<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC  20549


                                   FORM 10-Q


               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended June 30, 1999

                       Commission File Number: 000-23283

                                [LOGO OF FMAC]

                     Franchise Mortgage Acceptance Company
            (Exact name of registrant as specified in its charter)


           DELAWARE                                       95-4649104
-----------------------------------         ------------------------------------
(State or other jurisdiction of             (IRS Employer Identification Number)
incorporation or organization)


1888 Century Park East, Third Floor
Los Angeles, California                                      90067
(Address of principal executive offices)                   (Zip Code)

      Registrant's telephone number, including area code:  (310) 229-2600


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(b) 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 filing
requirements for the past 90 days.
Yes   X     No
    -----      -----

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest possible date:


     Class                                 Shares Outstanding at July 31, 1999
     ------------------------------        -----------------------------------

     Common Stock, $0.001 par value        28,781,552
<PAGE>

                     FRANCHISE MORTGAGE ACCEPTANCE COMPANY

                                   FORM 10-Q

                               TABLE OF CONTENTS
                               -----------------

<TABLE>
<CAPTION>
                         Part I - Financial Information                                                         Page
                         ------------------------------                                                         ----

Item 1      Consolidated Financial Statements
            ---------------------------------
<S>         <C>                                                                                                 <C>
               Consolidated Balance Sheets - June 30, 1999 and December 31, 1998...........................       3

               Consolidated Statements of Operations and Comprehensive Loss - Three months ended June 30,         4
               1999 and 1998 and six months ended June 30, 1999 and 1998...................................

               Consolidated Statements of Cash Flows - Six months ended June 30, 1999 and 1998.............       5

               Notes to Consolidated Financial Statements..................................................       6

Item 2      Management's Discussion and Analysis of Financial Condition and Results of Operations..........      12
            -------------------------------------------------------------------------------------
Item 3      Quantitative and Qualitative Disclosures About Market Risk..................................         18
            ----------------------------------------------------------

                                            Part II - Other Information
                                            ---------------------------

Item 1      Legal Proceedings...........................................................................         20
            -----------------

Items 2-6   Not Applicable
            --------------

            Signatures..................................................................................         21
            ----------
</TABLE>


Forward-Looking Statements

     Certain statements in this Form 10-Q constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. These forward-looking statements were based on various
factors and were derived utilizing numerous important assumptions and other
important factors that could cause actual results to differ materially from
those in the forward-looking statements, including, but are not limited to:
regional and national economic conditions, substantial changes in levels of
market interest rates, credit and other risks of lending and investment
activities and competitive and regulatory factors, competition in the Company's
existing and potential future lines of business, the ability of the Company to
complete, on a timely basis, the necessary actions with respect to Year 2000
computer issues and other factors. Other factors and assumptions not identified
above were also involved in the derivation of these forward-looking statements,
and the failure of such other assumptions to be realized as well as other
factors may also cause actual results to materially differ from those projected.
The Company does not undertake, and specifically disclaims any obligation, to
update any forward-looking statements to reflect occurrences or unanticipated
events or circumstances after the date of such statements.

                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

                   ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

                     FRANCHISE MORTGAGE ACCEPTANCE COMPANY

                          CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)
                       (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                           June 30,    December 31,
                                                                             1999         1998
                                                                             ----         ----
<S>                                                                      <C>           <C>
                                    ASSETS
Cash and cash equivalents.............................................     $ 21,496      $ 33,425
Interest bearing deposits - restricted................................        6,140         5,757
Securities available for sale.........................................       14,388        16,818
Loans and leases held for sale........................................      352,496       325,727
Loans and leases held for investment..................................      138,776       162,928
Retained interest in loan securitizations.............................       28,938        29,952
Servicing rights......................................................       34,132        29,905
Premises and equipment, net...........................................        6,632         6,854
Goodwill..............................................................       48,735        37,353
Accrued interest receivable...........................................        1,942         2,587
Other assets..........................................................       29,539        25,008
                                                                           --------      --------
     Total assets.....................................................     $683,214      $676,314
                                                                           ========      ========

