,135  |                    |  |              | 50,873   |   |  |   | 32,634   |  
|                                                                                             |  |                                                  |         |                    |  |              |          |   |  |   |          |  
|Basic earnings (loss) per share before cumulative
effect of change in accounting principle   |  | $                                                | 1.44    |                    |  | $            | (1.99    | ) |  | $ | (10.00   | )
|Cumulative effect of change in accounting
principle, net                                     |  | $                                                | (0.30   | )                  |  |              |         |   |  |   |         |  
|                                                                                             |  |                                                  |         |                    |  |              |          |   |  |   |          |  
|Net basic earnings (loss) per share                                                          |  | $                                                | 1.14    |                    |  | $            | (1.99    | ) |  | $ | (10.00   | )
|                                                                                             |  |                                                  |         |                    |  |              |          |   |  |   |          |  
|Diluted earnings (loss) per share before cumulative
effect of change in accounting principle |  | $                                                | 1.43    |                    |  | $            | (1.99    | ) |  | $ | (10.00   | )
|Cumulative effect of change in accounting
principle, net                                     |  | $                                                | (0.30   | )                  |  |              |         |   |  |   |         |  
|                                                                                             |  |                                                  |         |                    |  |              |          |   |  |   |          |  
|Net diluted earnings (loss) per share                                                        |  | $                                                | 1.13    |                    |  | $            | (1.99    | ) |  | $ | (10.00   | )
|                                                                                             |  |                                                  |         |                    |  |              |          |   |  |   |          |  

Recent Accounting Pronouncements

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45 expands on the
accounting guidance of Statements No. 5, 57, and 107 and incorporates without
change the provisions of FASB Interpretation No. 34 which was superseded. FIN
45 elaborates on the existing disclosure requirements for most guarantees and
requires that guarantors recognize a liability for the fair value of guarantees
at inception. The disclosure requirements of this Interpretation are effective
for financial statement periods ending after December 15, 2002. The initial
recognition and measurement provisions of FIN 45 are applied on a prospective
basis to guarantees issued or modified after December 31, 2002. Significant
guarantees that have been entered into by the Company are disclosed in Note 20.
Management believes that adopting the measurements provisions of FIN 45 will
not have a material impact on the Companys financial position or results of
operations.

In January 2003, the FASB issued FIN 46, Consolidation of Variable
Interest Entities. The purpose of this interpretation is to provide guidance
on how to identify a variable interest entity (VIE) and determine when the
assets, liabilities, noncontrolling interests, and results of operations of a
VIE need to be included in a companys consolidated financial statements. A
company that holds variable interests in an entity will be required to
consolidate that entity if the companys interest in the VIE is such that the
company will absorb a majority of the VIEs expected losses and /or receive a
majority of the VIEs expected residual returns, if they occur. New disclosure
requirements are also prescribed by FIN 46. FIN 46 became effective upon its
issuance. As of December 31, 2002, the Company did not have any VIEs for
which this interpretation would be applicable.

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Reclassifications

In addition to the reclassifications discussed in Principles of
Consolidation above, certain other reclassifications have been made to prior
year balances in order to conform to the current year presentation.

Note 3. Restructuring Charges

In September 2000, we announced the restructuring of our franchise lending
division, BVFMAC, which was acquired in November of 1999. The restructuring of
the franchise lending division was effective as of September 30, 2000.

As part of the Companys ongoing efforts to focus on its core banking
operations, we announced a reduction in our workforce in June 2001 which
affected employees primarily from business lines that we were exiting, such as
franchise operations, and other non-core and redundant operations.

The following table illustrates the changes in the restructuring accruals
for the periods indicated, including the payments for severance and closures of
facilities:

|                                                                |  |                        |        |            |  |   |        |  
|--------------------------------------------------------------- |  | ---------------------- | ------ | ---------- |  | - | ------ | -
|                                                                |  | Restructuring Charges 
|                                                                |  |                       
|                                                                |  | Severance              |        | Facilities
|                                                                |  |                        |        |           
|                                                                |  | (Dollars in thousands)
|Accrue liabilities related to BVFMAC restructuring              |  | $                      | 5,403  |            |  | $ | 5,079  |  
|Reversal of accruals during 2000                                |  |                        | (1,269 | )          |  |   |       |  
|Payments during 2000                                            |  |                        | (1,429 | )          |  |   | (3,466 | )
|                                                                |  |                        |        |            |  |   |        |  
|Balance at December 31, 2000                                    |  |                        | 2,705  |            |  |   | 1,613  |  
|Accrue liabilities related to reduction in
workforce            |  |                        | 6,712  |            |  |   | 3,315  |  
|Reversal of accruals during 2001                                |  |                        | (2,092 | )          |  |   | (1,000 | )
|Payments during 2001                                            |  |                        | (4,366 | )          |  |   | (1,865 | )
|                                                                |  |                        |        |            |  |   |        |  
|Balance at December 31, 2001                                    |  |                        | 2,959  |            |  |   | 2,063  |  
|Reversal of accruals during 2002                                |  |                        | (144   | )          |  |   |       |  
|Payments during 2002                                            |  |                        | (1,401 | )          |  |   | (828   | )
|Transfer
accruals to reserve for estimated costs of liquidation |  |                        | (1,414 | )          |  |   | (1,235 | )
|                                                                |  |                        |        |            |  |   |        |  
|Balance at September 30, 2002                                   |  | $                      |       |            |  | $ |       |  
|                                                                |  |                        |        |            |  |   |        |  

In connection with our adoption of liquidation basis accounting effective
September 30, 2002, we transferred the remaining balances of our restructuring
accruals to our reserve for estimated costs of liquidation.

Note 4. Regulatory Matters

During the third quarter of 2000, we entered into formal agreements with
the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Bank of San Francisco.

The agreement between Bay View Bank and the OCC was dated September 6,
2000. The provisions of this agreement, among other things, required that Bay
View Banks Board of Directors adopt a new budget as well as new strategic,
earnings and capital plans, which were provided to the OCC in 2001. The new
strategic plan establishes objectives for Bay View Banks overall risk
profile, earnings performance, growth, and capital

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adequacy. In addition, a
provision of the agreement states that Bay View Bank may not declare or
distribute any dividends without the prior written approval of the OCC.

The agreement between Bay View Capital Corporation and the Federal
Reserve Bank was dated September 28, 2000. The provisions of this agreement,
among other things, also required that we adopt a new budget and new
strategic, earnings and capital plans, which were provided to the Federal
Reserve Bank in 2001. The agreement also states that we may not declare or
pay any cash or stock dividends or make any interest payments on our Capital
Securities without the prior written approval of the Federal Reserve Bank.
The agreement further requires the prior written approval of the Federal
Reserve Bank to increase the principal balance of any category of debt above
the levels outstanding as of June 30, 2000. Finally, we may not repurchase
any stock without the prior written approval of the Federal Reserve Bank.

At December 31, 2002, Bay View Capital Corporations regulatory capital
levels exceeded minimum regulatory capital requirements while Bay View Banks regulatory capital levels exceeded both the
minimum regulatory requirements as well as the requirements necessary to be considered
well-capitalized (See Note 15 for further discussion of our capital ratios).

Note 5. Investment Securities

All investment securities were classified as available-for-sale at
December 31, 2002 and 2001. We did not maintain a trading portfolio during
2002 and 2001. The following tables illustrate our investment securities as of
the dates indicated:

|                    |                                       |                        |        |        | 
|------------------- | ------------------------------------- | ---------------------- | ------ | ------ | 
|                    |                                       | At December 31, 2002  
|                    |                                       |                       
|                    |                                       | Net Realizable Value  
|                    |                                       |                       
|                    |                                       | (Dollars in thousands)
|Available-for-sale: |                                       |                        |        |       
|                    | Asset-backed securities               |                        | $      | 6,267  | 
|                    | Retained interests in securitizations |                        |        | 31,870 | 
|                    |                                       |                        |        |       
|                    |                                       | $                      | 38,137 |       
|                    |                                       |                        |        |       

|                    |                                             |   |                        |        |                  |   |          |     |       |   |      |      |   |   |        |        | 
|------------------- | ------------------------------------------- | - | ---------------------- | ------ | ---------------- | - | -------- | --- | ----- | - | ---- | ---- | - | - | ------ | ------ | 
|                    |                                             |   | At December 31, 2001  
|                    |                                             |   |                       
|                    |                                             |   | Amortized              |        | Gross Unrealized |   | Fair    
|                    |                                             |   | Cost                   |        | Gains            |   | (Losses) |     | Value
|                    |                                             |   |                        |        |                  |   |          |     |      
|                    |                                             |   | (Dollars in thousands)
|Available-for-sale: |                                             |   |                        |        |                  |   |          |     |       |   |      |      |   |   |        |       
|                    | Federal National Mortgage Association stock |   | $                      | 580    |                  |   | $        | 181 |       |   | $    |     |   |   | $      | 761    | 
|                    | Federal Home Loan Bank callable notes       |   |                        | 10,000 |                  |   |          |    |       |   |      | (12  | ) |   |        | 9,988  | 
|                    | Asset-backed securities                     |   |                        | 14,129 |                  |   |          |    |       |   |      | (33  | ) |   |        | 14,096 | 
|                    | Trust preferred securities                  |   |                        | 48,082 |                  |   |          |    |       |   |      | (175 | ) |   |        | 47,907 | 
|                    | Other investment securities                 |   |                        | 12,287 |                  |   |          |    |       |   |      | 67   |   |   |        | 12,354 | 
|                    | Retained interests in securitizations       |   |                        | 13,874 |                  |   |          |    |       |   |      |     |   |   |        | 13,874 | 
|                    |                                             |   |                        |        |                  |   |          |     |       |   |      |      |   |   |        |        | 
|                    |                                             | $ | 98,952                 |        |                  | $ | 181      |     |       | $ | (153 | )    |   | $ | 98,980 |       
|                    |                                             |   |                        |        |                  |   |          |     |       |   |      |      |   |   |        |        | 

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The following table illustrates the expected maturities of our investment
securities as of the date indicated:

|                                       |  |  |  |  |  |                        |        | 
|-------------------------------------- |  |  |  |  |  | ---------------------- | ------ | 
|                                       |  |  |  |  |  | At December 31, 2002  
|                                       |  |  |  |  |  |                       
|                                       |  |  |  |  |  | Net Realizable Value  
|                                       |  |  |  |  |  |                       
|                                       |  |  |  |  |  | (Dollars in thousands)
|Due in one year or less                |  |  |  |  |  | $                      |       | 
|Due after one year through five years  |  |  |  |  |  |                        | 37,068 | 
|Due after five years through ten years |  |  |  |  |  |                        |       | 
|Due after ten years                    |  |  |  |  |  |                        | 1,069  | 
|                                       |  |  |  |  |  |                        |        | 
|Total                                  |  |  |  |  |  | $                      | 38,137 | 
|                                       |  |  |  |  |  |                        |        | 

The following tables illustrate activity in our retained interests in loan
and lease securitizations for the periods indicated:

|                                                     |  |   |                                      |  |                 |   |          |  |           |   |        |   |          |   |                 |  |        |   |        |   |  |   |           |   |  |   |        |  | 
|---------------------------------------------------- |  | - | ------------------------------------ |  | --------------- | - | -------- |  | --------- | - | ------ | - | -------- | - | --------------- |  | ------ | - | ------ | - |  | - | --------- | - |  | - | ------ |  | 
|                                                     |  |   | For the Year Ended December 31, 2002
|                                                     |  |   |                                     
|                                                     |  |   |                                      |  |                 |   |          |  |           |   |        |   |          |   |                 |  |        |   |        |   |  |   | Change in |   |  |   |       
|                                                     |  |   | Beginning                            |  | 2002            |   | Cash     |  |           |   |        |   | Realized |   | Unrealized Gain |  | Ending
|                                                     |  |   | Balance                              |  | Securitizations |   | Received |  | Accretion |   | Loss   |   | (Loss)   |   | Balance        
|                                                     |  |   |                                      |  |                 |   |          |  |           |   |        |   |          |   |                
|                                                     |  |   | (Dollars in thousands)              
|Retained interests
in auto loan securitizations      |  | $ | 9,309                                |  |                 | $ | 23,241   |  |           | $ | (1,330 | ) |          | $ | 705             |  |        | $ |       |   |  | $ | (55       | ) |  | $ | 31,870 | 
|Retained interests
in franchise loan securitizations |  |   | 4,565                                |  |                 |   |         |  |           |   |       |   |          |   | 382             |  |        |   | (4,947 | ) |  |   |          |   |  |   |       | 
|                                                     |  |   |                                      |  |                 |   |          |  |           |   |        |   |          |   |                 |  |        |   |        |   |  |   |           |   |  |   |        |  | 
|Totals                                               |  | $ | 13,874                               |  |                 | $ | 23,241   |  |           | $ | (1,330 | ) |          | $ | 1,087           |  |        | $ | (4,947 | ) |  | $ | (55       | ) |  | $ | 31,870 | 
|                                                     |  |   |                                      |  |                 |   |          |  |           |   |        |   |          |   |                 |  |        |   |        |   |  |   |           |   |  |   |        |  | 

|                                                     |  |   |                                      |  |                 |   |          |  |           |   |        |   |          |   |                 |  |        |   |         |   |  |   |           |  |  |   |        |  | 
|---------------------------------------------------- |  | - | ------------------------------------ |  | --------------- | - | -------- |  | --------- | - | ------ | - | -------- | - | --------------- |  | ------ | - | ------- | - |  | - | --------- |  |  | - | ------ |  | 
|                                                     |  |   | For the Year Ended December 31, 2002
|                                                     |  |   |                                     
|                                                     |  |   |                                      |  |                 |   |          |  |           |   |        |   |          |   |                 |  |        |   |         |   |  |   | Change in |  |  |   |       
|                                                     |  |   | Beginning                            |  | 2001            |   | Cash     |  |           |   |        |   | Realized |   | Unrealized Gain |  | Ending
|                                                     |  |   | Balance                              |  | Securitizations |   | Received |  | Accretion |   | Loss   |   | (Loss)   |   | Balance        
|                                                     |  |   |                                      |  |                 |   |          |  |           |   |        |   |          |   |                
|                                                     |  |   | (Dollars in thousands)              
|Retained interests
in auto loan securitizations      |  | $ | 13,836                               |  |                 | $ |         |  |           | $ | (4,716 | ) |          | $ | 656             |  |        | $ | (467    | ) |  | $ |          |  |  | $ | 9,309  | 
|Retained interests
in franchise loan
securitizations |  |   | 14,394                               |  |                 |   |         |  |           |   | (507   | ) |          |   | 891             |  |        |   | (10,213 | ) |  |   |          |  |  |   | 4,565  | 
|                                                     |  |   |                                      |  |                 |   |          |  |           |   |        |   |          |   |                 |  |        |   |         |   |  |   |           |  |  |   |        | 
|Totals                                               |  | $ | 28,230                               |  |                 | $ |         |  |           | $ | (5,223 | ) |          | $ | 1,547           |  |        | $ | (10,680 | ) |  | $ |          |  |  | $ | 13,874 | 
|                                                     |  |   |                                      |  |                 |   |          |  |           |   |        |   |          |   |                 |  |        |   |         |   |  |   |           |  |  |   |        | 

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The following table illustrates the significant assumptions utilized in
the valuation of retained interests as of the dates indicated:

|                                            |  |                      |            |                      |   |       |   |           |  |         |            |   |  |  |              |  
|------------------------------------------- |  | -------------------- | ---------- | -------------------- | - | ----- | - | --------- |  | ------- | ---------- | - |  |  | ------------ | -
|                                            |  | At December 31, 2002 |            | At December 31, 2001
|                                            |  |                      |            |                     
|                                            |  | Auto                 |            | Franchise            |   | Auto  |   | Franchise
|                                            |  | Loans                |            | Loans                |   | Loans |   | Loans    
|                                            |  |                      |            |                      |   |       |   |          
|Weighted-average discount rate              |  |                      | 15.0       | %                    |   |       |  |           |  |         | 14.0       | % |  |  | 18.0         | %
|Range of projected annual credit losses     |  |                      | 1.46%-3.03 | %                    |   |       |  |           |  |         | 0.00%-0.50 | % |  |  | 0.00%-5.88   | %
|Range of projected cumulative credit losses |  |                      | 1.62%-3.20 | %                    |   |       |  |           |  |         | 1.60%-3.00 | % |  |  | 10.74%-12.33 | %
|Prepayment speed                            |  | 1.6 ABS              |            |                      |  |       |   | 1.5 ABS   |  | 2.5 CPR

The losses realized during the years ended December 31, 2002 and 2001 on
our retained interests in loan and lease securitizations were due to other than
temporary declines in the estimated values of these securities. These declines
in value were primarily attributable to higher than projected credit losses
resulting from deterioration in the credit quality of the underlying loans
during the year.

At December 31, 2002, the decreases in the current fair value of our
retained interests in auto loan securitizations as a result of immediate 10%
and 20% adverse changes in significant assumptions materially impacted by
adverse changes are as follows:

|                                                                          |  |              |  |   |        |  |  | 
|------------------------------------------------------------------------- |  | ------------ |  | - | ------ |  |  | 
|                                                                          |  | At          
|                                                                          |  | December 31,
|                                                                          |  | 2002        
|                                                                          |  |             
|                                                                          |  | Auto        
|                                                                          |  | Loans       
|                                                                          |  |             
|Carrying amount/fair value of retained interests                          |  |              |  | $ | 31,870 |  |  | 
|Decrease in fair value from 10% adverse change in discount rate           |  |              |  |   | 1,472  |  |  | 
|Decrease in fair value from 20% adverse change in discount rate           |  |              |  |   | 2,437  |  |  | 
|Decrease in fair value from 10% adverse change in projected
credit losses |  |              |  |   | 1,202  |  |  | 
|Decrease in fair value from 20% adverse change in projected
credit losses |  |              |  |   | 1,946  |  |  | 

During the second quarter of 2001, we transferred our remaining
held-to-maturity investment securities totaling $27.9 million to
available-for-sale. The mark-to-market adjustment related to the transfer, in
accordance with Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities, was
insignificant. As a result of the transfer, combined with our adoption of
liquidation basis accounting effective September 30, 2002, we do not intend to
hold any investment securities as held-to-maturity in the foreseeable future.
In accordance with liquidation basis accounting, our investment securities will
continue to be classified as available-for-sale and marked to their fair values
through income as liquidation basis adjustments.

Proceeds from the sale of investment securities classified as
available-for-sale in 2002 totaled $75.5 million. Gross gains of $42,000 were
recognized on these sales. Proceeds from the sale of investment securities
classified as available-for-sale in 2001 was $19.8 million. A gross gain of
$130,000 was realized on the sale. Additionally, we recognized a $6.5 million
contingent gain related to the December 2000 sales of asset-backed securities
during the first quarter of 2001. Proceeds from sales of investment securities
classified as available-for-sale in 2000 were $230.0 million. Gross losses of
$26.4 million were realized on these sales. There were no sales of investment
securities classified as held-to-maturity during 2002, 2001 or 2000.

In 2002, we purchased $52.9 million of asset-backed securities and $3.0 million
of Federal Home Loan Bank structured notes. In 2001, we purchased $48.1
million of trust preferred securities, $19.7 million of Sallie Mae
floating-rate bonds which were subsequently sold, $16.0 million of asset-backed
securities, $10.0 million of Federal Home Loan Bank callable notes, $10.0
million of Freddie Mac structured notes, which were called during the fourth
quarter, and $14.3 million in other investment securities.

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On September 30, 2002, we securitized and sold $453.2 million of auto loans and
retained an interest in this securitization with an initial balance of $23.2
million. Additionally, we wrote-off the entire balance of $4.9 million of
franchise securitization residual assets upon our adoption of liquidation basis
accounting, primarily as a result of further deterioration in the franchise
loans underlying the securities.

We have used certain qualified types of investment securities as full or
partial collateral for borrowings, including advances from the Federal Home
Loan Bank of San Francisco. There were no pledged investment securities at
December 31, 2002 and 2001.

Note 6. Mortgage-backed Securities

We hold or have held mortgage-backed securities issued by
government-chartered agencies, including Fannie Mae, Freddie Mac and the
Government National Mortgage Association and by non-public financial
intermediaries. The mortgage-backed securities portfolio also includes senior
tranches of private-issue collateralized mortgage obligations. All
mortgage-backed securities were classified as available-for-sale at December
31, 2002 and 2001. The following tables illustrate our mortgage-backed
securities as of the dates indicated:

|                    |                                     |  |                        |        | 
|------------------- | ----------------------------------- |  | ---------------------- | ------ | 
|                    |                                     |  | At December 31, 2002  
|                    |                                     |  |                       
|                    |                                     |  | Net Realizable Value  
|                    |                                     |  |                       
|                    |                                     |  | (Dollars in thousands)
|Available-for-sale: |                                     |  |                        |       
|                    | Fannie Mae                          |  | $                      | 18,096 | 
|                    | Freddie Mac                         |  |                        | 13,335 | 
|                    | Collateralized mortgage obligations |  |                        | 1,085  | 
|                    |                                     |  |                        |       
|                    | Total available-for-sale            |  | $                      | 32,516 | 
|                    |                                     |  |                        |       

|                    |                                          |  |                        |         |                  |  |          |       |       |  |   |      |   |  |   |         | 
|------------------- | ---------------------------------------- |  | ---------------------- | ------- | ---------------- |  | -------- | ----- | ----- |  | - | ---- | - |  | - | ------- | 
|                    |                                          |  | At December 31, 2001  
|                    |                                          |  |                       
|                    |                                          |  | Amortized              |         | Gross Unrealized |  | Fair    
|                    |                                          |  | Cost                   |         | Gains            |  | (Losses) |       | Value
|                    |                                          |  |                        |         |                  |  |          |       |      
|                    |                                          |  | (Dollars in thousands)
|Available-for-sale: |                                          |  |                        |         |                  |  |          |       |       |  |   |      |   |  |   |        
|                    | Fannie Mae                               |  | $                      | 89,083  |                  |  | $        | 1,173 |       |  | $ |     |   |  | $ | 90,256  | 
|                    | Freddie Mac                              |  |                        | 73,850  |                  |  |          |      |       |  |   | (180 | ) |  |   | 73,670  | 
|                    | Government National Mortgage Association |  |                        | 2,837   |                  |  |          |      |       |  |   | (2   | ) |  |   | 2,835   | 
|                    | Collateralized mortgage obligations      |  |                        | 103,450 |                  |  |          |      |       |  |   | (20  | ) |  |   | 103,430 | 
|                    | Issued by other financial intermediaries |  |                        | 8,797   |                  |  |          |      |       |  |   | (97  | ) |  |   | 8,700   | 
|                    |                                          |  |                        |         |                  |  |          |       |       |  |   |      |   |  |   |        
|                    | Total available-for-sale                 |  | $                      | 278,017 |                  |  | $        | 1,173 |       |  | $ | (299 | ) |  | $ | 278,891 | 
|                    |                                          |  |                        |         |                  |  |          |       |       |  |   |      |   |  |   |        

During the second quarter of 2001, we transferred our remaining
held-to-maturity mortgage-backed securities totaling $603.8 million to
available-for-sale. In accordance with Statement No. 115, we recorded $1.5
million of unrealized losses related to the transfer. As a result of the
transfer and subsequent sales of mortgage-backed securities from our
held-to-maturity portfolio during the second quarter of 2001 and our adoption
of liquidation basis accounting, we do not intend to hold any mortgage-backed
securities as held-to-maturity in the foreseeable future. Similar to our
investment securities, our mortgage-backed securities will continue to be
classified as available-for-sale and marked to their net realizable value
through income as liquidation basis adjustments in accordance with liquidation
basis accounting.

The weighted-average yields on mortgage-backed securities classified as
available-for-sale at December 31, 2002 was 6.48%. The weighted-average yields
on mortgage-backed securities classified as available-for-sale at December 31,
2001 was 5.40%. The amount of adjustable-rate mortgage-backed securities was
$1.1 million at December 31, 2002 and $65.9 million at December 31, 2001. We
use mortgage-backed securities as full or partial collateral
for

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advances or
other credit facilities provided by the Federal Home Loan Bank of San
Francisco. The total par value of pledged mortgage-backed securities was $20.5
million at December 31, 2002 and $178.3 million at December 31, 2001.

Proceeds from sales of mortgage-backed securities classified as available
for sale during 2002 was $181.8 million. Gross gains of $1.1 million were
realized on these sales. Proceeds from sales of mortgage-backed securities
classified as available-for-sale during 2001 were $392.2 million. Gross gains
of $13.4 million were realized on these sales. Proceeds from sales of
mortgage-backed securities classified as available-for-sale during 2000 were
$240.0 million. Gross gains of $2.5 million and gross losses of $2.4 million
were realized on these sales. There were no sales of mortgage-backed
securities classified as held-to-maturity during 2000.

The net realizable value of mortgage-backed securities classified as
available-for-sale at December 31, 2002, categorized by remaining contractual
maturity, are illustrated in the following table. Expected remaining
maturities of mortgage-backed securities will generally differ from contractual
maturities because borrowers may have the right to prepay obligations with or
without penalties.

|                                       |  |                        |        | 
|-------------------------------------- |  | ---------------------- | ------ | 
|                                       |  | At December 31, 2002  
|                                       |  |                       
|                                       |  | Net Realizable Value  
|                                       |  |                       
|                                       |  | (Dollars in thousands)
|Due in one year or less                |  | $                      | 43     | 
|Due after one year through five years  |  |                        | 5,178  | 
|Due after five years through ten years |  |                        | 26,210 | 
|Due after ten years                    |  |                        | 1,085  | 
|                                       |  |                        |        | 
|Total                                  |  | $                      | 32,516 | 
|                                       |  |                        |        | 

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Note 7. Loans and Leases

The following table illustrates our loan and lease portfolio as of the
dates indicated:

|                                                        |                                   |                                                                                 |         |                        |         |      |           |           |         | 
|------------------------------------------------------- | --------------------------------- | ------------------------------------------------------------------------------- | ------- | ---------------------- | ------- | ---- | --------- | --------- | ------- | 
|                                                        |                                   |                                                                                 |         | December 31,          
|                                                        |                                   |                                                                                 |         |                       
|                                                        |                                   |                                                                                 |         | 2002                   |         | 2001
|                                                        |                                   |                                                                                 |         |                        |         |     
|                                                        |                                   |                                                                                 |         | (Dollars in thousands)
|Loans and leases receivable:                            |                                   |                                                                                 |         |                        |         |      |           |          
|                                                        | Retail platform:                  |                                                                                 |         |                        |         |      |           |           |        
|                                                        |                                   | Single-family mortgage loans                                                    |         | $                      |        |      |           | $         | 277,288 | 
|                                                        |                                   | High loan-to-value home equity loans and lines of credit                        |         |                        |        |      |           |           | 12,238  | 
|                                                        |                                   | Other home equity loans and lines of credit                                     |         |                        |        |      |           |           | 132,381 | 
|                                                        |                                   | Auto loans                                                                      |         |                        | 142,357 |      |           |           | 444,607 | 
|                                                        |                                   |                                                                                 |         |                        |         |      |           |          
|                                                        | Total retail loans                |                                                                                 |         | 142,357                |         |      |           | 866,514   |        
|                                                        | Commercial platform:              |                                                                                 |         |                        |         |      |           |           |        
|                                                        |                                   | Multi-family mortgage loans                                                     |         |                        | 2,443   |      |           |           | 697,339 | 
|                                                        |                                   | Commercial mortgage loans                                                       |         |                        | 7,712   |      |           |           | 289,093 | 
|                                                        |                                   | Franchise loans                                                                 |         |                        | 46,928  |      |           |           | 160,072 | 
|                                                        |                                   | Asset-based loans, syndicated loans, factored receivables
and commercial leases |         |                        | 104,362 |      |           |           | 310,070 | 
|                                                        |                                   | Business loans                                                                  |         |                        | 7,212   |      |           |           | 79,883  | 
|                                                        |                                   |                                                                                 |         |                        |         |      |           |          
|                                                        | Total commercial loans and leases |                                                                                 |         | 168,657                |         |      |           | 1,536,457 |        
|Premiums and discounts and deferred fees and costs, net |                                   |                                                                                 |        |                        |         |      | 14,215    |          
|                                                        |                                   |                                                                                 |         |                        |         |      |           |          
|Gross loans and leases receivable                       |                                   |                                                                                 | 311,014 |                        |         |      | 2,417,186 |          
|Allowance for losses on loans and leases                |                                   |                                                                                 |        |                        |         |      | (49,791   | )        
|                                                        |                                   |                                                                                 |         |                        |         |      |           |          
|Loans and leases receivable (1)                         |                                   | $                                                                               | 311,014 |                        |         | $    | 2,367,395 |          
|                                                        |                                   |                                                                                 |         |                        |         |      |           |          

(1)     
All loans and leases are classified as held-for-sale and stated at net
realizable value at December 31, 2002. Total loans and leases at December 31,
2001 include franchise loans classified as held-for-sale totaling $40.6
million.

Our loan and lease classifications for financial reporting purposes differ
from those for regulatory reporting purposes. Loans and leases are classified
for financial reporting purposes based upon the purpose and primary source of
repayment of the loans or leases. Loans and leases are classified for
regulatory reporting purposes based upon the type of collateral securing the
loans or leases.

During 2002, we completed the sale of $859.6 million of multi-family
mortgage loans, $207.7 million of commercial real estate loans, $157.4 million
of home equity loans, $139.4 million of single-family loans, $67.8 million of
business loans, $60.6 million of franchise loans, $50.8 million of factored
receivables, $21.1 million of commercial leases and $2.7 million of consumer
loans. During 2001, we sold $488.2 million of franchise loans, $142.8 million
of home equity loans, which included approximately $90.0 million of high
loan-to-value home equity loans, and $7.0 million of commercial loans. During
2000, we sold $423.2 million of single-family mortgage loans, $244.0 million of
high loan-to-value home equity loans, $120.0 million of franchise loans, $58.5
million of multi-family mortgage loans, $49.1 million of auto loans and $26.5
million of commercial equipment leases.

We securitized and sold $453.2 million of our auto loans during 2002. We
recognized a gross gain of $11.8 million on the securitization of auto loans.
There were no loan securitizations in 2001. During 2000, we securitized and
sold $356.6 million of auto loans and completed a $268.2 million on-balance
sheet franchise loan securitization that effectively transferred these loans to
investment securities. We retained servicing responsibilities and subordinated
interests in all of our securitizations. The investors and the securitization
trusts have no recourse to our other assets for failure of debtors to pay when
due. Our retained interests are subordinate to investors interests. Their
value is subject to credit, prepayment, and interest rate risks on the
transferred financial assets. In 2000, we recognized pre-tax losses of $9.1
million related to the revaluation of our retained interests in our auto loan

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securitizations combined with charges associated with the exercise of the
cleanup call on our 1997 auto loan securitization. No gain or loss was
recognized on the on-balance sheet securitization of franchise loans.

We serviced participating interests in mortgage and auto loans and leases
that we securitized and/or sold of $514.7 million at December 31, 2002 and
$351.9 million at December 31, 2001.

Impaired loans and leases, consisting entirely of nonaccrual loans and
leases, totaled $24.7 million at December 31, 2002. Impaired loans and leases
totaled $87.7 million at December 31, 2001 and included $79.7 million of
nonaccrual loans and leases. Interest on nonaccrual loans and leases that was
not recorded in income was $5.9 million for the year ended December 31, 2002,
$8.6 million for 2001 and $6.7 million for 2000. Actual interest that we
recognized on these nonaccrual loans and leases was not significant in 2002,
2001 or 2000. At December 31, 2002, we had no commitments to lend additional
funds to these borrowers. The average investment in impaired loans and leases
was $63.2 million for the year ended December 31, 2002, $95.1 million for 2001
and $55.4 million for 2000.

The following table includes off-balance sheet amounts related to
securitized financial assets and illustrates delinquencies, net charge-offs,
and components of securitized financial assets and other assets managed
together with them:

|                                                                                                |  |                        |         |                     |  |                     |           |      |  |                     |        |      |  |   |        |  |  |                    |        |  |  |   |        | 
|----------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | ------------------- |  | ------------------- | --------- | ---- |  | ------------------- | ------ | ---- |  | - | ------ |  |  | ------------------ | ------ |  |  | - | ------ | 
|                                                                                                |  |                        |         |                     |  |                     |           |      |  | Principal Amount of |        |      |  |   |        |  |  |                   
|                                                                                                |  | Loans and Leases       |         | Loans Delinquent 60 |  |                     |           |      |  |                     |        |     
|                                                                                                |  | Receivable (1)         |         | Days or More        |  | Net Charge-offs (2)
|                                                                                                |  |                        |         |                     |  |                    
|                                                                                                |  |                        |         |                     |  |                     |           |      |  |                     |        |      |  |   |        |  |  | For the Year Ended
|                                                                                                |  | At December 31,        |         | December 31,       
|                                                                                                |  |                        |         |                    
|                                                                                                |  | 2002                   |         | 2001                |  | 2002                |           | 2001 |  | 2002                |        | 2001
|                                                                                                |  |                        |         |                     |  |                     |           |      |  |                     |        |     
|                                                                                                |  | (Dollars in thousands)
|Mortgage loans                                                                                  |  | $                      | 10,155  |                     |  | $                   | 1,263,720 |      |  | $                   | 817    |      |  | $ | 11,167 |  |  | $                  |       |  |  | $ | 1,205  | 
|Home equity loans                                                                               |  |                        |        |                     |  |                     | 144,619   |      |  |                     |       |      |  |   | 2,006  |  |  |                    | 845    |  |  |   | 5,694  | 
|Auto
loans (3)(4)                                                                               |  |                        | 629,843 |                     |  |                     | 659,521   |      |  |                     | 970    |      |  |   | 2,068  |  |  |                    | 6,871  |  |  |   | 7,177  | 
|Franchise
loans and leases (3)(5)                                                               |  |                        | 46,928  |                     |  |                     | 160,072   |      |  |                     | 16,064 |      |  |   | 47,825 |  |  |                    | 11,237 |  |  |   | 76,685 | 
|Asset-based loans, syndicated loans,
factored receivables, commercial leases
and business loans |  |                        | 111,574 |                     |  |                     | 389,953   |      |  |                     | 600    |      |  |   | 8,636  |  |  |                    | 6,145  |  |  |   | 9,048  | 
|                                                                                                |  |                        |         |                     |  |                     |           |      |  |                     |        |      |  |   |        |  |  |                    |        |  |  |   |        | 
|Total loans managed or securitized                                                              |  | $                      | 798,500 |                     |  | $                   | 2,617,885 |      |  | $                   | 18,451 |      |  | $ | 71,702 |  |  | $                  | 25,098 |  |  | $ | 99,809 | 
|                                                                                                |  |                        |         |                     |  |                     |           |      |  |                     |        |      |  |   |        |  |  |                    |        |  |  |   |        | 
|Less:                                                                                           |  |                        |         |                     |  |                     |           |      |  |                     |        |      |  |   |        |  |  |                    |        |  |  |   |        | 
|Loans and leases securitized                                                                    |  |                        | 487,486 |                     |  |                     | 214,914   |      |  |                     |        |      |  |   |        |  |  |                    |        |  |  |   |        | 
|Loans and leases held-for-sale                                                                  |  |                        |        |                     |  |                     | 40,608    |      |  |                     |        |      |  |   |        |  |  |                    |        |  |  |   |        | 
|                                                                                                |  |                        |         |                     |  |                     |           |      |  |                     |        |      |  |   |        |  |  |                    |        |  |  |   |        | 
|Loans and leases receivable                                                                     |  | $                      | 311,014 |                     |  | $                   | 2,362,363 |      |  |                     |        |      |  |   |        |  |  |                    |        |  |  |   |        | 
|                                                                                                |  |                        |         |                     |  |                     |           |      |  |                     |        |      |  |   |        |  |  |                    |        |  |  |   |        | 



|(1) |  | All loans and leases are classified as held-for-sale at December 31, 2002.                                                                                                                                                                                                                                                     
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Excluding $4.2 million in net charge-offs related to off-balance sheet
securitized auto loans for 2002, net charge-offs were through
September 30, 2002. Subsequent to September 30, 2002, all charge-offs and
recoveries are recorded as mark-to-market valuation
adjustments in accordance with liquidation basis accounting.
|   
|(3) |  | Includes off-balance sheet amounts associated with securitized assets.                                                                                                                                                                                                                                                         
|   
|(4) |  | Includes $4.2 million and $4.9 million in net charge-offs related to
off-balance sheet securitized auto loans for 2002 and 2001,
respectively.                                                                                                                                                                                 
|   
|(5) |  | Includes $52.7 million in net charge-offs related to off-balance sheet
securitized franchise loans through June 22, 2001, the
effective date of the sale of BVFMAC and its related servicing platform.                                                                                                                         