                     LIABILITIES AND STOCKHOLDERS' EQUITY
Borrowings............................................................     $496,035      $483,763
Current income taxes payable..........................................        1,576         1,661
Deferred income taxes.................................................       16,402        18,045
Other liabilities.....................................................       24,451        26,140
                                                                           --------      --------
     Total liabilities................................................      538,464       529,609
                                                                           --------      --------

Commitments and contingencies

Minority interest in subsidiary.......................................         (897)           (8)

Stockholders' equity:
  Preferred stock, $.001 par value; 10,000,000 shares authorized; none
  issued and outstanding..............................................           --            --
  Common stock, $.001 par value; 100,000,000 shares authorized;
  28,781,552 shares issued and outstanding at June 30, 1999 and
  28,715,625 shares issued and outstanding at December 31, 1998.......           29            29
  Additional paid-in capital..........................................      126,193       118,330
  Employee stock awards...............................................       (7,313)           --
  Accumulated other comprehensive loss:
    Unrealized loss on securities available for sale, net of tax......       (1,500)           --
  Retained earnings...................................................       28,238        28,354
                                                                           --------      --------
     Total stockholders' equity.......................................      145,647       146,713
                                                                           --------      --------
     Total liabilities and stockholders' equity.......................     $683,214      $676,314
                                                                           ========      ========
</TABLE>

         See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                     FRANCHISE MORTGAGE ACCEPTANCE COMPANY

         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                                  (Unaudited)
                (In thousands, except income (loss) per share)

<TABLE>
<CAPTION>
                                                                     Three Months Ended              Six Months Ended
                                                                           June 30,                      June 30,
                                                                           --------                      --------
                                                                    1999            1998           1999            1998
                                                                   -------         -------        -------         -------
<S>                                                                <C>             <C>            <C>             <C>
Revenue:
 Gain on sale of loans and leases...........................       $ 7,158         $22,917        $18,368         $39,238
                                                                   -------         -------        -------         -------
 Interest income............................................        10,269          14,958         19,255          25,525
 Interest expense...........................................         6,131          11,081         12,468          17,446
                                                                   -------         -------        -------         -------
    Net interest income.....................................         4,138           3,877          6,787           8,079
                                                                   -------         -------        -------         -------
 Loan servicing income......................................         5,286           4,614         11,798           5,868
 Trading income.............................................         1,822             --           3,463             --
 Insurance services income..................................           193             --           1,320             --
 Other income (loss)........................................        (1,711)            201         (1,520)            579
                                                                   -------         -------        -------         -------
    Total revenue...........................................        16,886          31,609         40,216          53,764
                                                                   -------         -------        -------         -------
Expense:
 Personnel..................................................         8,342           8,016         16,797          13,181
 Professional services......................................         1,353             929          1,845           1,525
 Travel.  ..................................................           886             931          1,730           1,498
 Business promotion.........................................         1,006           1,151          1,851           1,808
 Provision for losses.......................................         9,947             633         10,209             633
 Occupancy..................................................           933             663          1,756           1,018
 Goodwill amortization......................................           935             702          1,637             817
 General and administrative.................................         3,158           1,509          5,473           3,772
                                                                   -------         -------        -------         -------
    Total expense...........................................        26,560          14,534         41,298          24,252
                                                                   -------         -------        -------         -------
Income (loss) before income taxes and minority interest in
 subsidiary.................................................        (9,674)         17,075         (1,082)         29,512
Minority interest in subsidiary.............................          (956)            110           (889)            110
Income taxes (tax benefit)..................................        (3,487)          7,126            (77)         12,349
                                                                   -------         -------        -------         -------
     Net income (loss)......................................       $(5,231)        $ 9,839        $  (116)        $17,053
                                                                   =======         =======        =======         =======