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The following table illustrates our allowance for losses on loans and
leases, as well as the changes thereto, as of and for the periods indicated:

|                                                                                                                                      |                                                                                 |   |                        |         |              |                           |         |         |   |   |         |         |  
|------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | - | ---------------------- | ------- | ------------ | ------------------------- | ------- | ------- | - | - | ------- | ------- | -
|                                                                                                                                      |                                                                                 |   | For the Nine           |         |              |                           |         |         |  
|                                                                                                                                      |                                                                                 |   | Months
Ended           |         |              | At and For the Year Ended
|                                                                                                                                      |                                                                                 |   | September 30,          |         | December 31,
|                                                                                                                                      |                                                                                 |   |                        |         |             
|                                                                                                                                      |                                                                                 |   | 2002                   |         | 2001         |                           | 2000   
|                                                                                                                                      |                                                                                 |   |                        |         |              |                           |        
|                                                                                                                                      |                                                                                 |   | (Dollars in thousands)
|Balance
at beginning of period                                                                                                        |                                                                                 | $ | 49,791                 |         |              | $                         | 73,738  |         |   | $ | 52,161  |        
|Transfers of loans to held-for-sale                                                                                                   |                                                                                 |   | (10,658                | )       |              |                           | (53,606 | )       |   |   | (15,210 | )      
|Charge-offs:                                                                                                                          |                                                                                 |   |                        |         |              |                           |         |         |   |   |         |        
|                                                                                                                                      | Mortgage                                                                        |   |                        |        |              |                           |         | (1,488  | ) |   |         | (422    | )
|                                                                                                                                      | Home equity and lines of credit                                                 |   |                        | (1,309  | )            |                           |         | (10,296 | ) |   |         | (18,014 | )
|                                                                                                                                      | Auto                                                                            |   |                        | (3,696  | )            |                           |         | (3,809  | ) |   |         | (2,953  | )
|                                                                                                                                      | Asset-based loans, syndicated loans, factored receivables and
commercial leases |   |                        | (6,987  | )            |                           |         | (9,397  | ) |   |         | (4,425  | )
|                                                                                                                                      | Franchise                                                                       |   |                        | (11,363 | )            |                           |         | (24,197 | ) |   |         | (1,128  | )
|                                                                                                                                      | Business                                                                        |   |                        | (416    | )            |                           |         | (2,509  | ) |   |         | (7,926  | )
|                                                                                                                                      |                                                                                 |   |                        |         |              |                           |         |         |   |   |         |        
|                                                                                                                                      |                                                                                 |   | (23,771                | )       |              |                           | (51,696 | )       |   |   | (34,868 | )      
|Recoveries:                                                                                                                           |                                                                                 |   |                        |         |              |                           |         |         |   |   |         |        
|                                                                                                                                      | Mortgage                                                                        |   |                        |        |              |                           |         | 283     |   |   |         | 218     |  
|                                                                                                                                      | Home
equity and lines of credit (1)                                             |   |                        | 464     |              |                           |         | 4,602   |   |   |         | 3,157   |  
|                                                                                                                                      | Auto                                                                            |   |                        | 1,039   |              |                           |         | 1,526   |   |   |         | 1,488   |  
|                                                                                                                                      | Asset-based loans, syndicated loans, factored receivables and
commercial leases |   |                        | 1,220   |              |                           |         | 2,479   |   |   |         | 1,366   |  
|                                                                                                                                      | Franchise                                                                       |   |                        | 126     |              |                           |         | 196     |   |   |         | 2,826   |  
|                                                                                                                                      | Business                                                                        |   |                        | 38      |              |                           |         | 379     |   |   |         |        |  
|                                                                                                                                      |                                                                                 |   |                        |         |              |                           |         |         |   |   |         |        
|                                                                                                                                      |                                                                                 |   | 2,887                  |         |              |                           | 9,465   |         |   |   | 9,055   |        
|                                                                                                                                      |                                                                                 |   |                        |         |              |                           |         |         |   |   |         |        
|Net charge-offs                                                                                                                       |                                                                                 |   | (20,884                | )       |              |                           | (42,231 | )       |   |   | (25,813 | )      
|Provision for losses on loans and leases                                                                                              |                                                                                 |   | 10,700                 |         |              |                           | 71,890  |         |   |   | 62,600  |        
|Reallocation 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                                                                                                              |                                                                                 | $ |                       |         |              | $                         | 49,791  |         |   | $ | 73,738  |        
|                                                                                                                                      |                                                                                 |   |                        |         |              |                           |         |         |   |   |         |        
|Allowance for loan and lease losses
Mortgage                                                                                          |                                                                                 |   |                        |         |              |                           |         |         |   |   |         |        
|                                                                                                                                      | Mortgage                                                                        |   |                        | N/A     |              |                           | $       | 3,622   |   |   | $       | 4,592   |  
|                                                                                                                                      | Home equity and lines of credit                                                 |   |                        | N/A     |              |                           |         | 3,042   |   |   |         | 9,684   |  
|                                                                                                                                      | Franchise                                                                       |   |                        | N/A     |              |                           |         | 20,096  |   |   |         | 32,438  |  
|                                                                                                                                      | Auto                                                                            |   |                        | N/A     |              |                           |         | 4,431   |   |   |         | 2,593   |  
|                                                                                                                                      | Asset-based loans, factoring loans, commercial leases and
business loans        |   |                        | N/A     |              |                           |         | 13,797  |   |   |         | 12,596  |  
|                                                                                                                                      | Unallocated                                                                     |   |                        | N/A     |              |                           |         | 4,803   |   |   |         | 11,835  |  
|                                                                                                                                      |                                                                                 |   |                        |         |              |                           |         |         |   |   |         |        
|                                                                                                                                      | Total                                                                           |   |                        | N/A     |              |                           | $       | 49,791  |   |   | $       | 73,738  |  
|                                                                                                                                      |                                                                                 |   |                        |         |              |                           |         |         |   |   |         |        

(1)     
2001 recoveries include a $2.6 million recovery on the sale of charged-off
high loan-to-value home equity loans totaling $45.0
million.

Upon our adoption of liquidation basis accounting effective September 30,
2002, we reallocated the balance of the allowance for loan and lease losses as
mark-to-market adjustments to individual loans and leases and groups of
homogeneous loans in liquidation. Prior to this reallocation, an allowance for
loan and lease losses was provided for all impaired loans and leases. The
total allowance for loan and lease losses was $49.8 million at December 31,
2001 and $73.7 million at December 31, 2000. The portion of the total
allowance for loan and lease losses that was attributable to impaired loans was
$26.2 million at December 31, 2001 and $31.1 million at December 31, 2000.

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Prior to our adoption of liquidation basis accounting, we transferred
loans from held-for-investment to held-for-sale resulting in a $10.7 million
reduction to the allowance for loan and lease losses during the first nine
months of 2002 related to the sale and payoff of multi-family mortgage,
commercial real estate, auto and franchise and other commercial loans. During
2001, we transferred loans from held-for-investment to held-for-sale resulting
in a $53.6 million reduction to the allowance for loan and lease losses related
to mark-to-market adjustments on these loans, consisting of $48.8 million in
net reductions related to franchise loans and $4.8 million related to the sale
of home equity loans. During 2000, the transfer of loans from
held-for-investment to held-for-sale resulted in a $15.2 million reduction to
the allowance for loan and lease losses primarily related to the sale of home
equity loans and the securitization and sale of auto loans.

There were no mortgage loans pledged as collateral for Federal Home Loan
Bank advances at December 31, 2002. At December 31, 2001, mortgage loans
aggregating $157.9 million was pledged as collateral for advances from the
Federal Home Loan Bank of San Francisco. We paid-off our Federal Home Loan
Bank advances during 2002.

Note 8. Premises and Equipment

The following table illustrates our premises and equipment as of the dates
indicated:

|                                          |  |                        |         |      |  |   |         |  
|----------------------------------------- |  | ---------------------- | ------- | ---- |  | - | ------- | -
|                                          |  | At December 31,       
|                                          |  |                       
|                                          |  | 2002
(1)               |         | 2001
|                                          |  |                        |         |     
|                                          |  | (Dollars in thousands)
|Land                                      |  | $                      |        |      |  | $ | 1,658   |  
|Buildings                                 |  |                        |        |      |  |   | 2,998   |  
|Leasehold improvements                    |  |                        | 1,771   |      |  |   | 16,090  |  
|Furniture and equipment                   |  |                        | 11,510  |      |  |   | 32,099  |  
|Other                                     |  |                        | 10      |      |  |   | 111     |  
|                                          |  |                        |         |      |  |   |         |  
|                                          |  |                        | 13,291  |      |  |   | 52,956  |  
|Less:                                     |  |                        |         |      |  |   |         |  
|Accumulated depreciation
and amortization |  |                        | (11,964 | )    |  |   | (39,811 | )
|                                          |  |                        |         |      |  |   |         |  
|Total                                     |  | $                      | 1,327   |      |  | $ | 13,145  |  
|                                          |  |                        |         |      |  |   |         |  

(1) 
Stated at net realizable value at December 31, 2002.

Depreciation and amortization expense related to premises and equipment
totaled $3.1 million for the year ended December 31, 2002, $4.8 million for
2001 and $8.6 million for 2000.

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Note 9. Accounting for Goodwill and Other Intangible Assets

The following table illustrates our intangible assets as of the dates
indicated:

|                         |  |                        |   |      |  |   |         |  
|------------------------ |  | ---------------------- | - | ---- |  | - | ------- | -
|                         |  | At December 31,       
|                         |  |                       
|                         |  | 2002                   |   | 2001
|                         |  |                        |   |     
|                         |  | (Dollars in thousands)
|Core deposit intangibles |  | $                      |  |      |  | $ | 13,849  |  
|Goodwill                 |  |                        |  |      |  |   | 156,296 |  
|                         |  |                        |   |      |  |   |         |  
|                         |  |                        |  |      |  |   | 170,145 |  
|Less:                    |  |                        |   |      |  |   |         |  
|Accumulated amortization |  |                        |  |      |  |   | (46,572 | )
|                         |  |                        |   |      |  |   |         |  
|Total                    |  | $                      |  |      |  | $ | 123,573 |  
|                         |  |                        |   |      |  |   |         |  

Amortization expense for core deposit intangibles was $0.6 million for the
year ended December 31, 2002, $1.3 million for 2001 and $1.9 million for 2000.

Amortization expense for goodwill was $0.4 million for the year ended
December 31, 2002, $10.0 million for 2001 and $18.9 million for 2000. This
included amortization expense for BVFMAC-related goodwill of $9.6 million for
the year ended December 31, 2000.

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. As of
January 1, 2002, the amortization of the existing goodwill ceased and
amortization of the other identifiable assets with definite useful lives
continued to be amortized.

In accordance with Statement No. 142, the effect of this accounting change
is reflected prospectively. Supplemental comparative disclosure as if the
change had been retroactively applied to the prior year period is as follows:

|                                               |  |                                                  |        |                                 |  |  |  |      |  |      |          |   |  |   |          |  
|---------------------------------------------- |  | ------------------------------------------------ | ------ | ------------------------------- |  |  |  | ---- |  | ---- | -------- | - |  | - | -------- | -
|                                               |  | For the Nine Months                              |        |                                 |  |  |  |      |  |      |          |   |  |  
|                                               |  | Ended September 30,                              |        | For the Year Ended December 31,
|                                               |  |                                                  |        |                                
|                                               |  | 2002                                             |        |                                 |  |  |  | 2001 |  | 2000
|                                               |  |                                                  |        |                                 |  |  |  |      |  |     
|                                               |  | (Amounts in thousands, except per share amounts)
|Reported net earnings (loss)                   |  | $                                                | 71,661 |                                 |  |  |  |      |  | $    | (101,170 | ) |  | $ | (326,197 | )
|Goodwill amortization, net of tax              |  |                                                  |       |                                 |  |  |  |      |  |      | 9,694    |   |  |   | 17,271   |  
|                                               |  |                                                  |        |                                 |  |  |  |      |  |      |          |   |  |   |          |  
|Adjusted net earnings (loss)                   |  | $                                                | 71,661 |                                 |  |  |  |      |  | $    | (91,496  | ) |  | $ | (308,926 | )
|                                               |  |                                                  |        |                                 |  |  |  |      |  |      |          |   |  |   |          |  
|Reported net basic earnings (loss) per share   |  | $                                                | 1.14   |                                 |  |  |  |      |  | $    | (1.99    | ) |  | $ | (10.00   | )
|Goodwill amortization                          |  |                                                  |       |                                 |  |  |  |      |  |      | 0.19     |   |  |   | 0.53     |  
|Adjusted net basic earnings (loss) per share   |  | $                                                | 1.14   |                                 |  |  |  |      |  | $    | (1.80    | ) |  | $ | (9.47    | )
|                                               |  |                                                  |        |                                 |  |  |  |      |  |      |          |   |  |   |          |  
|Reported net diluted earnings (loss) per share |  | $                                                | 1.13   |                                 |  |  |  |      |  | $    | (1.99    | ) |  | $ | (10.00   | )
|Goodwill amortization                          |  |                                                  |       |                                 |  |  |  |      |  |      | 0.19     |   |  |   | 0.53     |  
|Adjusted net diluted earnings (loss) per share |  | $                                                | 1.13   |                                 |  |  |  |      |  | $    | (1.80    | ) |  | $ | (9.47    | )
|                                               |  |                                                  |        |                                 |  |  |  |      |  |      |          |   |  |   |          |  

The Company completed the second step of the goodwill impairment test as
of September 30, 2002. In connection with the Companys planned sale of the
Banks retail banking assets to U.S. Bank, all goodwill and

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intangible assets
from previous branch and deposit acquisitions were realized as part of the
liquidation basis valuation adjustments related to the sale transaction (and
were recorded as a reduction to the deposit premium). The goodwill
and intangible assets realized included the unamortized balances of
goodwill and core deposit intangibles, totaling $86.8 million and $4.2 million,
respectively, from the EurekaBank and Luther Burbank branch acquisitions.
Through our plan of liquidation and our corresponding negotiations to sell
certain businesses, we were able to obtain the fair values of the Asset-based
lending, Factored Receivables and Commercial leasing reporting units based on
recent bids on the businesses in the form of existing sales contracts or
letters of intent. 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 these businesses. As required by the transitional
provisions of Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets, which the Company adopted January 1, 2002, the
impairment loss is 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.

Note 10. Deposits

The following table illustrates our deposits as of the dates indicated:

|                                 |  |                        |         |      |  |   |           | 
|-------------------------------- |  | ---------------------- | ------- | ---- |  | - | --------- | 
|                                 |  | At December 31,       
|                                 |  |                       
|                                 |  | 2002                   |         | 2001
|                                 |  |                        |         |     
|                                 |  | (Dollars in thousands)
|Savings accounts                 |  | $                      |        |      |  | $ | 160,509   | 
|Checking accounts                |  |                        |        |      |  |   | 608,398   | 
|Money market accounts            |  |                        |        |      |  |   | 1,181,792 | 
|                                 |  |                        |         |      |  |   |           | 
|Total transaction accounts       |  |                        |        |      |  |   | 1,950,699 | 
|Retail certificates of deposit   |  |                        |        |      |  |   | 1,284,228 | 
|Brokered certificates of deposit |  |                        | 224,189 |      |  |   |          | 
|                                 |  |                        |         |      |  |   |           | 
|Total                            |  | $                      | 224,189 |      |  | $ | 3,234,927 | 
|                                 |  |                        |         |      |  |   |           | 

During the second quarter of 2002, we began acquiring brokered
certificates of deposit to provide additional liquidity in anticipation of
funding the U.S. Bank transaction. On November 1, 2002, Bay View Banks
retail deposits totaling $3.307 billion were assumed by U.S. Bank, N.A.

At December 31, 2002, there were no noninterest-bearing deposits. At
December 31, 2001, noninterest-bearing deposits totaled $46.8 million. The
aggregate amount of retail certificates of deposit individually exceeding
$100,000 totaled $355.0 million at December 31, 2001.

The following table illustrates interest expense on deposits, by deposit
type, for the periods indicated:

|                                            |  |                                 |        |      |  |      |         |  |  |   |         | 
|------------------------------------------- |  | ------------------------------- | ------ | ---- |  | ---- | ------- |  |  | - | ------- | 
|                                            |  | For the Year Ended December 31,
|                                            |  |                                
|                                            |  | 2002                            |        | 2001 |  | 2000
|                                            |  |                                 |        |      |  |     
|                                            |  | (Dollars in thousands)         
|Savings accounts                            |  | $                               | 775    |      |  | $    | 1,637   |  |  | $ | 2,353   | 
|Checking and money market accounts          |  |                                 | 19,366 |      |  |      | 46,938  |  |  |   | 52,910  | 
|Retail and brokered certificates
of deposit |  |                                 | 31,387 |      |  |      | 87,161  |  |  |   | 121,339 | 
|                                            |  |                                 |        |      |  |      |         |  |  |   |         | 
|Total                                       |  | $                               | 51,528 |      |  | $    | 135,736 |  |  | $ | 176,602 | 
|                                            |  |                                 |        |      |  |      |         |  |  |   |         | 

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Note 11. Other Borrowings

On December 31, 2001, we completed a financing secured by our auto lease
cash flows and recorded $136.5 million in other borrowings at an initial rate
of 5.25%. Since there have been no new auto leases originated since June 2000,
the contractual auto lease cash flows decrease monthly and are scheduled to
conclude in December 2005. The transaction was treated as a sale for tax
purposes that allowed us to capture expiring net operating loss carryforwards
and partially reverse the related valuation allowance on deferred tax assets.
At December 31, 2002, the balance of other borrowings related to the financing
secured by our auto lease contractual cash flows was $62.0 million. The
recorded effective rate of the borrowing for 2002 was 4.54%.

Note 12. Notes and Debentures

On August 18, 1999, Bay View Bank issued $50 million in Subordinated
Notes. The Subordinated Notes were unsecured obligations of Bay View Bank and
were subordinated in right of payment to all existing and future senior
indebtedness, as defined, of Bay View 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 Bay View Capital Corporation and used to partially finance
the acquisition of FMAC. On December 9, 2002, Bay View Bank redeemed the
entire $50 million of its outstanding Subordinated Notes. Interest expense on
the Subordinated Notes was $4.9 million for the year ended December 31, 2002
and $5.3 million for each of the years ended December 31, 2001 and 2000. Prior
to its redemption, these Subordinated Notes qualified as Tier 2 capital for
both Bay View Bank and Bay View Capital Corporation regulatory capital
purposes, subject to certain limitations

On August 28, 1997, Bay View Capital Corporation issued $100 million in
Subordinated Notes registered under the Securities Act of 1933, as amended.
The Subordinated Notes were unsecured obligations of Bay View Capital
Corporation and were subordinated in right of payment to all existing and
future senior indebtedness, as defined, of Bay View Capital Corporation. 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 of 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 we acquired in January 1998. On November 29, 2002, Bay View Capital
Corporation prepaid the entire $100 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 and $9.6 million for each of
the years ended December 31, 2001 and 2000. Prior to its redemption, these
Subordinated Notes qualified as Tier 2 capital for Bay View Capital Corporation
regulatory capital purposes, subject to certain limitations.

Note 13. Capital Securities

On December 21, 1998, we issued $90 million in Capital Securities through
Bay View Capital I, sometimes referred to as the Trust. The Capital Securities
pay quarterly cumulative cash distributions at an annual rate of 9.76% of the
liquidation value of $25 per share. The Capital Securities represent undivided
beneficial interests in the Trust. We own 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 our 9.76% Junior
Subordinated Deferrable Interest Debentures, sometimes referred to as the
Junior Debentures, due December 31, 2028 with an aggregate principal amount of
$92.8 million. The primary asset of the Trust is the Junior Debentures. The
obligations of the Trust with respect to the Capital Securities are fully and
unconditionally guaranteed by us to the extent provided in the Guarantee
Agreement with respect to the Capital Securities. We used a portion of the
proceeds to repay our $50 million Senior Debentures upon their maturity on June
1, 1999 and the balance for general corporate purposes. The

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all-in cost of the
Capital Securities was 9.95%. The Capital Securities have the added benefit of
qualifying as Tier 1 capital for regulatory capital purposes.

In September of 2000, we entered into an agreement with the FRB which
requires that we obtain their approval prior to disbursing any dividends
associated with our Capital Securities (see Note 4). Beginning with the third
quarter of 2000, we 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 will continue 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).
Holders of the Capital Securities at the time the distribution of dividends is
resumed will receive the cumulative deferred distributions plus the cumulative
interest thereon.

At a meeting held on October 3, 2002, holders of the Capital Securities of
Bay View Capital I approved a waiver of those provisions of the legal
instruments governing the Capital Securities and the Companys 9.76% Junior
Subordinated Deferrable Interest Debentures that would, absent the waiver,
prevent the Company from disposing of all of its assets pursuant to its Plan.
Capital Securities holders also approved the amendment of certain provisions of
the legal instruments governing the Capital Securities and the Junior
Debentures that would allow early redemption of the Capital Securities at the
option of each holder of the Capital Securities.

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 total amount paid
per share as of December 31, 2002 was $6.10 for the 10 quarterly distributions
plus $0.715 in accrued interest. Although we intend to pay out future
distributions as scheduled, we continue to be subject to a formal agreement
with the FRB and, accordingly, future distributions will remain subject to
their prior approval. Dividend expense on the Capital Securities was $10.6
million for the year ended December 31, 2002, $9.8 million for 2001 and $9.0
million for 2000.

Note 14. Income Taxes

The following table illustrates our consolidated income tax expense
(benefit) for the periods indicated:

|                                   |  |  |  |  |  |                                      |         |       |  |       |        |  |  |   |         |  |  |  |  | 
|---------------------------------- |  |  |  |  |  | ------------------------------------ | ------- | ----- |  | ----- | ------ |  |  | - | ------- |  |  |  |  | 
|                                   |  |  |  |  |  | For the Year Ended December 31, 2002 |         |       |  |      
|                                   |  |  |  |  |  |                                      |         |       |  |      
|                                   |  |  |  |  |  | Federal                              |         | State |  | Total |        |  |  |  
|                                   |  |  |  |  |  |                                      |         |       |  |       |        |  |  |  
|                                   |  |  |  |  |  | (Dollars in thousands)               |         |       |  |      
|Current provision                  |  |  |  |  |  | $                                    |        |       |  | $     | 15,579 |  |  | $ | 15,579  |  | 
|Deferred provision                 |  |  |  |  |  |                                      | 147,926 |       |  |       | 11,099 |  |  |   | 159,025 |  | 
|                                   |  |  |  |  |  |                                      |         |       |  |       |        |  |  |   |         |  | 
|Total income tax expense (benefit) |  |  |  |  |  | $                                    | 147,926 |       |  | $     | 26,678 |  |  | $ | 174,604 |  | 
|                                   |  |  |  |  |  |                                      |         |       |  |       |        |  |  |   |         |  | 

|                                   |  |                        |  |  |  |                                      |         |   |  |   |         |   |  |   |         |   |  |  |  | 
|---------------------------------- |  | ---------------------- |  |  |  | ------------------------------------ | ------- | - |  | - | ------- | - |  | - | ------- | - |  |  |  | 
|                                   |  |                        |  |  |  | For the Year Ended December 31, 2001 |         |   |  |  
|                                   |  |                        |  |  |  |                                      |         |   |  |  
|                                   |  | (Dollars in thousands)
|Current provision                  |  |                        |  |  |  | $                                    |        |   |  | $ | 1,130   |   |  | $ | 1,130   |  
|Deferred provision                 |  |                        |  |  |  |                                      | (68,118 | ) |  |   | (18,878 | ) |  |   | (86,996 | )
|                                   |  |                        |  |  |  |                                      |         |   |  |   |         |   |  |   |         |  
|Total income tax expense (benefit) |  |                        |  |  |  | $                                    | (68,118 | ) |  | $ | (17,748 | ) |  | $ | (85,866 | )
|                                   |  |                        |  |  |  |                                      |         |   |  |   |         |   |  |   |         |  

|                                   |  |                        |  |  |  |                                      |         |   |  |   |         |   |  |   |         |   |  |  |  | 
|---------------------------------- |  | ---------------------- |  |  |  | ------------------------------------ | ------- | - |  | - | ------- | - |  | - | ------- | - |  |  |  | 
|                                   |  |                        |  |  |  | For the Year Ended December 31, 2000 |         |   |  |  
|                                   |  |                        |  |  |  |                                      |         |   |  |  
|                                   |  | (Dollars in thousands)
|-                                  |  |                        |  |  |  |                                      |         |   |  |   |         |   |  |   |         |   |  |  |  | 
|Current provision                  |  |                        |  |  |  | $                                    | 5,200   |   |  | $ | 35      |   |  | $ | 5,235   |  
|Deferred provision                 |  |                        |  |  |  |                                      | (41,997 | ) |  |   | (19,048 | ) |  |   | (61,045 | )
|                                   |  |                        |  |  |  |                                      |         |   |  |   |         |   |  |   |         |  
|Total income tax expense (benefit) |  |                        |  |  |  | $                                    | (36,797 | ) |  | $ | (19,013 | ) |  | $ | (55,810 | )
|                                   |  |                        |  |  |  |                                      |         |   |  |   |         |   |  |   |         |  

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The following table illustrates 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,
|                                                       |  |                                
|                                                       |  | 2002                            |      | 2001 |  | 2000
|                                                       |  |                                 |      |      |  |     
|Federal statutory income tax rate                      |  |                                 | 35.0 | %    |  |      | 35.0 | % |  |  | 35.0  | %
|Amortization and disposition of nondeductible goodwill |  |                                 | 15.2 |      |  |      | (1.6 | ) |  |  | (15.3 | )
|Valuation allowance                                    |  |                                 | 8.9  |      |  |      | 13.9 |   |  |  | (6.8  | )
|State income tax rate, net of federal tax benefit      |  |                                 | 11.0 |      |  |      | 7.0  |   |  |  | 3.2   |  
|Sale of BVFMAC                                         |  |                                 |     |      |  |      | (4.3 | ) |  |  |      |  
|Nondeductible compensation                             |  |                                 | 2.0  |      |  |      |     |   |  |  |      |  
|Expiration of tax operating loss carryforward          |  |                                 |     |      |  |      | (1.6 | ) |  |  |      |  
|Other, net                                             |  |                                 |     |      |  |      | (2.5 | ) |  |  | (1.5  | )
|                                                       |  |                                 |      |      |  |      |      |   |  |  |       |  
|Effective income tax rate                              |  |                                 | 72.1 | %    |  |      | 45.9 | % |  |  | 14.6  | %
|                                                       |  |                                 |      |      |  |      |      |   |  |  |       |  

Net assets in liquidation or stockholders equity were credited with a tax
benefit associated with the exercise of stock options of $194,000 for the year
ended December 31, 2002, $0 for 2001, and $3,000 for 2000.

The following table illustrates the components of net deferred tax assets
as of the dates indicated:

|                               |                                                         |   |                        |         |      |   |         |         |  
|------------------------------ | ------------------------------------------------------- | - | ---------------------- | ------- | ---- | - | ------- | ------- | -
|                               |                                                         |   | At December 31,       
|                               |                                                         |   |                       
|                               |                                                         |   | 2002                   |         | 2001
|                               |                                                         |   |                        |         |     
|                               |                                                         |   | (Dollars in thousands)
|Deferred tax assets:           |                                                         |   |                        |         |      |   |         |        
|                               | Net operating loss carryforwards                        |   | $                      | 13,834  |      |   | $       | 76,099  |  
|                               | Auto lease receivable financing                         |   |                        | 21,689  |      |   |         | 56,429  |  
|                               | Provision for losses on loans and leases                |   |                        | 18,902  |      |   |         | 32,845  |  
|                               | Mark-to-market adjustment, net                          |   |                        | 4,317   |      |   |         | 36,539  |  
|                               | Other accrued expenses not deducted for tax purposes    |   |                        | 6,694   |      |   |         | 4,373   |  
|                               | Intangible assets                                       |   |                        |        |      |   |         | 2,226   |  
|                               | Alternative minimum tax credit carryforwards            |   |                        | 3,603   |      |   |         | 4,161   |  
|                               | Securitizations                                         |   |                        | 7,684   |      |   |         | 17,994  |  
|                               | Other                                                   |   |                        | 1,150   |      |   |         | 3,378   |  
|                               |                                                         |   |                        |         |      |   |         |        
|Gross deferred tax assets      |                                                         |   | 77,873                 |         |      |   | 234,044 |        
|Valuation allowance            |                                                         |   | 21,495                 |         |      |   |        |        
|                               |                                                         |   |                        |         |      |   |         |        
|Net deferred tax asset         |                                                         |   | 56,378                 |         |      |   | 234,044 |        
|Deferred tax liabilities:      |                                                         |   |                        |         |      |   |         |        
|                               | Tax depreciation in excess of book depreciation         |   |                        | (38,662 | )    |   |         | (48,753 | )
|                               | Deferred gain on disposition of BVAC                    |   |                        | (10,190 | )    |   |         |        |  
|                               | Federal Home Loan Bank of San Francisco stock
dividends |   |                        | (1,374  | )    |   |         | (3,101  | )
|                               | Loan fees                                               |   |                        |        |      |   |         | (2,301  | )
|                               | Excess over base year reserves                          |   |                        |        |      |   |         | (1,253  | )
|                               | Real estate partnership investments                     |   |                        | (218    | )    |   |         | (230    | )
|                               | Loan premiums                                           |   |                        |        |      |   |         | (26     | )
|                               | Unrealized gain on securities available-for-sale        |   |                        |        |      |   |         | (349    | )
|                               | Other                                                   |   |                        |        |      |   |         | (6,014  | )
|                               |                                                         |   |                        |         |      |   |         |        
|Gross deferred tax liabilities |                                                         |   | (50,444                | )       |      |   | (62,027 | )      
|                               |                                                         |   |                        |         |      |   |         |        
|Net deferred tax asset         |                                                         | $ | 5,934                  |         |      | $ | 172,017 |        
|                               |                                                         |   |                        |         |      |   |         |        

The Company recorded an income tax expense of $176.9 million for the year
ended December 31, 2002, as compared to an income tax benefit of $85.9 million
for 2001 and a benefit of $55.8 million for 2000. The Company

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also recorded a
deferred tax benefit of $2.3 million on the cumulative effect of change in
accounting principle, which is presented net of this tax benefit. As a result
of the Companys Plan, income tax expense includes 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 are based on total projected future income through
the final liquidation of the Company.

The
Companys effective tax rate was 72.1% for 2002 as compared to 45.9%
for 2001 and 14.6% for 2000. Our 2002 effective rate differs from the 35.0%
federal statutory tax rate primarily due to state income taxes, the valuation
allowance on deferred tax assets, amortization and disposition of nondeductible
goodwill and nondeductible compensation associated with the Companys Plan.

During 2000, the Company recorded a $26.0 million valuation allowance
against its gross deferred tax assets primarily relating to approximately $48.6
million in federal net operating loss carryforwards that were expiring in 2001
as the Company did not expect to be able to fully utilize these amounts prior
to their expiration date. In May 2001, the Company raised $137.5 million of
additional capital which enabled the Company to implement a new strategic plan,
including the disposition of non-core and higher-risk assets. As a result of
these actions, the Companys ability to generate future taxable income was more
predictable. During 2001, the Company also executed certain transactions that
resulted in significant amounts of taxable income. These transactions included
the sale of the BVFMAC legal entity which generated significant taxable income
related to previously deferred gains in the franchise securitization trusts.
The Company also executed a financing secured by the contractual cash flows of
our auto operating lease portfolio that was treated as a sale for income tax
purposes and generated $136.5 million in taxable income. Primarily as a result
of these transactions, the Company generated sufficient taxable income during
the year to be able to utilize the majority of its net operating loss
carryforwards expiring in 2001. In addition, the Company identified
tax-planning strategies which included the sale of certain assets obtained in
connection with a previous purchase business combination with significant
built-in gains for tax purposes which would be triggered in the event of a
sale. Such a transaction would not only generate significant levels of taxable
income, but would also increase the limitation on the utilization of the net
operating loss carryforward acquired in connection with a previous purchase
business combination. As a result, the Company eliminated the $26.0 million
valuation allowance against its gross deferred tax assets during 2001. 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 sales transactions.

The tax benefit for the year ended December 31, 2000 included
approximately $5.2 million in expense to establish a liability for the
recapture of bad debt reserves that arose in the tax years which began prior to
January 1, 1988, for which a deferred tax liability had not been established.
At December 31, 2000, there was no remaining unrecognized deferred tax
liability for these reserves.

At December 31, 2002, the federal net operating loss carryforwards were
$39.5 million. They will expire in 2019 and 2020. We have federal alternative
minimum tax credits of $3.6 million. These credits can be carried forward
indefinitely to reduce future regular tax.

Effective for the 2002 tax year, 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.
In future periods after 2002, the Company does not expect to realize any
benefit from California net operating loss carryforwards.

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Note 15. Regulatory Capital Requirements

Bay View Bank is a national bank regulated by the Office of the
Comptroller of the Currency. Bay View Capital Corporation is a bank holding
company regulated by the Board of Governors of the Federal Reserve Bank.

Under regulatory capital adequacy guidelines, Bay View Bank and Bay View
Capital Corporation must meet specific capital guidelines that involve
quantitative measures of assets, liabilities and certain off-balance sheet
items as calculated in accordance with GAAP and regulatory capital guidelines.
Our capital amounts and classifications are also subject to qualitative
judgments by the regulators about interest rate risk components, asset and
off-balance sheet risk weightings and other factors. The regulators also have
the discretion to set individual minimum capital requirements for specific
institutions at rates significantly above minimum guidelines and ratios.

Additionally, the Federal Deposit Insurance Corporation Improvement Act of
1991, sometimes referred to as FDICIA, requires each federal banking agency to
implement prompt corrective actions for undercapitalized institutions that it
regulates. The prompt corrective action regulations define specific capital
categories based on an institutions capital ratios. The five capital
categories are well-capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. Institutions categorized as undercapitalized or worse are
subject to certain restrictions, including the requirement to file a capital
plan with its primary federal regulator, prohibitions on the payment of
dividends and management fees, restrictions on executive compensation and
increased supervisory monitoring, among other things. Other restrictions may
be imposed on the institution either by its primary federal regulator or by the
FDIC, including requirements to raise additional capital, sell assets or sell
the entire institution. Once an institution becomes critically
undercapitalized, it must generally be placed in receivership or
conservatorship within 90 days.

The regulations provide that an institution is well-capitalized if its
Tier 1 leverage ratio is 5% or greater, its Tier 1 risk-based ratio is 6% or
greater, its total risk-based ratio is 10% or greater, and the institution is
not subject to a capital directive. To be considered adequately capitalized,
an institution must generally have a Tier 1 leverage ratio of at least 4%, a
Tier 1 risk-based capital ratio of at least 4%, and a total risk-based capital
ratio of at least 8%. An institution is deemed to be critically
undercapitalized if it has a tangible equity ratio of 2% or less.

Regulatory Capital Requirements for Bay View Bank

The OCC regulates Bay View Bank and provides definitions of regulatory
capital ratios (e.g., Tier 1 leverage, Tier 1 risk-based and total risk-based)
and the methods of calculating capital and each ratio. The minimum Tier 1
leverage capital requirement is 4.0% of adjusted quarterly average assets, as
defined. The minimum Tier 1 risk-based capital requirement is 4.0% of
risk-weighted assets, including certain off-balance sheet items. The minimum
total risk-based capital requirement (Tier 1 and Tier 2 capital) is 8.0% of
risk-weighted assets, including certain off-balance sheet items.

The OCC has adopted final capital rules based on FDICIAs five capital
categories. Regulations provide that capital be calculated using a Tier 1
leverage ratio, a Tier 1 risk-based capital ratio and a total risk-based ratio.
As used herein, total risk-based capital ratio means the ratio of total
risk-based capital to risk-weighted assets, including off-balance sheet items,
Tier 1 risk-based capital ratio means the ratio of core capital to
risk-weighted assets, including off-balance sheet items, and Tier 1 leverage
ratio means the ratio of core capital to adjusted total average assets, in each
case as calculated in accordance with current agency capital regulations.

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As of
December 31, 2002, the most recent notification from the Federal
Deposit Insurance Corporation categorized Bay View Bank as
well-capitalized under the regulatory framework for prompt corrective
action. To be categorized as well-capitalized, an institution must
maintain minimum total risk-based, Tier 1 risk-based and
Tier 1 leverage ratios as set forth in the following tables.
There are no conditions or events since the notification that
management believes have changed Bay View Banks category.

At December 31, 2002, Bay View Banks regulatory capital levels exceeded
both the minimum requirements as well as the requirements necessary to be
considered well-capitalized as illustrated in the following table:

|                  |  |                        |         |             |  |             |       |       |  |         |        |                  |  |  |      |   |  |   |         |  |  |  |       |  
|----------------- |  | ---------------------- | ------- | ----------- |  | ----------- | ----- | ----- |  | ------- | ------ | ---------------- |  |  | ---- | - |  | - | ------- |  |  |  | ----- | -
|                  |  |                        |         |             |  |             |       |       |  | Minimum |        | Well-Capitalized
|                  |  | Actual                 |         | Requirement |  | Requirement
|                  |  |                        |         |             |  |            
|                  |  | Amount                 |         | Ratio       |  | Amount      |       | Ratio |  | Amount  |        | Ratio           
|                  |  |                        |         |             |  |             |       |       |  |         |        |                 
|                  |  | (Dollars in thousands)
|Tier 1 leverage   |  | $                      | 499,891 |             |  |             | 21.25 | %     |  | $       | 94,114 |                  |  |  | 4.00 | % |  | $ | 117,643 |  |  |  | 5.00  | %
|Tier 1 risk-based |  | $                      | 499,891 |             |  |             | 71.24 | %     |  | $       | 28,068 |                  |  |  | 4.00 | % |  | $ | 42,102  |  |  |  | 6.00  | %
|Total risk-based  |  | $                      | 499,891 |             |  |             | 71.24 | %     |  | $       | 56,136 |                  |  |  | 8.00 | % |  | $ | 70,170  |  |  |  | 10.00 | %

On December 9, 2002, Bay View Bank redeemed the entire $50 million of its
outstanding Subordinated Notes which, prior to its redemption, qualified as
Tier 2 capital for both Bay View Bank and Bay View Capital Corporation
regulatory capital purposes, subject to certain limitations.

Regulatory Capital Requirements for
Bay View Capital Corporation as a Bank Holding Company

The regulations administered by the Board of Governors of the Federal
Reserve Bank provide definitions of regulatory capital ratios and the methods
of calculating capital and each ratio for bank holding companies. Such
regulations require a minimum ratio of qualifying total risk-based capital to
risk-adjusted assets of 8% and a minimum ratio of Tier 1 capital to
risk-adjusted assets of 4%. In addition to the risk-based guidelines, federal
banking regulators require banking organizations to maintain a minimum amount
of Tier 1 capital to total average assets, referred to as the leverage ratio.
For bank holding companies rated in the highest of the five categories used by
regulators to rate banking organizations, the minimum leverage ratio of Tier 1
capital to total average assets is 3%. For organizations not rated in the
highest of the five categories, which includes Bay View Capital Corporation,
the regulations require an additional cushion of at least 100 basis points.

At December 31, 2002, Bay View Capital Corporations regulatory capital
levels exceeded the minimum regulatory requirements as illustrated in the following table:

|                  |  |                        |         |             |  |        |       |       |  |         |        |  |  |  |      |  
|----------------- |  | ---------------------- | ------- | ----------- |  | ------ | ----- | ----- |  | ------- | ------ |  |  |  | ---- | -
|                  |  |                        |         |             |  |        |       |       |  | Minimum
|                  |  | Actual                 |         | Requirement
|                  |  |                        |         |            
|                  |  | Amount                 |         | Ratio       |  | Amount |       | Ratio
|                  |  |                        |         |             |  |        |       |      
|                  |  | (Dollars in thousands)
|Tier 1 leverage   |  | $                      | 500,055 |             |  |        | 20.96 | %     |  | $       | 95,440 |  |  |  | 4.00 | %
|Tier 1 risk-based |  | $                      | 500,055 |             |  |        | 67.47 | %     |  | $       | 29,644 |  |  |  | 4.00 | %
|Total risk-based  |  | $                      | 500,055 |             |  |        | 67.47 | %     |  | $       | 59,288 |  |  |  | 8.00 | %

On November 29, 2002, Bay View Capital Corporation prepaid the entire $100
million of its outstanding Subordinated Notes which, prior to its redemption,
qualified as Tier 2 capital for Bay View Capital Corporation regulatory capital
purposes, subject to certain limitations.