Basic income (loss) per share...............................       $ (0.18)        $  0.34        $  0.00         $  0.59
                                                                   =======         =======        =======         =======
Weighted average shares outstanding.........................        28,780          28,716         28,757          28,716
                                                                   =======         =======        =======         =======

Diluted income (loss) per share.............................       $ (0.18)        $  0.34        $  0.00         $  0.59
                                                                   =======         =======        =======         =======
Weighted average shares outstanding.........................        28,780          29,100         28,757          28,762
                                                                   =======         =======        =======         =======

Net income (loss)...........................................       $(5,231)        $ 9,839        $  (116)        $17,053
Other comprehensive loss:
 Unrealized loss on securities available for sale, net of
  tax.......................................................        (1,500)            --          (1,500)            --
                                                                   -------         -------        -------         -------
Comprehensive loss..........................................       $(6,731)        $ 9,839        $(1,616)        $17,053
                                                                   =======         =======        =======         =======
</TABLE>

         See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

                     FRANCHISE MORTGAGE ACCEPTANCE COMPANY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
                                (In thousands)

<TABLE>
<CAPTION>
                                                                                              Six Months Ended
                                                                                                  June 30,
                                                                                                  --------
                                                                                            1999             1998
                                                                                            ----             ----
<S>                                                                                      <C>              <C>
Cash flows from operating activities:
  Net income (loss)..................................................................    $    (116)       $  17,053
  Adjustments to reconcile net income to net cash used in operating activities:
    Depreciation, amortization and discount accretion................................        2,589            2,059
    (Increase) decrease in accrued interest receivable...............................          645           (6,590)
    Increase (decrease) in deferred income taxes.....................................         (643)          12,394
    Decrease in current income taxes payable.........................................          (85)              --
    Increase (decrease) in other liabilities and accrued interest payable............       (7,208)          14,577
    (Increase) decrease in other assets..............................................       (4,531)           5,571
    Increase in valuation allowance for retained interest in loan securitizations....          458              --
    Increase in originated mortgage servicing rights.................................       (6,127)             --
    Loan and lease operations
      Loans and leases originated....................................................     (908,872)        (879,266)
      Loans sold to affiliates.......................................................      487,907          157,348
      Provision for loan and lease losses, net of write-offs.........................        9,122              910
      Principal reductions...........................................................       79,370           41,797
      Cash proceeds from loan sales and securitizations..............................      329,607          448,972
                                                                                         ---------        ---------
  Net cash used in operating activities..............................................      (17,884)        (185,175)
                                                                                         ---------        ---------

  Cash flows from investing activities:
    Purchases of premises and equipment..............................................       (1,100)          (2,689)
    Increase in interest bearing deposits............................................         (383)            (218)
    Sale of securities available for sale............................................          --            22,870
    Proceeds from securities available for sale......................................        1,094              398
    Increase in retained interests in securitizations................................          --            (3,935)
    Proceeds from retained interests in securitizations..............................        1,951              444
    Purchase of servicing rights.....................................................          --            (1,180)
    Purchase of Bankers Mutual.......................................................          --           (63,028)
    Increase in Goodwill due to Bankers Mutual earn-out..............................       (7,500)             --
    Increase (decrease) in minority interest in subsidiary...........................         (889)             110
                                                                                         ---------        ---------
  Net cash used in investing activities..............................................       (6,827)         (47,228)
                                                                                         ---------        ---------

  Cash flows from financing activities:
    Proceeds from issuance of common stock...........................................          510              --
    Increase in borrowings...........................................................       12,272          231,161
                                                                                         ---------        ---------
  Net cash provided by financing activities..........................................       12,782          231,161
                                                                                         ---------        ---------

Net change in cash...................................................................      (11,929)          (1,242)
Cash at beginning of period..........................................................       33,425            7,335
                                                                                         ---------        ---------
Cash at end of period................................................................    $  21,496        $   6,093
                                                                                         =========        =========
</TABLE>

          See accompanying notes to consolidated financial statements

                                       5
<PAGE>

                     FRANCHISE MORTGAGE ACCEPTANCE COMPANY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

(1) Organization

  Unless the context indicates otherwise, all references hereinafter to the
Company refer to Franchise Mortgage Acceptance Company, along with all its
predecessor entities, including Franchise Mortgage Acceptance Company LLC
("Franchise Mortgage LLC").