The Office of the Comptroller of the Currency has adopted rules
incorporating an interest rate risk component of the capital adequacy
guidelines for institutions with a greater than normal level of interest rate
risk exposure, as defined. As of December 31, 2002, Bay View Bank was not
subject to an interest rate risk component for capital measurement purposes.

Management
believes, as of December 31, 2002, that Bay View Capital
Corporation and Bay View Bank met all capital adequacy requirements
to which they are subject.

Bay View Capital Corporations principal source of funds on an
unconsolidated basis has historically been dividends from our wholly owned
subsidiaries, including Bay View Bank. Dividends declared by Bay View Bank to
Bay View Capital Corporation totaled $135.9 million in 2002. The dividends
allowed Bay View Capital Corporation to prepay its outstanding Subordinated
Notes and pay the cumulative deferred distributions, interest on the deferred

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distributions and the current quarterly distribution on its Capital Securities.
There were no dividends declared by Bay View Bank to Bay View Capital
Corporation during 2001. Dividends declared by Bay View Bank to Bay View
Capital Corporation was $69.6 million in 2000. There are various statutory and
regulatory restrictions on the extent to which Bay View Bank may pay dividends
to, make investments in or loans to, or otherwise supply funds to Bay View
Capital Corporation. As a national bank, Bay View Bank may pay dividends in
any one calendar year equal to its net earnings in that calendar year plus net
earnings for the previous two calendar years, less any dividends paid during
this three-year period. As discussed in Note 4, during the third quarter of
2000, we entered into formal agreements with the OCC and the Federal Reserve
Bank of San Francisco. These agreements, among other things, require prior
approval for Bay View Bank to pay dividends to Bay View Capital Corporation and
also require approval to pay dividends on our common stock and our Capital
Securities.

In May 2001, we completed a rights offering and a concurrent offering to
standby purchasers that generated aggregate gross proceeds of $137.5 million.
The offering provided us with additional capital which we used to implement a
new strategic plan that included exiting businesses inconsistent with a
California-focused bank and included assumptions related to the liquidation of
our remaining franchise-related assets and operations and our remaining high
loan-to-value home equity loans. Our results for 2001 included specific
charges consistent with the new strategic plan consisting of $70.1 million in
pre-tax charges associated with the revaluation of franchise-related assets,
$59.5 million of provision for loan and lease losses related to franchise
loans, $10.5 million in net losses on sales of assets, $8.2 million in FHLB
prepayment penalties related to our strategy to reduce high-cost borrowings and
$6.9 million in restructuring charges primarily related to the reduction in our
workforce.

As a national bank, effective March 1, 1999, Bay View Bank is required to
hold stock in the Federal Reserve Bank totaling 3.0% of its capital stock and
surplus. Bay View Bank records its investment in Federal Reserve Bank stock at
cost (par value). Bay View Bank held $13.7 million in Federal Reserve Bank
stock at December 31, 2002.

Note 16. Stock Repurchase Program

In August 1998, our Board of Directors authorized the repurchase of up to
$50 million in shares of our common stock. We did not repurchase shares of our
common stock in 2002, 2001 and 2000. At December 31, 2002, we had approximately
$17.6 million in remaining authorization available for future share
repurchases. Pursuant to our agreement with the Federal Reserve Bank of San
Francisco, we must obtain prior written approval before repurchasing shares.

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Note 17. Stock Options

As of December 31, 2002, we 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 1999 FMAC Stock Option, Deferred Stock and
Restricted Stock Plan, and the 2001 Stock Option and Incentive Plan, which
authorize the issuance of 1,759,430, 2,500,000, 400,000, 270,576 and 3,200,000
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 550,000, 200,000, and 500,000 shares of
common stock, respectively. Excluding options for 3,477,000 shares granted in
2001 which 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.

Our 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. A substantial number of our employees have terminated their
employment with us to become employees of U.S. Bank and a number of other
employees have been terminated or will be terminated as part of our downsizing
and cost control program. To prevent our terminated employees from losing the
value in their stock options as a result of the termination of their employment
and to motivate our remaining employees throughout the dissolution process, our
Board of Directors has amended our stock option plans, to the extent necessary,
to permit the exercise of the options on a net issuance basis. This right will
entitle the holder to elect to receive from us, in exchange for the shares
subject to the stock option, that number of shares of our common stock that has
a value equal to the total amount by which the market price of the shares on
the date the option is exercised exceeds the total exercise price of the shares
subject to the option.

All of our stock option plans define a change in control as including a
sale of all or substantially all of our assets, and all of our 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 our 2001
Stock Option and Incentive Plan (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 our Board of Directors determines to be
appropriate. On August 6, 2002, our stock option committee determined that the
consummation of the sale of the Banks retail banking assets constitutes 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 of our option holders would be treated equally. On
October 3, 2002, the Board of Directors authorized such acceleration as of that
date. 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 our financial
statements.

During 2001, we recognized a total of $5.2 million in expenses related to
the issuance of 3,477,000 of stock options with below market exercise prices.
During the quarter ended September 30, 2002, we amortized the remaining balance
of $2.0 million of the deferred expense related to the issuance of stock
options with below market strike prices as part of our liquidation basis
valuation adjustments.

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The following table illustrates the stock options available for grant as
of December 31, 2002:

|                             |  |                       |            |                             |  |       |            |   |  |  |             |  
|---------------------------- |  | --------------------- | ---------- | --------------------------- |  | ----- | ---------- | - |  |  | ----------- | -
|                             |  | Employee Stock Option |            | Non-Employee Director Stock |  |       |            |  
|                             |  | and Incentive Plans   |            | Option
and Incentive Plans  |  | Total
|                             |  |                       |            |                             |  |      
|Shares reserved for issuance |  |                       | 8,130,006  |                             |  |       | 1,250,000  |   |  |  | 9,380,006   |  
|Granted                      |  |                       | (9,239,892 | )                           |  |       | (1,137,000 | ) |  |  | (10,376,892 | )
|Forfeited                    |  |                       | 2,705,759  |                             |  |       | 152,000    |   |  |  | 2,857,759   |  
|Expired                      |  |                       | (418,688   | )                           |  |       | (102,000   | ) |  |  | (520,688    | )
|                             |  |                       |            |                             |  |       |            |   |  |  |             |  
|Total available for grant    |  |                       | 1,177,185  |                             |  |       | 163,000    |   |  |  | 1,340,185   |  
|                             |  |                       |            |                             |  |       |            |   |  |  |             |  

At December 31, 2002, we had outstanding options under the plans with
expiration dates ranging from the year 2003 through 2014, as illustrated in the
following table:

|                                 |  |               |           |                |  |                  |            |  |  |   |       | 
|-------------------------------- |  | ------------- | --------- | -------------- |  | ---------------- | ---------- |  |  | - | ----- | 
|                                 |  | Number of     |           | Exercise Price |  | Weighted-Average
|                                 |  | Option Shares |           | Range          |  | Exercise Price  
|                                 |  |               |           |                |  |                 
|Outstanding at December 31, 1999 |  |               | 2,907,776 |                |  | $                | 7.88-34.41 |  |  | $ | 17.49 | 
|Granted                          |  |               | 823,250   |                |  |                  | 5.41-10.03 |  |  |   | 7.53  | 
|Exercised                        |  |               | (6,000    | )              |  |                  | 7.88-7.88  |  |  |   | 7.88  | 
|Forfeited                        |  |               | (903,536  | )              |  |                  | 7.53-32.56 |  |  |   | 14.88 | 
|                                 |  |               |           |                |  |                  |            |  |  |   |       | 
|Outstanding at December 31, 2000 |  |               | 2,821,490 |                |  | $                | 5.41-34.41 |  |  | $ | 15.43 | 
|Granted                          |  |               | 3,744,000 |                |  |                  | 4.59-7.70  |  |  |   | 4.78  | 
|Exercised                        |  |               | (20,334   | )              |  |                  | 4.59       |  |  |   | 4.59  | 
|Forfeited                        |  |               | (267,359  | )              |  |                  | 5.41-34.41 |  |  |   | 13.21 | 
|                                 |  |               |           |                |  |                  |            |  |  |   |       | 
|Outstanding at December 31, 2001 |  |               | 6,277,797 |                |  | $                | 4.59-34.41 |  |  | $ | 9.21  | 
|Granted                          |  |               | 38,000    |                |  |                  | 6.64-6.84  |  |  |   | 6.82  | 
|Exercised                        |  |               | (350,252  | )              |  |                  | 4.59-5.41  |  |  |   | 4.69  | 
|Forfeited                        |  |               | (764,441  | )              |  |                  | 4.59-34.41 |  |  |   | 13.98 | 
|                                 |  |               |           |                |  |                  |            |  |  |   |       | 
|Outstanding at December 31, 2002 |  |               | 5,201,104 |                |  | $                | 4.59-34.41 |  |  | $ | 8.80  | 
|                                 |  |               |           |                |  |                  |            |  |  |   |       | 
|Exercisable at December 31, 2000 |  |               | 1,681,167 |                |  | $                | 5.41-34.41 |  |  | $ | 18.11 | 
|                                 |  |               |           |                |  |                  |            |  |  |   |       | 
|Exercisable at December 31, 2001 |  |               | 3,546,331 |                |  | $                | 4.59-34.41 |  |  | $ | 12.01 | 
|                                 |  |               |           |                |  |                  |            |  |  |   |       | 
|Exercisable at December 31, 2002 |  |               | 5,201,104 |                |  | $                | 4.59-34.41 |  |  | $ | 8.80  | 
|                                 |  |               |           |                |  |                  |            |  |  |   |       | 

The following table illustrates information about stock options
outstanding at December 31, 2002:

|  |             |  |             |             |                 |             |                |           |             |  |                |       |  |  |  |           |  |  |   |       |  |  | 
|- | ----------- |  | ----------- | ----------- | --------------- | ----------- | -------------- | --------- | ----------- |  | -------------- | ----- |  |  |  | --------- |  |  | - | ----- |  |  | 
|  |             |  |             | Outstanding |                 | Exercisable |               
|  |             |  |             |             |                 |             |               
|  |             |  |             |             |                 |             |                | Weighted- |             |  |                |       |  |  |  |           |  |  |   |       | 
|  | Range of    |  | Number of   |             | Average         |             | Weighted-      |           | Number of   |  | Weighted-      |      
|  | Exercise    |  | Options     |             | Remaining       |             | Average        |           | Options     |  | Average        |      
|  | Prices      |  | Outstanding |             | Life (in years) |             | Exercise Price |           | Exercisable |  | Exercise Price |      
|  |             |  |             |             |                 |             |                |           |             |  |               
|$ | 4.59-4.59   |  |             | 3,108,332   |                 |             |                | 8.49      |             |  | $              | 4.59  |  |  |  | 3,108,332 |  |  | $ | 4.59  |  | 
|  | 5.41-8.56   |  |             | 571,000     |                 |             |                | 9.20      |             |  |                | 6.72  |  |  |  | 571,000   |  |  |   | 6.72  |  | 
|  | 9.09-13.97  |  |             | 590,772     |                 |             |                | 4.38      |             |  |                | 11.60 |  |  |  | 590,772   |  |  |   | 11.60 |  | 
|  | 15.63-23.63 |  |             | 524,500     |                 |             |                | 4.69      |             |  |                | 17.90 |  |  |  | 524,500   |  |  |   | 17.90 |  | 
|  | 24.13-31.25 |  |             | 317,500     |                 |             |                | 4.53      |             |  |                | 27.07 |  |  |  | 317,500   |  |  |   | 27.07 |  | 
|  | 31.56-31.56 |  |             | 63,000      |                 |             |                | 5.49      |             |  |                | 31.56 |  |  |  | 63,000    |  |  |   | 31.56 |  | 
|  | 31.63-31.63 |  |             | 7,000       |                 |             |                | 5.41      |             |  |                | 31.63 |  |  |  | 7,000     |  |  |   | 31.63 |  | 
|  | 31.69-31.69 |  |             | 11,500      |                 |             |                | 5.06      |             |  |                | 31.69 |  |  |  | 11,500    |  |  |   | 31.69 |  | 
|  | 32.69-32.69 |  |             | 5,000       |                 |             |                | 5.15      |             |  |                | 32.69 |  |  |  | 5,000     |  |  |   | 32.69 |  | 
|  | 34.41-34.41 |  |             | 2,500       |                 |             |                | 4.95      |             |  |                | 34.41 |  |  |  | 2,500     |  |  |   | 34.41 |  | 
|  |             |  |             |             |                 |             |                |           |             |  |                |       |  |  |  |           |  |  |   |       | 
|$ | 4.59-34.41  |  |             | 5,201,104   |                 |             |                | 7.42      |             |  | $              | 8.80  |  |  |  | 5,201,104 |  |  | $ | 8.80  |  | 
|  |             |  |             |             |                 |             |                |           |             |  |                |       |  |  |  |           |  |  |   |       | 

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Statement of Financial Accounting Standards No. 123 Pro Forma Disclosure

We adopted Statement No. 123 effective January 1, 1996, but continue 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. Accordingly, no compensation cost
has been recognized for our stock option awards to employees and directors in
2002, 2001 and 2000, except as discussed above. The weighted-average fair
value of options granted to employees and directors was $2.31, $3.85 and $2.21
per share in 2002, 2001 and 2000, respectively. See Note 2 for a pro forma
presentation of our net assets in liquidation and net assets in liquidation per
share and our net income (loss) and earnings (loss) per share had compensation
cost related to our 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,
|                                        |  |                                
|                                        |  | 2002                            |      | 2001 |  | 2000
|                                        |  |                                 |      |      |  |     
|Dividend yield                          |  |                                 |     | %    |  |      |     | % |  |  | 3.42 | %
|Expected volatility of our common stock |  |                                 | 37   | %    |  |      | 36   | % |  |  | 35   | %
|Expected
risk-free interest rate (1)    |  |                                 | 2.73 | %    |  |      | 4.30 | % |  |  | 4.98 | %
|Expected life of options in years       |  |                                 | 4.60 |      |  |      | 4.84 |   |  |  | 5.44 |  



|(1) |  | The expected risk-free interest rate was calculated using a term
commensurate with the expected life of the options.
|--- |  | --------------------------------------------------------------------------------------------------------------------

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Note 18. Employee Benefit Plans

We have 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, we 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. Our contribution was
$1.9 million for year ended December 31, 2002, $2.6 million for 2001 and $3.4
million for 2000.

Effective December 31, 1995, we modified our non-qualified defined benefit
retirement plan for non-employee members of our Board of Directors and
terminated our non-qualified supplemental retirement plan for executive
officers. As of December 31, 2002, we had a $701,000 liability to certain
non-employee members of our Board of Directors payable in 42,347 shares of our
common stock in satisfaction of the non-qualified defined benefit retirement
plan liability. Such shares were repurchased in the market and are held in
treasury and restricted as to re-issuance until paid out. The liability is
included in additional paid-in capital. As of December 31, 2002, we had a $2.9
million liability to certain current and retired executive officers (relating
to the remaining benefits owed pursuant to the terminated non-qualified
supplemental retirement and health care benefits for executive officers)
recorded as other liabilities. In addition, we had a $1.3 million liability to
certain retired employees, officers and directors as of December 31, 2002
related to post-retirement health care benefits.

We have an Employee Stock Ownership Plan, sometimes referred to as the
ESOP, covering all regular full-time and part-time employees who have completed
one year of service. ESOP plan participants become 100% vested in their
allocated balances upon the completion of three years of service. In 1989, we
borrowed $6.0 million from a financial institution and in turn lent it to the
ESOP to purchase shares of our common stock in the open market. The ESOP held
361,818 shares of our common stock at December 31, 2002 and 420,718 shares at
December 31, 2001. All shares of common stock held by the ESOP are treated as
outstanding shares in calculating net assets in liquidation per share. Prior
to our adoption of liquidation basis accounting, all shares of common stock
held by the ESOP were treated as outstanding shares in both our basic and
diluted earnings per share computations. During the first quarter of 2002, the
ESOP paid-off the remaining outstanding balance on its debt totaling $1.1
million. The interest rate we paid on the ESOP debt was based on 90% of the
prime rate. The ESOP incurred interest expense on its debt totaling $7,000 for
the year ended December 31, 2002, $72,000 for 2001 and $151,000 for 2000. We
recorded ESOP-related interest expense of $3,000 for the year ended December
31, 2002, $72,000 for 2001 and $115,000 for 2000. We recorded ESOP-related
compensation expense of $0.5 million for the year ended December 31, 2002, $1.2
million for 2001 and $1.6 million for 2000. We make periodic contributions to
the ESOP primarily 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 our common stock. We made contributions to the ESOP on a
cash basis totaling $1.1 million for 2002, $1.3 million for 2001 and $1.2
million for 2000. On August 6, 2002, our Board of Directors voted to terminate
the ESOP effective October 31, 2002. All non-vested participants with an
account balance as of October 1, 2002 became fully vested as of that date.

We assumed the liability associated with a qualified, noncontributory
defined benefit retirement plan in conjunction with our acquisition of America
First Eureka Holdings (AFEH) covering substantially all of AFEHs former
employees. AFEH had previously frozen the benefits provided under the plan
effective January 1, 1994. Prior to that date, the benefits were based on the
average of each eligible employees highest five consecutive annual salaries in
the ten years preceding age 65, or the employees termination date, if earlier.
Due to the plans frozen status, no additional benefits were accrued in the
plan after January 1, 1994. All plan participants became fully vested in their
accrued benefits on this date. At December 31, 2002, plan assets consisted
primarily of a well-diversified portfolio of equities and fixed-income
securities. It is our policy to fund the minimum amount required. On July 22,
2002, our Board of Directors voted to terminate the plan effective September
30, 2002 and to distribute the assets to participants as soon as reasonably
practicable.

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The following table illustrates the change in the AFEH plans projected
benefit obligation for periods indicated:

|                                                  |  |                                 |        |      |  |   |       |  
|------------------------------------------------- |  | ------------------------------- | ------ | ---- |  | - | ----- | -
|                                                  |  | For the Year Ended December 31,
|                                                  |  |                                
|                                                  |  | 2002                            |        | 2001
|                                                  |  |                                 |        |     
|                                                  |  | (Dollars in thousands)         
|Projected benefit obligation at beginning of year |  | $                               | 5,201  |      |  | $ | 5,662 |  
|Interest cost                                     |  |                                 | 359    |      |  |   | 388   |  
|Actuarial (gain) loss                             |  |                                 | 1,440  |      |  |   | (353  | )
|Benefits paid                                     |  |                                 | (3,148 | )    |  |   | (496  | )
|                                                  |  |                                 |        |      |  |   |       |  
|Projected benefit obligation at end of year       |  | $                               | 3,852  |      |  | $ | 5,201 |  
|                                                  |  |                                 |        |      |  |   |       |  

The following table illustrates the change in the plan assets for the
periods indicated:

|                                 |  |                                 |        |      |  |   |       |  
|-------------------------------- |  | ------------------------------- | ------ | ---- |  | - | ----- | -
|                                 |  | For the Year Ended December 31,
|                                 |  |                                
|                                 |  | 2002                            |        | 2001
|                                 |  |                                 |        |     
|                                 |  | (Dollars in thousands)         
|Plan assets at beginning of year |  | $                               | 4,430  |      |  | $ | 5,460 |  
|Actual return on plan assets     |  |                                 | (292   | )    |  |   | (534  | )
|Employer contribution            |  |                                 | 2,140  |      |  |   |      |  
|Benefits paid                    |  |                                 | (3,148 | )    |  |   | (496  | )
|                                 |  |                                 |        |      |  |   |       |  
|Plan assets at end of year       |  | $                               | 3,130  |      |  | $ | 4,430 |  
|                                 |  |                                 |        |      |  |   |       |  

The following table illustrates the plans funded status and amounts
recognized in our consolidated statement of net assets or financial
condition (as applicable) for the periods
indicated:

|                                                                                                                    |  |                                 |        |      |  |   |       |  
|------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------ | ---- |  | - | ----- | -
|                                                                                                                    |  | For the Year Ended December 31,
|                                                                                                                    |  |                                
|                                                                                                                    |  | 2002                            |        | 2001
|                                                                                                                    |  |                                 |        |     
|                                                                                                                    |  | (Dollars in thousands)         
|Fair value of plan assets                                                                                           |  | $                               | 3,130  |      |  | $ | 4,430 |  
|Projected benefit obligation                                                                                        |  |                                 | 3,852  |      |  |   | 5,201 |  
|                                                                                                                    |  |                                 |        |      |  |   |       |  
|Plan assets less than projected benefit obligation                                                                  |  |                                 | (722   | )    |  |   | (771  | )
|Unrecognized loss from past experience different than originally
assumed and from effects of changes in assumptions |  |                                 | 1,540  |      |  |   | 500   |  
|Recognition of previously unrecognized loss upon termination
of the plan                                            |  |                                 | (1,540 | )    |  |   |      |  
|Minimum pension liability adjustment                                                                                |  |                                 |       |      |  |   | (500  | )
|                                                                                                                    |  |                                 |        |      |  |   |       |  
|Total accrued benefit liability                                                                                     |  | $                               | (722   | )    |  | $ | (771  | )
|                                                                                                                    |  |                                 |        |      |  |   |       |  
|Weighted-average discount rate                                                                                      |  |                                 | 5.00   | %    |  |   | 7.25  | %
|                                                                                                                    |  |                                 |        |      |  |   |       |  
|Expected long-term rate of return on assets                                                                         |  |                                 | 1.50   | %    |  |   | 8.00  | %
|                                                                                                                    |  |                                 |        |      |  |   |       |  

The following table illustrates components of net periodic pension benefit
for the periods indicated:

|                                              |  |                                 |      |      |  |      |      |   |  |   |      |  
|--------------------------------------------- |  | ------------------------------- | ---- | ---- |  | ---- | ---- | - |  | - | ---- | -
|                                              |  | For the Year Ended December 31,
|                                              |  |                                
|                                              |  | 2002                            |      | 2001 |  | 2000
|                                              |  |                                 |      |      |  |     
|                                              |  | (Dollars in thousands)         
|Interest cost on projected benefit obligation |  | $                               | 358  |      |  | $    | 388  |   |  | $ | 384  |  
|Assumed return on plan assets                 |  |                                 | (337 | )    |  |      | (417 | ) |  |   | (446 | )
|Net amortization of unrecognized gain         |  |                                 |     |      |  |      |     |   |  |   | (29  | )
|                                              |  |                                 |      |      |  |      |      |   |  |   |      |  
|Net periodic pension benefit                  |  | $                               | 21   |      |  | $    | (29  | ) |  | $ | (91  | )
|                                              |  |                                 |      |      |  |      |      |   |  |   |      |  

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Note 19. Risk Management Instruments

With the adoption of liquidation basis accounting on September 30, 2002
and the substantial reduction of our balance sheet, we are not currently
entering into new risk management instruments to hedge against our exposure to
interest rate fluctuations.

Prior to the adoption of liquidation basis accounting, we used risk
management instruments to modify interest rate characteristics of certain
assets or liabilities to hedge against our exposure to interest rate
fluctuations, reducing the effects these fluctuations might have on associated
cash flows or values. These risk management instruments, also referred to as
derivative instruments include interest rate option contracts, commonly
referred to as caps. Derivative financial instruments involve, to varying
degrees, elements of credit risk. Credit risk is defined as the possibility of
sustaining a loss because other parties to the financial instrument fail to
perform in accordance with the terms of the contract.

Upon adoption of Statement No. 133 in 2000 as discussed in Note 2, our
risk management instruments are being carried at fair value, with changes in
such fair value charged or credited to earnings.

Interest Rate Caps

At December 31, 2002 and 2001, we had interest rate caps with notional
amounts totaling $100.0 million and $180.0 million, respectively. Our interest
rate caps had cap rates at 7.00% and a cap index based on the three-month LIBOR
rate. These interest rate caps are used to limit our exposure to rising
interest rates on our liabilities. There was no interest expense related to
our interest rate caps during 2002 and 2001. Interest expense associated with
the interest rate caps totaled $380,000 for the year ended December 31, 2000.
In addition, we recognized a transition adjustment, a $1.5 million loss, during
the fourth quarter of 2000 to record these interest rate caps at their fair
value in connection with adopting Statement No. 133. These caps were reported
at their fair value of $0 and $5,000 December 31, 2002 and 2001, respectively.
Changes in fair value of our interest rate caps are reported as gains or losses
and are charged to earnings when incurred.

Note 20. Commitments and Contingencies

Premises

At December 31, 2002, we occupied a total of 18 offices plus our
administrative corporate office 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.

The Bank is a party to lease agreements for seven former BVFMAC offices,
all of which were subleased at December 31, 2002. Rental expense was $9.1
million for the year ended December 31, 2002, $10.7 million for 2001 and $12.5
million for 2000. Sublease rental income totaled $567,000 for the year ended
December 31, 2002, $490,000 for 2001 and $632,000 for 2000.

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Future minimum payments under noncancellable lease obligations are
summarized below. These payments exclude approximately $5.6 million in
sublease rental income from existing sublease rental arrangements through the
year 2008.

|           |  |                        |        | 
|---------- |  | ---------------------- | ------ | 
|           |  | Operating Lease       
|           |  | Payments              
|           |  |                       
|           |  | (Dollars in thousands)
|2003       |  | $                      | 5,378  | 
|2004       |  |                        | 2,904  | 
|2005       |  |                        | 2,544  | 
|2006       |  |                        | 2,196  | 
|2007       |  |                        | 2,222  | 
|Thereafter |  |                        | 8,533  | 
|           |  |                        |        | 
|           |  | $                      | 23,777 | 
|           |  |                        |        | 

Loans

At December 31, 2002, we had outstanding commitments to originate $76.6
million in commercial loans and letters of credit and $3.1 million in
construction loans. At December 31, 2001, we had outstanding commitments to
originate $192.4 million in consumer loans, $52.5 million in commercial loans
and letters of credit, $42.4 million in mortgage loans and $5.4 million in
construction loans. We had outstanding recourse and subordination
contingencies relating to $15.6 million of securitized and/or sold loans at
December 31, 2002 and $25.7 million at December 31, 2001 (see Note 7).

Litigation

On June 25, 2002, the Company and the Bank entered into a settlement
agreement with JP Morgan Chase Bank (JP Morgan Chase), successor by merger to
Morgan Guaranty Trust Company of New York (Morgan Guaranty) relating to the
complaint filed on November 9, 2000, in the U.S. District Court, Southern
District of New York, against Bay View Franchise Mortgage Acceptance Company.

Throughout 1999, the former Franchise Mortgage Acceptance Company
originated approximately $80.5 million in loans (Loans) to a group of
borrowers consisting of Cimms Incorporated and its affiliates. Prior to its
acquisition by the Company in 1999, FMAC sold approximately $57 million of the
Loans to Morgan Guaranty. In early 2001, the Companys Board appointed a new
management team that implemented a strategic plan to exit non-core businesses
and refocus on its banking operations in Northern California. As part of that
strategy, the Company and the Bank sold BVFMAC and signed a specific agreement
to indemnify BVFMAC with respect to the claim, which was pending at the time of
the sale.

Without admitting the truth of the allegations raised in the claim, the
Bank agreed to pay to JP Morgan Chase consideration consisting of the transfer
of non-performing loans held by the Bank along with a cash payment of $1.1
million, in exchange for which JP Morgan Chase agreed to release all claims
against BVFMAC, the Bank and the Company relating to the sale of the Loans.

The settlement resulted in a $13.1 million pre-tax charge to earnings
recorded in the second quarter of 2002 and the removal of approximately $12
million of non-performing loans from the Companys consolidated balance sheet.

We are involved as plaintiff or defendant in various other legal actions
and are occasionally exposed to unasserted claims arising in the normal course
of business. In the opinion of management, after consultation with counsel,
the resolution of these other legal actions will not have a material adverse
effect on our consolidated financial condition or results of operations.

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Note 21. 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 our financial instruments, are made solely to comply with the
requirements of Statement No. 107 and should be read in conjunction with our
consolidated financial statements and related notes.

At December 31, 2002, all of our financial instruments are carried at net
realizable value on our consolidated financial statements in accordance with
liquidation basis accounting. As such, all financial instruments are carried
at fair value at December 31, 2002.

At December 31, 2001, we determined the estimated fair value amounts by
using market information and valuation methodologies that we considered
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 we could realize
or have 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, our 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, federal funds sold and commercial paper. 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 was a
reasonable estimate of fair value.

Securities: The fair values of investment securities and mortgage-backed
securities were based on published market prices or quotes obtained from
independent registered securities brokers. The fair values of retained
interests in loan and lease securitizations were estimated by discounting
future cash flows using a discount rate commensurate with the risks involved.

Loans and leases: The fair value of fixed-rate and variable-rate loans and
leases was based on prices for similar loans and leases in the secondary whole
loan or securitization markets or, absent this information, estimated by
discounting contractual cash flows using discount rates that reflect our
current pricing for loans and leases with similar credit ratings and for the
same remaining maturities. Prepayment estimates were based on historical
experience and published data for similar loans and leases.

Investments in stock of the Federal Home Loan Bank of San Francisco and
the Federal Reserve Bank: The carrying amounts of the investments in stock of
the Federal Home Loan Bank of San Francisco and the Federal Reserve Bank were
used as a reasonable estimate of fair value.

Other Assets: This category represents an investment whereby the Company
is entitled to receive contractual cash flows through 2013. The carrying
amount of this asset, which is included in other assets, was used as a reasonable estimate of fair value.

Deposits: The fair value of transaction accounts with no stated maturity,
such as savings accounts, checking accounts and money market accounts is equal
to the amount payable on demand at the reporting date and is assumed to equal
the carrying amount. The fair value of certificates of deposit was estimated
using the rates offered for certificates of deposit with similar remaining
maturities. The fair value of deposits does not include the benefit that

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results from the lower-cost funding provided by our deposits as compared to the
cost of borrowing funds in the market.

Debt and other borrowings: Rates available to us for debt and other
borrowings with similar terms and remaining maturities were used to estimate
the fair value of existing debt, including our Subordinated Notes, other
borrowings and Capital Securities. For short-term borrowings, the carrying
amount was a reasonable estimate of fair value.

Interest rate caps: The fair value of these derivative instruments was the
estimated amount that we would receive or pay to terminate the contracts at the
reporting date, taking into account current interest rates.

Off-balance sheet commitments: We have not estimated the fair value of
off-balance sheet commitments to extend credit. Because of the uncertainty in
attempting to assess the likelihood and timing of a commitment being drawn
upon, coupled with the lack of an established market for these financial
instruments, we do not believe it was meaningful or practicable to provide an
estimate of fair value.

Limitations: The fair value estimates presented herein were based on
pertinent information available to us as of December 31, 2001. Although we are
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 illustrates the estimated fair values of our
financial instruments as of the date indicated:

|                       |                                           |  |                        |           |            |  |           |           | 
|---------------------- | ----------------------------------------- |  | ---------------------- | --------- | ---------- |  | --------- | --------- | 
|                       |                                           |  | At December 31, 2001  
|                       |                                           |  |                       
|                       |                                           |  |                        |           |            |  | Estimated
|                       |                                           |  |                        |           | Net       
|                       |                                           |  | Carrying               |           | Realizable
|                       |                                           |  | Amount                 |           | Value     
|                       |                                           |  |                        |           |           
|                       |                                           |  | (Dollars in thousands)
|Financial assets:      |                                           |  |                        |           |            |  |           |          
|                       | Cash and cash equivalents                 |  | $                      | 521,388   |            |  | $         | 521,388   | 
|                       | Investment securities                     |  |                        | 98,980    |            |  |           | 98,980    | 
|                       | Mortgage-backed securities                |  |                        | 278,891   |            |  |           | 278,891   | 
|                       | Loans and leases, net                     |  |                        | 2,367,395 |            |  |           | 2,360,614 | 
|                       | Investment in stock of the FHLBSF and FRB |  |                        | 36,023    |            |  |           | 36,023    | 
|                       | Other assets                              |  |                        | 10,854    |            |  |           | 10,854    | 
|                       | Interest rate caps                        |  |                        | 5         |            |  |           | 5         | 
|Financial liabilities: |                                           |  |                        |           |            |  |           |          
|                       | Transaction accounts                      |  |                        | 1,950,699 |            |  |           | 1,950,699 | 
|                       | Certificates of deposit                   |  |                        | 1,284,228 |            |  |           | 1,294,707 | 
|                       | Other borrowings                          |  |                        | 137,532   |            |  |           | 137,532   | 
|                       | Subordinated Notes                        |  |                        | 149,632   |            |  |           | 146,135   | 
|                       | Capital Securities                        |  |                        | 90,000    |            |  |           | 90,000    | 

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Note 22. Parent Company Financial Information

Similar to the presentation of our consolidated financial statements, our
parent company financial statements as of and for the quarter ended December
31, 2002 have been prepared under the liquidation basis of accounting. For
reporting periods prior to September 30, 2002, our parent company financial
statements are presented on a going concern basis of accounting. The following
tables illustrate the parent companys (1) Condensed Statement of Net Assets
(Liquidation Basis) as of December 31, 2002 and Condensed Statement of
Financial Condition (Going Concern Basis) as of December 31, 2001, (2)
Statement of Changes in Net Assets in Liquidation for the three-month period
ended December 31, 2002, (3) Condensed Statements of Operations for the
nine-month periods ended September 30, 2002 (Liquidation Basis) and the years
ended December 31, 2001 and 2000 (Going Concern Basis) and (4) Condensed
Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000:

Condensed Statement of Net Assets
(Liquidation Basis) as of December 31, 2002 and
Condensed Statement of Financial Condition (Going Concern Basis) as
of December 31, 2001

|                                           |  |                        |         |               |  |   |         | 
|------------------------------------------ |  | ---------------------- | ------- | ------------- |  | - | ------- | 
|                                           |  | At December 31,       
|                                           |  |                       
|                                           |  | 2002                   |         | 2001         
|                                           |  |                        |         |              
|                                           |  | Liquidation            |         | Going Concern
|                                           |  | Basis                  |         | Basis        
|                                           |  |                        |         |              
|                                           |  | (Dollars in thousands)
|ASSETS                                     |  |                        |         |               |  |   |         | 
|Cash on deposit with subsidiary bank       |  | $                      | 5,279   |               |  | $ | 13,061  | 
|Investment securities, at fair value       |  |                        | 959     |               |  |   | 1,153   | 
|Loans held-for-sale                        |  |                        | 11,636  |               |  |   | 3,407   | 
|Loans held-for-investment, net             |  |                        |        |               |  |   | 23,716  | 
|Investment in and advances to subsidiaries |  |                        | 512,166 |               |  |   | 477,718 | 
|Deferred income taxes                      |  |                        |        |               |  |   | 27,255  | 
|Other assets                               |  |                        | 5,161   |               |  |   | 11,864  | 
|                                           |  |                        |         |               |  |   |         | 
|Total assets                               |  | $                      | 535,201 |               |  | $ | 558,174 | 
|                                           |  |                        |         |               |  |   |         | 
|LIABILITIES AND STOCKHOLDERS EQUITY       |  |                        |         |               |  |   |         | 
|Income taxes                               |  | $                      | 178     |               |  | $ |        | 
|Accounts payable and other liabilities     |  |                        | 32,175  |               |  |   | 29,571  | 
|Subordinated Notes and Senior Debentures   |  |                        |        |               |  |   | 99,632  | 
|Junior Subordinated Debentures             |  |                        | 92,784  |               |  |   | 92,784  | 
|Stockholders equity                       |  |                        |        |               |  |   | 336,187 | 
|                                           |  |                        |         |               |  |   |         | 
|Total liabilities and stockholders equity |  |                        | 125,137 |               |  | $ | 558,174 | 
|                                           |  |                        |         |               |  |   |         | 
|Net assets in liquidation                  |  | $                      | 410,064 |               |  |   |         | 
|                                           |  |                        |         |               |  |   |         | 

Statement of Changes in Net Assets in Liquidation

|                                                      |  |                        |         | 
|----------------------------------------------------- |  | ---------------------- | ------- | 
|                                                      |  | For the Three         
|                                                      |  | Months Ended          
|                                                      |  | December 31, 2002     
|                                                      |  |                       
|                                                      |  | (Dollars in thousands)
|Net assets in liquidation, September 30, 2002         |  | $                      | 413,675 | 
|Pre-tax income from operations                        |  |                        | 18,979  | 
|Changes in estimated values of assets and liabilities |  |                        | 368     | 
|Income tax expense                                    |  |                        | 23,346  | 
|Other changes in net assets in liquidation            |  |                        | 388     | 
|                                                      |  |                        |         | 
|Net assets in liquidation, December 31, 2002          |  | $                      | 410,064 | 
|                                                      |  |                        |         | 

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Condensed Statements of Operations

|         |                                                                  |  |                        |         |                     |  |        |          |   |  |        |          |  
|-------- | ---------------------------------------------------------------- |  | ---------------------- | ------- | ------------------- |  | ------ | -------- | - |  | ------ | -------- | -
|         |                                                                  |  | For the Nine           |         |                    
|         |                                                                  |  | Months Ended           |         | For the Year Ended 
|         |                                                                  |  | September 30,          |         | December 31,       
|         |                                                                  |  |                        |         |                    
|         |                                                                  |  | 2002                   |         | 2001                |  | 2000  
|         |                                                                  |  |                        |         |                     |  |       
|         |                                                                  |  | Liquidation            |         |                    
|         |                                                                  |  | Basis                  |         | Going
Concern Basis
|         |                                                                  |  |                        |         |                    
|         |                                                                  |  | (Dollars in thousands)
|Income:  |                                                                  |  |                        |         |                     |  |        |          |   |  |        |         
|         | Dividends from subsidiaries                                      |  | $                      |        |                     |  | $      |         |   |  | $      | 69,570   |  
|         | Interest income                                                  |  |                        | 1,330   |                     |  |        | 6,881    |   |  |        | 24,034   |  
|         | Other income                                                     |  |                        |        |                     |  |        | 2,226    |   |  |        |         |  
|         |                                                                  |  |                        |         |                     |  |        |          |   |  |        |         
|         |                                                                  |  | 1,330                  |         |                     |  | 9,107  |          |   |  | 93,604 |         
|         |                                                                  |  |                        |         |                     |  |        |          |   |  |        |         
|Expense: |                                                                  |  |                        |         |                     |  |        |          |   |  |        |         
|         | Interest expense                                                 |  |                        | 15,378  |                     |  |        | 24,942   |   |  |        | 37,471   |  
|         | Provision for loss on loans                                      |  |                        | 100     |                     |  |        | 1,000    |   |  |        | 2,700    |  
|         | General and administrative expense                               |  |                        | 8,486   |                     |  |        | 32,089   |   |  |        | 22,973   |  
|         | Adjustment for liquidation expense                               |  |                        | 46,722  |                     |  |        |         |   |  |        |         |  
|         | Income tax expense (benefit)                                     |  |                        | 5,186   |                     |  |        | (20,752  | ) |  |        | 1,185    |  
|         |                                                                  |  |                        |         |                     |  |        |          |   |  |        |         
|         |                                                                  |  | 75,872                 |         |                     |  | 37,279 |          |   |  | 64,329 |         
|         |                                                                  |  |                        |         |                     |  |        |          |   |  |        |         
|         | Income (loss) before undistributed net income of subsidiaries    |  |                        | (74,542 | )                   |  |        | (28,172  | ) |  |        | 29,275   |  
|         | Net loss or distribution in excess of net income of subsidiaries |  |                        | 146,203 |                     |  |        | (72,998  | ) |  |        | (355,472 | )
|         |                                                                  |  |                        |         |                     |  |        |          |   |  |        |         
|         | Net income (loss)                                                |  | $                      | 71,661  |                     |  | $      | (101,170 | ) |  | $      | (326,197 | )
|         |                                                                  |  |                        |         |                     |  |        |          |   |  |        |         