  On November 18, 1997, the Company completed its initial public offering (the
"Offering") pursuant to which 10,000,000 shares of common stock were sold to the
public at a price of $18.00 per share. On November 28, 1997, and December 3,
1997, 890,625 and 609,378 additional shares of common stock were sold to the
public, respectively, at the sale price of $18.00 per share. Net proceeds to the
Company after offering costs of $1.7 million were $112.6 million.

  Immediately prior to the Offering, Franchise Mortgage LLC merged into
Franchise Mortgage Acceptance Company, a Delaware corporation which was
incorporated in August 1997 for the purpose of succeeding to the business of
Franchise Mortgage LLC. As part of the Offering, Imperial Credit Industries,
Inc. ("ICII") and FLRT, Inc. collectively sold to the public 4,062,500 shares of
Company common stock at $18.00 per share. Subsequent to the sales of common
stock described above, ICII owned 38.4% and FLRT, Inc. owned 21.6% of the
Company's outstanding shares of common stock. On February 17, 1999, the Company
granted 1,189,500 shares of restricted common stock to certain employees, which
vest over the next eight years and fully vest upon the effective date of the
merger with Bay View Capital Corporation ("Bay View"). On February 24, 1999, the
Company issued an additional 44,932 shares of common stock to former employees
of the Company. On April 7, 1999, the Company issued 20,995 shares of common
stock to certain employees.

  On March 11, 1999, Bay View and the Company executed an Agreement and Plan of
Merger and Reorganization ("Merger Agreement") providing for the merger of the
Company and Bay View. Under the terms of the Merger Agreement, Bay View will
acquire all of the Company's common stock for consideration valued at
approximately $309 million. Each share of the Company's common stock will be
exchanged for, at the election of its holder, either $10.25 in cash or 0.5125
shares of Bay View's common stock. The Company's stockholder elections are
subject to the aggregate number of shares of the Company's common stock to be
exchanged for Bay View's common stock being equal to 60% of the number of shares
of the Company's common stock outstanding immediately prior to closing the
transaction and no Company stockholder owning more than 9.99% of Bay View's
common stock after the merger, other than any former Company stockholder who had
been expressly approved by the appropriate banking regulatory authorities to own
more than 9.99% of Bay View's common stock. The Merger Agreement also provides
for additional payments of up to $30 million in connection with the earn-out
provision of the Company's April 1998 purchase of Bankers Mutual, $7.5 million
of which was paid by the Company during the second quarter of 1999. The Company
and Bay View are currently in discussions regarding a possible restructuring of
the transaction to increase the primary equity component of the consideration
price. During the second quarter of 1999, Bay View received regulatory approval
for the merger from the Federal Reserve Bank and on August 18, 1999, Bay View
received approval by the Office of the Comptroller of the Currency. The
acquisition, which is subject to approval by both the Company's and Bay View's
stockholders, is expected to close by the end of the third quarter or the
beginning of the fourth quarter of 1999.

  On April 30, 1999, the Company sold certain of its assets relating to its
Equipment Finance Group to Federated Capital Corporation ("Federated"). As a
condition of this agreement, Federated will service the Company's current
equipment finance transactions and act as sub-servicer on the Company's 1998-1
securitization. The Company will still offer equipment loans to its borrowers,
however, it will do so through its other operating units.

(2) Basis of Presentation

  The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. The consolidated financial statements
include the financial statements of Franchise Mortgage Acceptance

                                       6
<PAGE>

Company and FMAC Golf Finance Group LLC ("Golf JV"). All significant
intercompany balances and transactions have been eliminated in consolidation. In
preparing the consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the dates of the balance sheet and revenues and expenses for
the periods presented. Significant balance sheet accounts which could be
materially affected by such estimates include securities available for sale,
loans and leases held for sale, loans and leases held for investment, retained
interest in loan securitizations and servicing rights. Actual results could
differ significantly from those estimates. Certain reclassifications were made
to the prior year balances to conform with the current year presentation.

(3) Supplemental Disclosure of Cash Flow Information

     Cash paid for interest for the six months ended June 30, 1999 and 1998 was
$16.3 million and $12.8 million, respectively. Cash paid for taxes for the six
months ended June 30, 1999 and 1998 was $1.7 million and $0.7 million,
respectively. For the six months ended June 30, 1999, the Company recorded $1.5
million of unrealized losses on securities available for sale, net of tax.

(4) Securities Available for Sale

     Securities available for sale consist of asset-backed securities issued by
the Company. For the six months ended June 30, 1999 and the year ended December
31, 1998, activity in securities available for sale was as follows:

<TABLE>
<CAPTION>
(In thousands)                                    For the Six Months Ended June 30, 1999
                                                  --------------------------------------
                       Beginning     Face                   Cash      Discount                 Unrealized    Ending
                        Balance     Amount    Discount    Received    Accretion      Sold         Loss      Balance
                       ---------   --------   ---------   ---------   ---------   ----------                --------
<S>                    <C>         <C>        <C>         <C>         <C>         <C>          <C>          <C>
1998-CE(1)..........    $10,388     $    -     $      -    $  (567)     $  815       $  -       $(2,000)     $ 8,636
1998-CF(1)..........      3,547          -            -       (243)        349          -          (500)       3,153
1998-1(2)...........      2,883          -            -       (284)          -          -             -        2,599
                        -------     ------     --------    -------      ------       ----       -------      -------
Totals..............    $16,818     $    -     $      -    $(1,094)     $1,164       $  -       $(2,500)     $14,388
                        =======     ======     ========    =======      ======       ====       =======      =======

<CAPTION>
                                                   For the Year Ended December 31, 1998
                                                   ------------------------------------
                       Beginning     Face                   Cash      Discount                 Unrealized    Ending
                        Balance     Amount    Discount    Received    Accretion      Sold         Loss      Balance
                       ---------   --------   ---------   ---------   ---------   ----------                --------
<S>                    <C>         <C>        <C>         <C>         <C>         <C>          <C>          <C>
1997-B(3)...........    $22,870     $     -    $     -      $   -     $       -    $(22,870)   $        -    $     -
1998-CE(1)..........          -      13,090     (2,702)         -             -           -             -     10,388
1998-CF(1)..........          -       5,610     (2,063)         -             -           -             -      3,547
1998-1(2)...........          -       3,301       (283)      (135)            -           -             -      2,883
                        -------     -------    -------      -----     ---------    --------    ----------    -------
Totals..............    $22,870     $22,001    $(5,048)     $(135)    $       -    $(22,870)   $        -    $16,818
                        =======     =======    =======      =====     =========    ========    ==========    =======
</TABLE>
_____
(1)  1998-CE and 1998-CF represent the Class E and F certificates that were
     purchased by the Company as part of the 1998-C securitization.
(2)  1998-1 is the Class C certificate that was purchased by the Company as part
     of the 1998-1 equipment finance securitization.
(3)  1997-B is an interest-only strip that was purchased from CS First Boston in
     December 1997 and was subsequently sold in March 1998.

(5) Loans and Leases Held for Sale

     The Company offers permanent commercial loans, multi-family and equipment
loans and leases to those sectors in which it operates. Substantially all of the
Company's permanent commercial loans are self-amortizing, long-term fixed or
adjustable rate loans provided for purposes other than development and
construction of business units. Multi-family loans are generally fixed rate
loans amortized over 30 years. Equipment loans are fixed rate products tied to
U.S. Treasury rates that generally have a maximum term of up to 10 years. The
Company's equipment leases generally range in term from 5 to 7 years and are
substantially made up of "direct financing" leases. Loans and leases held for
sale were pledged as collateral for the borrowings of the Company.