Condensed Statements of Cash Flows

|                                                                                                   |  |                                 |          |      |  |      |          |   |  |   |          |  
|-------------------------------------------------------------------------------------------------- |  | ------------------------------- | -------- | ---- |  | ---- | -------- | - |  | - | -------- | -
|                                                                                                   |  | For the Year Ended December 31,
|                                                                                                   |  |                                
|                                                                                                   |  | 2002                            |          | 2001 |  | 2000
|                                                                                                   |  |                                 |          |      |  |     
|                                                                                                   |  | (Dollars in thousands)         
|CASH FLOWS FROM OPERATING ACTIVITIES                                                               |  |                                 |          |      |  |      |          |   |  |   |          |  
|Net income (loss)                                                                                  |  | $                               | 67,661   |      |  | $    | (101,170 | ) |  | $ | (326,197 | )
|Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activities: |  |                                 |          |      |  |      |          |   |  |   |          |  
|Net loss or distribution in excess of net
income of subsidiaries                                   |  |                                 | (169,353 | )    |  |      | 72,998   |   |  |   | 355,472  |  
|Revaluation of franchise-related assets                                                            |  |                                 |         |      |  |      | 19,055   |   |  |   |         |  
|Gain (loss) on sale of loans and securities                                                        |  |                                 | 1,469    |      |  |      | (902     | ) |  |   | (647     | )
|(Increase) decrease in other assets                                                                |  |                                 | 28,073   |      |  |      | (17,321  | ) |  |   | 19,167   |  
|Increase (decrease) in other liabilities                                                           |  |                                 | 2,782    |      |  |      | 11,315   |   |  |   | (1,457   | )
|Adjustment for liquidation basis                                                                   |  |                                 | 14,764   |      |  |      |         |   |  |   |         |  
|Other, net                                                                                         |  |                                 | 4,872    |      |  |      | 11,718   |   |  |   | 354      |  
|                                                                                                   |  |                                 |          |      |  |      |          |   |  |   |          |  
|Net cash (used in) provided by operating activities                                                |  |                                 | (49,732  | )    |  |      | (4,307   | ) |  |   | 46,692   |  
|                                                                                                   |  |                                 |          |      |  |      |          |   |  |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                                               |  |                                 |          |      |  |      |          |   |  |   |          |  
|Investment in subsidiary                                                                           |  |                                 | 135,917  |      |  |      | (115,845 | ) |  |   | (39,155  | )
|Proceeds from sale of investment securities                                                        |  |                                 | 6,024    |      |  |      |         |   |  |   |         |  
|Proceeds from repayments of loans                                                                  |  |                                 | 4,728    |      |  |      | 13,744   |   |  |   |         |  
|Proceeds from sale of loans                                                                        |  |                                 |         |      |  |      | 68,099   |   |  |   | 265,350  |  
|Other, net                                                                                         |  |                                 | (1,492   | )    |  |      | 572      |   |  |   | (827     | )
|                                                                                                   |  |                                 |          |      |  |      |          |   |  |   |          |  
|Net cash provided by (used in) investing activities                                                |  |                                 | 145,177  |      |  |      | (33,430  | ) |  |   | 225,368  |  
|                                                                                                   |  |                                 |          |      |  |      |          |   |  |   |          |  

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Condensed Statements of Cash Flows (continued)

|                                                          |  |                                 |          |      |  |      |         |   |  |   |          |  
|--------------------------------------------------------- |  | ------------------------------- | -------- | ---- |  | ---- | ------- | - |  | - | -------- | -
|                                                          |  | For the Year Ended December 31,
|                                                          |  |                                
|                                                          |  | 2002                            |          | 2001 |  | 2000
|                                                          |  |                                 |          |      |  |     
|                                                          |  | (Dollars in thousands)         
|CASH FLOWS FROM FINANCING ACTIVITIES                      |  |                                 |          |      |  |      |         |   |  |   |          |  
|Decrease in short-term borrowings                         |  |                                 |         |      |  |      | (94,497 | ) |  |   | (252,440 | )
|Repayment of Subordinated Debentures                      |  |                                 | (104,563 | )    |  |      |        |   |  |   |         |  
|Proceeds from issuance of common stock                    |  |                                 | 1,609    |      |  |      | 108,167 |   |  |   | 94       |  
|Proceeds from issuance of preferred stock                 |  |                                 |         |      |  |      | 26,400  |   |  |   |         |  
|Dividends paid to stockholders                            |  |                                 | (273     | )    |  |      |        |   |  |   | (9,780   | )
|                                                          |  |                                 |          |      |  |      |         |   |  |   |          |  
|Net cash (used in) provided by financing activities       |  |                                 | (103,227 | )    |  |      | 40,070  |   |  |   | (262,126 | )
|                                                          |  |                                 |          |      |  |      |         |   |  |   |          |  
|Net increase (decrease) in cash                           |  |                                 | (7,782   | )    |  |      | 2,333   |   |  |   | 9,934    |  
|Cash on deposit with subsidiary bank at beginning of year |  |                                 | 13,061   |      |  |      | 10,728  |   |  |   | 794      |  
|                                                          |  |                                 |          |      |  |      |         |   |  |   |          |  
|Cash on deposit with subsidiary bank at end of year       |  | $                               | 5,279    |      |  | $    | 13,061  |   |  | $ | 10,728   |  
|                                                          |  |                                 |          |      |  |      |         |   |  |   |          |  

Note 23. Segment and Related Information

As a result of our adoption of liquidation basis accounting effective
September 30, 2002, we currently operate in a single segment focused on
liquidating the Companys assets and liabilities.

Prior to September 30, 2002, we had two operating segments that we refer
to as business platforms. The platforms were determined primarily based upon
the characteristics of our interest-earning assets and their respective
distribution channels and reflect the way that we monitor, measure and evaluate
our primary business activities. Our platforms were as follows:

A Retail Platform which was comprised of single-family real estate loans,
home equity loans and lines of credit, auto loans and leases, mortgage-backed
securities and other investments, and consumer banking products and services.
The Retail Platforms revenues were derived from customers throughout the
United States.

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 Commercial Platforms
revenues were derived from customers throughout the United States.

Each of our business platforms contributed to our overall operations. We
evaluated the performance of our 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 our 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 our remaining funding sources,
including dividends associated with our 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.

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The Retail Platform incurred the direct general and administrative expenses
related to operating our 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, our 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 our adoption of liquidation basis accounting effective
September 30, 2002 were not allocated to our business platforms.

The following tables illustrate each platforms contribution for the
periods indicated. The tables also illustrate the reconciliation of total
contribution by platform to our consolidated net income (loss) for the periods
indicated. Reconciling items generally include indirect corporate overhead,
liquidation and valuation adjustments for 2002 and income taxes.

|                                                                  |  |                                              |           |            |  |       |         |   |  |   |           |  
|----------------------------------------------------------------- |  | -------------------------------------------- | --------- | ---------- |  | ----- | ------- | - |  | - | --------- | -
|                                                                  |  | For the Nine Months Ended September 30, 2002
|                                                                  |  |                                             
|                                                                  |  | Retail                                       |           | Commercial |  | Total
|                                                                  |  |                                              |           |            |  |      
|                                                                  |  | (Dollars in thousands)                      
|Interest income                                                   |  | $                                            | 69,054    |            |  | $     | 76,185  |   |  | $ | 145,239   |  
|Interest 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  |   |  |   | 91,565    |  
|Direct 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  |   |  |   | 22,339    |  
|                                                                  |  |                                              |           |            |  |       |         |   |  |   |           |  
|Indirect corporate overhead                                       |  |                                              |           |            |  |       |         |   |  |   | (16,476   | )
|Adjustment for liquidation basis                                  |  |                                              |           |            |  |       |         |   |  |   | 266,510   |  
|Income tax expense                                                |  |                                              |           |            |  |       |         |   |  |   | (181,792  | )
|Cumulative effect of change in accounting principle, net of taxes |  |                                              |           |            |  |       |         |   |  |   | (18,920   | )
|                                                                  |  |                                              |           |            |  |       |         |   |  |   |           |  
|Net income                                                        |  |                                              |           |            |  |       |         |   |  | $ | 71,661    |  
|                                                                  |  |                                              |           |            |  |       |         |   |  |   |           |  
|At September 30, 2002:                                            |  |                                              |           |            |  |       |         |   |  |   |           |  
|Interest-earning assets plus operating lease assets               |  | $                                            | 3,277,407 |            |  | $     | 358,258 |   |  | $ | 3,635,665 |  
|                                                                  |  |                                              |           |            |  |       |         |   |  |   |           |  
|Noninterest-earning assets                                        |  |                                              |           |            |  |       |         |   |  |   | 260,808   |  
|                                                                  |  |                                              |           |            |  |       |         |   |  |   |           |  
|Total assets                                                      |  |                                              |           |            |  |       |         |   |  | $ | 3,896,473 |  
|                                                                  |  |                                              |           |            |  |       |         |   |  |   |           |  

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|                                                                 |                        |                                      |           |            |  |       |           |   |  |   |           |  
|---------------------------------------------------------------- | ---------------------- | ------------------------------------ | --------- | ---------- |  | ----- | --------- | - |  | - | --------- | -
|                                                                 |                        | For the Year Ended December 31, 2001
|                                                                 |                        |                                     
|                                                                 |                        | Retail                               |           | Commercial |  | Total
|                                                                 |                        |                                      |           |            |  |      
|                                                                 | (Dollars in thousands)
|Interest income                                                  |                        | $                                    | 139,115   |            |  | $     | 163,630   |   |  | $ | 302,745   |  
|Interest expense                                                 |                        |                                      | (108,176  | )          |  |       | (72,321   | ) |  |   | (180,497  | )
|Provision for losses on loans and leases                         |                        |                                      | (8,419    | )          |  |       | (63,471   | ) |  |   | (71,890   | )
|Noninterest income (loss)                                        |                        |                                      | 114,575   |            |  |       | (7,406    | ) |  |   | 107,169   |  
|Direct general and administrative expenses                       |                        |                                      | (104,033  | )          |  |       | (22,988   | ) |  |   | (127,021  | )
|Allocation of branch network general and administrative expenses |                        |                                      | 28,386    |            |  |       | (28,386   | ) |  |   |          |  
|Restructuring charges                                            |                        |                                      | (4,998    | )          |  |       | (1,937    | ) |  |   | (6,935    | )
|Revaluation of franchise-related assets                          |                        |                                      | (2,733    | )          |  |       | (67,413   | ) |  |   | (70,146   | )
|Leasing expenses                                                 |                        |                                      | (86,120   | )          |  |       |          |   |  |   | (86,120   | )
|Real estate owned operations, net                                |                        |                                      | (7        | )          |  |       | (2,078    | ) |  |   | (2,085    | )
|Provision for losses on real estate owned                        |                        |                                      |          |            |  |       | (2,936    | ) |  |   | (2,936    | )
|Amortization of intangible assets                                |                        |                                      | (8,366    | )          |  |       | (2,914    | ) |  |   | (11,280   | )
|Dividends on Capital Securities                                  |                        |                                      | (5,774    | )          |  |       | (4,000    | ) |  |   | (9,774    | )
|                                                                 |                        |                                      |           |            |  |       |           |   |  |   |           |  
|Contribution by platform                                         |                        | $                                    | (46,550   | )          |  | $     | (112,220  | ) |  |   | (158,770  | )
|                                                                 |                        |                                      |           |            |  |       |           |   |  |   |           |  
|Indirect corporate overhead                                      |                        |                                      |           |            |  |       |           |   |  |   | (28,266   | )
|Income tax benefit                                               |                        |                                      |           |            |  |       |           |   |  |   | 85,866    |  
|                                                                 |                        |                                      |           |            |  |       |           |   |  |   |           |  
|Net loss                                                         |                        |                                      |           |            |  |       |           |   |  | $ | (101,170  | )
|                                                                 |                        |                                      |           |            |  |       |           |   |  |   |           |  
|At December 31, 2001:                                            |                        |                                      |           |            |  |       |           |   |  |   |           |  
|Interest-earning assets plus operating lease assets              |                        | $                                    | 1,793,499 |            |  | $     | 1,541,310 |   |  | $ | 3,334,809 |  
|                                                                 |                        |                                      |           |            |  |       |           |   |  |   |           |  
|Noninterest-earning assets                                       |                        |                                      |           |            |  |       |           |   |  |   | 679,296   |  
|                                                                 |                        |                                      |           |            |  |       |           |   |  |   |           |  
|Total assets                                                     |                        |                                      |           |            |  |       |           |   |  | $ | 4,014,105 |  
|                                                                 |                        |                                      |           |            |  |       |           |   |  |   |           |  

|                                                                       |                        |                                      |           |            |  |       |           |   |  |   |           |  
|---------------------------------------------------------------------- | ---------------------- | ------------------------------------ | --------- | ---------- |  | ----- | --------- | - |  | - | --------- | -
|                                                                       |                        | For the Year Ended December 31, 2000
|                                                                       |                        |                                     
|                                                                       |                        | Retail                               |           | Commercial |  | Total
|                                                                       |                        |                                      |           |            |  |      
|                                                                       | (Dollars in thousands)
|Interest income                                                        |                        | $                                    | 221,451   |            |  | $     | 238,741   |   |  | $ | 460,192   |  
|Interest expense                                                       |                        |                                      | (159,331  | )          |  |       | (135,421  | ) |  |   | (294,752  | )
|Provision for losses on loans and leases                               |                        |                                      | (10,354   | )          |  |       | (52,246   | ) |  |   | (62,600   | )
|Noninterest income (loss)                                              |                        |                                      | 90,350    |            |  |       | (13,708   | ) |  |   | 76,642    |  
|Direct general and administrative expenses                             |                        |                                      | (79,856   | )          |  |       | (31,547   | ) |  |   | (111,403  | )
|Direct general and administrative expenses  franchise loan production |                        |                                      |          |            |  |       | (15,561   | ) |  |   | (15,561   | )
|Direct general and administrative expenses  Bankers Mutual            |                        |                                      |          |            |  |       | (6,311    | ) |  |   | (6,311    | )
|Allocation of branch network general and administrative expenses       |                        |                                      | 21,934    |            |  |       | (21,934   | ) |  |   |          |  
|Restructuring charges                                                  |                        |                                      |          |            |  |       | (9,213    | ) |  |   | (9,213    | )
|Revaluation of franchise-related assets                                |                        |                                      |          |            |  |       | (101,894  | ) |  |   | (101,894  | )
|Leasing expenses                                                       |                        |                                      | (69,350   | )          |  |       |          |   |  |   | (69,350   | )
|Real estate owned operations, net                                      |                        |                                      | (22       | )          |  |       | (43       | ) |  |   | (65       | )
|Amortization of intangible assets                                      |                        |                                      | (8,768    | )          |  |       | (2,390    | ) |  |   | (11,158   | )
|Amortization of intangible assets  franchise                          |                        |                                      |          |            |  |       | (9,608    | ) |  |   | (9,608    | )
|Write-off of intangible assets  franchise                             |                        |                                      |          |            |  |       | (192,622  | ) |  |   | (192,622  | )
|Dividends on Capital Securities                                        |                        |                                      | (5,148    | )          |  |       | (3,841    | ) |  |   | (8,989    | )
|                                                                       |                        |                                      |           |            |  |       |           |   |  |   |           |  
|Contribution by platform                                               |                        | $                                    | 906       |            |  | $     | (357,598  | ) |  |   | (356,692  | )
|                                                                       |                        |                                      |           |            |  |       |           |   |  |   |           |  
|Indirect corporate overhead                                            |                        |                                      |           |            |  |       |           |   |  |   | (25,315   | )
|Income tax benefit                                                     |                        |                                      |           |            |  |       |           |   |  |   | 55,810    |  
|                                                                       |                        |                                      |           |            |  |       |           |   |  |   |           |  
|Net loss                                                               |                        |                                      |           |            |  |       |           |   |  | $ | (326,197  | )
|                                                                       |                        |                                      |           |            |  |       |           |   |  |   |           |  
|At December 31, 2000:                                                  |                        |                                      |           |            |  |       |           |   |  |   |           |  
|Interest-earning assets plus operating lease assets                    |                        | $                                    | 2,207,366 |            |  | $     | 2,178,619 |   |  | $ | 4,385,985 |  
|                                                                       |                        |                                      |           |            |  |       |           |   |  |   |           |  
|Noninterest-earning assets                                             |                        |                                      |           |            |  |       |           |   |  |   | 974,946   |  
|                                                                       |                        |                                      |           |            |  |       |           |   |  |   |           |  
|Total assets                                                           |                        |                                      |           |            |  |       |           |   |  | $ | 5,360,931 |  
|                                                                       |                        |                                      |           |            |  |       |           |   |  |   |           |  

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Note 24. Selected Quarterly Results of Operations (Unaudited)

|                                                    |                                                  |               |        |               |  |             |        |             |  |   |         |  |  |   |        |  
|--------------------------------------------------- | ------------------------------------------------ | ------------- | ------ | ------------- |  | ----------- | ------ | ----------- |  | - | ------- |  |  | - | ------ | -
|                                                    | For the Year Ended December 31, 2002            
|                                                    |                                                 
|                                                    |                                                  | First         |        | Second        |  | Third       |        | Fourth     
|                                                    |                                                  | Quarter       |        | Quarter       |  | Quarter     |        | Quarter    
|                                                    |                                                  |               |        |               |  |             |        |            
|                                                    |                                                  | Going Concern |        | Going Concern |  | Liquidation |        | Liquidation
|                                                    |                                                  | Basis         |        | Basis         |  | Basis       |        | Basis      
|                                                    |                                                  |               |        |               |  |             |        |            
|                                                    | (Dollars in thousands, except per share amounts)
|Interest income                                     |                                                  | $             | 53,693 |               |  | $           | 52,483 |             |  | $ | 39,063  |  |  | $ | 17,247 |  
|Net interest income                                 |                                                  |               | 33,144 |               |  |             | 33,447 |             |  |   | 18,580  |  |  |   | 7,246  |  
|Provision for losses on loans and leases            |                                                  |               | 4,900  |               |  |             | 3,600  |             |  |   | 2,200   |  |  |   |       |  
|Income
(loss) before income tax expense (benefit)   |                                                  |               | 7,552  |               |  |             | (5,114 | )           |  |   | 11,298  |  |  |   | (3,382 | )
|Adjustment for liquidation basis                    |                                                  |               |       |               |  |             |       |             |  |   | 266,510 |  |  |   | (2,761 | )
|Net income (loss)                                   |                                                  |               | 6,914  |               |  |             | (4,082 | )           |  |   | 87,749  |  |  |   |       |  
|Change in net assets in liquidation from operations |                                                  |               |       |               |  |             |       |             |  |   |        |  |  |   | (3,999 | )
|Net assets in liquidation per share                 |                                                  |               | N/A    |               |  |             | N/A    |             |  |   | 6.50    |  |  |   | 6.43   |  
|Basic earnings (loss) per share                     |                                                  |               | 0.11   |               |  |             | (0.07  | )           |  |   | N/A     |  |  |   | N/A    |  
|Diluted earnings (loss) per share                   |                                                  |               | 0.11   |               |  |             | (0.07  | )           |  |   | N/A     |  |  |   | N/A    |  

|                                         |  |                                                  |        |         |  |         |          |         |  |   |        |   |  |   |         |  
|---------------------------------------- |  | ------------------------------------------------ | ------ | ------- |  | ------- | -------- | ------- |  | - | ------ | - |  | - | ------- | -
|                                         |  | For the Year Ended December 31, 2001            
|                                         |  |                                                 
|                                         |  | First                                            |        | Second  |  | Third   |          | Fourth 
|                                         |  | Quarter                                          |        | Quarter |  | Quarter |          | Quarter
|                                         |  |                                                  |        |         |  |         |          |        
|                                         |  | Going Concern Basis                             
|                                         |  |                                                 
|                                         |  | (Dollars in thousands, except per share amounts)
|Interest income                          |  | $                                                | 94,459 |         |  | $       | 84,095   |         |  | $ | 65,329 |   |  | $ | 58,862  |  
|Net interest income                      |  |                                                  | 32,484 |         |  |         | 29,744   |         |  |   | 27,771 |   |  |   | 32,249  |  
|Provision for losses on loans and leases |  |                                                  | 7,300  |         |  |         | 52,433   |         |  |   | 3,257  |   |  |   | 8,900   |  
|Income
(loss) before income tax benefit  |  |                                                  | (5,678 | )       |  |         | (152,552 | )       |  |   | 1,291  |   |  |   | (20,323 | )
|Net income (loss)                        |  |                                                  | (7,966 | )       |  |         | (95,350  | )       |  |   | (632   | ) |  |   | 2,778   |  
|Basic earnings (loss) per share          |  |                                                  | (0.24  | )       |  |         | (2.11    | )       |  |   | (0.01  | ) |  |   | 0.04    |  
|Diluted earnings (loss) per share        |  |                                                  | (0.24  | )       |  |         | (2.11    | )       |  |   | (0.01  | ) |  |   | 0.04    |  

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Independent Auditors Report

To the Board of Directors
Bay View Capital Corporation:

We have audited the accompanying consolidated statement of net assets
(liquidation basis) of Bay View Capital Corporation and Subsidiaries (the
Company) as of December 31, 2002 and the related consolidated statements of
changes in net assets in liquidation for the period from September 30, 2002 to
December 31, 2002. In addition, we have audited the accompanying
consolidated statements of operations and comprehensive income
(loss) and of stockholders
equity for the period from January 1, 2002 to September 30, 2002 and cash flows
for the period from January 1, 2002 to December 31, 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. The consolidated financial statements of Bay View Capital Corporation and
Subsidiaries as of December 31, 2001 and for the year then ended, before revisions in Note 9, were audited
by other auditors who have ceased operations. Those auditors expressed an
unqualified opinion on those consolidated financial statements in their report dated January
18, 2002. The financial statements of Bay View Capital Corporation and
Subsidiaries for the year ended December 31, 2000, before the
revisions in Note 9, were audited by other
auditors whose report, dated February 14, 2001, expressed an unqualified
opinion on those consolidated financial statements.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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.

As discussed in Note 2 to the consolidated financial statements, the
stockholders of Bay View Capital Corporation and subsidiaries approved a plan
of liquidation on October 3, 2002, and the Company commenced liquidation
effective September 30, 2002. As a result, the Company has changed its basis
of accounting from the going concern basis to the liquidation basis effective
September 30, 2002.

In our opinion, such consolidated financial statements present fairly, in
all material respects, (1) the net assets (liquidation basis) of Bay View
Capital Corporation and Subsidiaries at December 31, 2002, (2) the changes in
its net assets in liquidation for the period from September 30, 2002 to
December 31, 2002, (3) the results of its operations for the period from January 1, 2002 to
September 30, 2002 and its cash flows for the period from January 1, 2002 to
December 31, 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 above, the consolidated financial statements of Bay View
Capital Corporation and Subsidiaries as of December 31, 2001, and for the year
then ended were audited by other auditors who have ceased operations. As
described in Note 2 and Note 9, these financial statements have been revised to
include the transitional disclosures required by Statement No. 142 which was
adopted by the Company as of January 1, 2002. Our audit procedures with
respect to the disclosures in Note 9 with respect to 2001 included (i) agreeing
the previously reported net income to the previously issued
consolidated financial
statements and the adjustments to reported net income representing amortization
expense (including any related tax effects) recognized in those periods related
to goodwill as a result of initially

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applying Statement No. 142 to the Companys underlying records obtained from
management, and (ii) testing the mathematical accuracy of the reconciliation of
adjusted net income to reported net
income, and the related earnings per share amounts. In our opinion, the
disclosures for 2001 in Note 9 are appropriate. However, we were not engaged
to audit, review, or apply any procedures to the 2001 financial statements of
the Company other than with respect to such disclosures and, accordingly, we do
not express an opinion or any other form of assurance on the 2001 financial
statements taken as a whole.

/s/ Deloitte & Touche LLP

San Francisco, California
January 24, 2003

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The report of Arthur Andersen LLP presented below is a copy of a
previously issued Arthur Andersen LLP report. This report has not been
reissued by Arthur Andersen LLP nor has Arthur Andersen LLP provided a consent
to the inclusion of its report in this Form 10-K. The consolidated financial
statements as of December 31, 2001 and for the year then ended have been
revised to include the transitional disclosures required by Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets
(see Note 2 and Note 9).

Report of Independent Public Accountants

To the Board of Directors
Bay View Capital Corporation:

We have audited the accompanying consolidated statement of financial
condition of Bay View Capital Corporation and subsidiaries (the Company) (a
Delaware Corporation) as of December 31, 2001 and the related consolidated
statement of operations and comprehensive income (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. The financial
statements of the Company as of December 31, 2000 and for the two years then
ended were audited by other auditors whose report dated February 14, 2001,
expressed an unqualified opinion on those statements.

We conducted our audit in accordance with auditing standards generally
accepted in the 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 as of December 31, 2001, and the results
of its operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States.

/s/ Arthur Andersen LLP

San Francisco, California
January 18, 2002

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Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

The information required by Item 304 of Regulation S-K was previously
filed as part of the Companys Current Reports on Form 8-K filed on May 31,
2002 and June 14, 2002.




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 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 April 24, 2003. 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 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 April 24, 2003. 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

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 April 24, 2003.




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 April 24, 2003.




Item 14. Controls and Procedures



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Evaluation of disclosure controls and procedures. The Companys
principal executive officer and its principal financial officer, after
evaluating the effectiveness of the Companys disclosure controls and
procedures (as defined in Exchange Act Rules 12(a)  and 15(d)- 14(c))
as of a date within 90 days of the filing of this annual report, have
concluded that, as of such date, the Companys disclosure controls and
procedures were adequate and effective to ensure that material
information relating to the Company and its consolidated subsidiaries
would be made known to them by others within those entities.



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | Changes in internal controls. There have been no significant changes
in the Companys internal controls or in the other factors that could
significantly affect the Companys disclosure controls and procedures
subsequent to the date of their evaluation, nor were there any
significant deficiencies or material weaknesses in the Companys
internal controls. As a result, no corrective actions were required or
undertaken.

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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.

|                             |  |                                                                                    |  |                                                            
|---------------------------- |  | ---------------------------------------------------------------------------------- |  | -----------------------------------------------------------
|RegulationS-K

ExhibitNumber |  | Document                                                                           |  | Reference to prior
filing or exhibit
number attached
hereto
|                             |  |                                                                                    |  |                                                            
|2                            |  | Plan of acquisition, reorganization, arrangement, liquidation or succession        |  | None                                                       
|3                            |  | Articles of Incorporation
Bylaws                                                   |  | 3a
3b                                                      
|4                            |  | Instruments defining the rights of security holders, including indentures:         |  |                                                            
|                             |  | Articles of Incorporation                                                          |  | 3a                                                         
|                             |  | Bylaws                                                                             |  | 3b                                                         
|                             |  | Specimen of common stock certificate                                               |  | 4a                                                         
|9                            |  | Voting trust agreement                                                             |  | None                                                       
|10                           |  | Material contracts:                                                                |  |                                                            
|                             |  | Employment Contract with John Okubo                                                |  | 10a.1                                                      
|                             |  | Employment Contract with Joe Catalano                                              |  | 10a.2                                                      
|                             |  | Employment Contract with Sossy Soukiassian                                         |  | 10a.3                                                      
|                             |  | Employment Contract with Weldon Culley                                             |  | 10a.4                                                      
|                             |  | Employment Contract with James A. Badame                                           |  | 10b                                                        
|                             |  | Employment Contract with Charles G. Cooper                                         |  | 10c                                                        
|                             |  | Supplemental Executive Retirement Plan                                             |  | 10d                                                        
|                             |  | Senior Management Incentive Plan                                                   |  | 10e                                                        
|                             |  | Senior Management Long-Term Incentive Plan                                         |  | 10f                                                        
|                             |  | Amended and Restated 1986 Stock Option and Incentive Plan                          |  | 10g                                                        
|                             |  | Amendment No. One to the 1986 Stock Option and Incentive Plan                      |  | 10h                                                        
|                             |  | Amendment No. One to the Amended and Restated 1995 Stock Option and Incentive Plan |  | 10h                                                        
|                             |  | Amendment No. Two to the Amended and Restated 1995 Stock Option
and Incentive Plan |  | 10h                                                        
|                             |  | Amended and Restated 1989 Non-Employee Director Stock Option Plan                  |  | 10i                                                        
|                             |  | Deferred Compensation Plan                                                         |  | 10j                                                        
|                             |  | Amended and Restated 1995 Stock Option and Incentive Plan                          |  | 10k                                                        
|                             |  | 1998 - 2000 Stock Performance Plan                                                 |  | 10l                                                        
|                             |  | 1998 Non-Employee Director Stock Option and Incentive Plan                         |  | 10l                                                        
|                             |  | Supplemental Phantom Stock Unit Plan                                               |  | 10m                                                        
|                             |  | Agreement by and between Bay View Capital and the Federal Reserve Bank             |  | 10n                                                        
|                             |  | Agreement by and between Bay View Bank and the Office of the                       |  |                                                            
|                             |  | Comptroller of the Currency                                                        |  | 10n                                                        
|                             |  | 2001 Equity Incentive Plan for Employees                                           |  | 10o                                                        

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|   |  |                                                                          |  |             
|-- |  | ------------------------------------------------------------------------ |  | ------------
|   |  | 2001 Non-employee Director Stock Option Plan                             |  | 10p         
|   |  | Purchase and Assumption agreement by and between U.S. Bank National      |  | 10q         
|   |  | Association and Bay View Bank                                            |  |             
|   |  | Mortgage Loan purchase agreement between Bay View Bank, National         |  | 10q         
|   |  | Association (seller) and Washington Mutual Bank FA (purchaser)       |  |             
|   |  | Amendment No. One to the Stock in Lieu of Cash Compensation Plan for     |  | 10.1        
|   |  | Non-employee Directors                                                   |  |             
|   |  | Amendment No. Three to the Amended Outside Directors Retirement Plan     |  | 10.2        
|  
|11 |  | Statement re computation of per share earnings                           |  | 11          
|  
|12 |  | Statements re computation of ratios                                      |  | 12          
|  
|13 |  | Annual Report to security holders                                        |  | Not required
|  
|16 |  | Letter re change in certifying accountant                                |  | Not required
|  
|18 |  | Letter re change in accounting principles                                |  | None        
|  
|21 |  | Subsidiaries of the Registrant                                           |  | 21          
|  
|22 |  | Published report regarding matters submitted to vote of security holders |  | None        
|  
|23 |  | Consent of Deloitte & Touche LLP                                         |  | 23a         
|  
|   |  | Consent of KPMG LLP                                                      |  | 23b         
|  
|24 |  | Power of attorney                                                        |  | Not required
|  
|99 |  | Additional Exhibits                                                      |  | None        

(References to Prior Filings)

|      |                                                                                                                                                                                              | 
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|3a    | Filed as exhibit 4(a) to the Registrants Registration Statement on Form
S-3 filed June 20, 1997 (File No. 333-29757)                                                                       
|     
|3b    | Filed as exhibit 10.3 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)                        
|     
|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)                                            
|     
|10b   | Filed as exhibit 10.1 to the Registrants Annual Report on Form 10-K
filed March 28, 2001 for the year ended December 31, 2000 (File No.
0-14879)                                           
|     
|10c   | Filed as exhibit 10.b.3 to the Registrants Quarterly Report on Form 10-Q
filed August 14, 2001 for the quarterly period ended June 30, 2001 (File
No. 0-14879)                             
|     
|10d-f | 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)                   
|     
|10g   | Filed as exhibit 4 to the Registrants Registration Statement on Form S-8
filed August 11, 1995 (File No. 33-95724)                                                                         
|     
|10h   | 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)  
|     
|10i   | Filed as exhibit 4.4 to the Registrants Registration Statement on Form
S-8 filed July 26, 1991 (File No. 33-41924)                                                                         
|     
|10j   | 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)               
|     
|10k   | 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)               
|     
|10l   | Filed as an appendix to the Registrants Definitive Proxy Statement on
Schedule 14-A filed April 20, 1998 (File No. 0-17901)                                                                
|     
|10m   | 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)                                        
|     
|10n   | Filed as exhibits 10.1 to 10.2, respectively, to the Registrants
Quarterly Report on Form 10-Q filed November 10, 2000 for the quarterly
period ended September 30, 2000 (File No. 0-14879)

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|    |  |                                                                                                                                       
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------
|10o |  | Filed as exhibit 10 to the Registrants Registration Statement on Form
S-8 filed September 27, 2001 (File No. 333-70372)              
|    |  |                                                                                                                                       
|10p |  | Filed as exhibit 10 to the Registrants Registration Statement on Form
S-8 filed September 27, 2001 (File No. 333-70362)              
|    |  |                                                                                                                                       
|10q |  | Filed as exhibits 99.2 and 99.3, respectively, to the Registrants
Current Report on Form 8-K filed July 24, 3003 (File No. 001-14879)

All of such previously filed documents are hereby incorporated herein by
reference in accordance with Item 601 of Regulation S-K.

(b) Reports on Form 8-K:



|b(i) |  | The Registrant filed the following reports on Form 8-K dated October
4, 2002 during the quarter ended December 31, 2002:
|---- |  | ------------------------------------------------------------------------------------------------------------------------



| |                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On October 3, 2002, the Registrant announced stockholder approval of
its plan of dissolution and stockholder liquidity and of the sale of
the retail banking assets of Bay View Bank, N.A., to U.S. Bank,
National Association.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company also announced that holders of the Capital Securities of Bay
View Capital I approved a waiver of those provisions of the legal
instruments governing the Capital Securities and the Companys 9.76%
Junior Subordinated Deferrable Interest Debentures (the Junior
Debentures) that would, absent the waiver, prevent the Company from
disposing of all of its assets pursuant to its plan of dissolution and
stockholder liquidity. Capital Securities holders also approved the
amendment of certain provisions of the legal instruments governing the
Capital Securities and the Junior Debentures that would allow early
redemption of the Capital Securities at the option of each holder of the
Capital Securities.



|b(ii) |  | The Registrant filed the following reports on Form 8-K dated
November 1, 2002 during the quarter ended December 31, 2002:
|----- |  | -------------------------------------------------------------------------------------------------------------------------



| |                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On November 1, 2002, the Registrant announced the close of the sale
transaction with U.S. Bank National Association. In connection with
the sale, certain management and board of director changes were also
announced.

124



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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: March 18, 2003 |  |  |  | BAY VIEW CAPITAL CORPORATION
By:/s/ John Okubo                                               
|                     |  |  |  |                                                                                              
|                     |  |  |  | John Okubo
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
|                     |  |  |  |                                                                                              
|                     |  |  |  | By:/s/ Jeffrey O. Butcher                                                                    
|                     |  |  |  |                                                                                              
|                     |  |  |  | Jeffrey O.
Butcher
Senior Vice President and
Controller
(Principal Accounting Officer)       

125



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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. Cooper
|                                                               |                         |                                                                                                                      |     |                      
|Robert B. Goldstein
Chairman of the Board
Date: March 18, 2003 |                         | Charles G. Cooper, Director
President and Chief Executive Officer
(Principal Executive Officer)
Date: March 18, 2003
|                                                               |                         |                                                                                                                      |     |                      
|By:                                                            | /s/ Roger K. Easley     |                                                                                                                      | By: | /s/ Thomas M. Foster 
|                                                               |                         |                                                                                                                      |     |                      
|Roger K. Easley, DirectorDate: March 18, 2003                  |                         | Thomas M. Foster, DirectorDate: March 18, 2003                                                                      
|                                                               |                         |                                                                                                                      |     |                      
|By:                                                            | /s/ Joel E. Hyman       |                                                                                                                      | By: | /s/ John W. Rose     
|                                                               |                         |                                                                                                                      |     |                      
|Joel E. Hyman, DirectorDate: March 18, 2003                    |                         | John W. Rose, Director
Date: March 18, 2003                                                                         

126



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##### Table of Contents






CERTIFICATIONS

I, Charles G. Cooper, certify that:



|1.  I have reviewed this annual report on Form 10-K of Bay View Capital
Corporation;                                                                                                                                                                                                                                                                                                      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                          
|2.  Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;                                                              
|                                                                                                                                                                                                                                                                                                                                                                                          
|3.  Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                          
|4.  The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                          
|a)  designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                          
|b)  evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the Evaluation Date); and                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                          
|c)  presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                          
|5.  The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                          
|a)  all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                          
|b)  any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                          
|6.  The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|      |  |                |  |                                                        
|----- |  | -------------- |  | -------------------------------------------------------
|Date: |  | March 18, 2003 |  |                                                        
|      |  |                |  | /s/ Charles G.
Cooper                                  
|      |  |                |  | Charles G.
Cooper
President and
Chief Executive Officer

127



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##### Table of Contents



CERTIFICATIONS

I, John Okubo, certify that:



|1.  I have reviewed this annual report on Form 10-K of Bay View Capital
Corporation;                                                                                                                                                                                                                                                                                                      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                          
|2.  Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;                                                              
|                                                                                                                                                                                                                                                                                                                                                                                          
|3.  Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                          
|4.  The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                          
|a)  designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                          
|b)  evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the Evaluation Date); and                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                          
|c)  presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                          
|5.  The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                          
|a)  all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                          
|b)  any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                          
|6.  The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|      |  |                |  |                                                                
|----- |  | -------------- |  | ---------------------------------------------------------------
|Date: |  | March 18, 2003 |  |                                                                
|      |  |                |  | /s/ John Okubo                                                 
|      |  |                |  | John Okubo
Executive Vice President and
Chief Financial Officer

128