                                       7
<PAGE>

     At June 30, 1999 and December 31, 1998, loans and leases held for sale
consisted of the following:

<TABLE>
<CAPTION>
(In thousands)                                                                                            June 30,      December 31,
                                                                                                            1999           1998
                                                                                                            ----           ----
  <S>                                                                                                     <C>             <C>
  Permanent commercial loans(1).......................................................................    $235,409       $149,222
  Multi-family loans..................................................................................      60,096        119,599
  Loans in process....................................................................................       3,496          7,410
  Equipment loans and leases..........................................................................      74,832         63,671
  Unearned lease income...............................................................................     (20,256)       (17,834)
  Allowance for loan and lease losses.................................................................        (699)          (445)
  Net deferred loan costs.............................................................................           1          2,198
  Margin and deferred net (gains) losses on futures contracts used to hedge loans and leases held for
  sale(2).............................................................................................        (383)         1,906
                                                                                                          --------       --------
     Loans and leases held for sale...................................................................    $352,496       $325,727
                                                                                                          ========       ========
</TABLE>
-------------
(1)  Includes $80.2 million in loans repurchased from Bay View, which were
     subsequently sold back to Bay View on June 29, 1999.
(2)  The deferred hedge (gain) loss is related to loans financed as part of the
     Golf JV.

     Activity in valuation allowances for loans and leases held for sale for the
six months ended June 30, 1999 and the year ended December 31, 1998 was as
follows:

<TABLE>
<CAPTION>
(In thousands)                                                       June 30,            December 31,
                                                                       1999                 1998
                                                                       ----                 ----
<S>                                                                  <C>                 <C>
Balance, beginning of period.................................          $ 445              $   998
Provisions...................................................            254                1,699
Charge-offs..................................................              -                    -
Transfer of allowance to loans held for investment...........              -               (2,252)
                                                                       -----              -------
Balance, end of period.......................................          $ 699              $   445
                                                                       =====              =======
</TABLE>

(6)  Loans and Leases Held for Investment

     The Company offers short-term commercial loans (DEVCO and Seasoning loans)
to those sectors in which it operates. DEVCO loans are short-term, interest-only
loans offered to fund the development and construction of new business units.
Seasoning loans are short-term, interest-only loans offered to fund the
acquisition of new business units or the conversion of existing business units
into a different franchise concept. The Company's permanent commercial loans,
multi-family loans, and equipment loans and leases that are classified as held
for investment are classified as such because they are not immediately salable
for reasons such as unique loan terms or delinquency status.

     At June 30, 1999 and December 31, 1998, loans and leases held for
investment consisted of the following:

<TABLE>
<CAPTION>
(In thousands)                                                                                  June 30,      December 31,
                                                                                                  1999            1998
                                                                                                  ----            ----
  <S>                                                                                           <C>           <C>
  Permanent commercial loans................................................................    $ 47,842        $  9,639
  Short-term commercial loans...............................................................      99,754         130,357
  Multi-family loans........................................................................           -          25,233
  Equipment loans and leases................................................................       3,088             598
  Allowance for loan and lease losses.......................................................     (11,856)         (2,988)
  Net deferred loan (fees) costs............................................................         (52)             89
                                                                                                --------        --------
     Loans and leases held for sale.........................................................    $138,776        $162,928
                                                                                                ========        ========
</TABLE>

     Non-accrual loans, including impaired loans, totaled $13.7 million and
$17.1 million at June 30, 1999 and December 31, 1998, respectively.

                                       8
<PAGE>

     Activity in valuation allowances for loans and leases held for investment
for the six months ended June 30, 1999 and the year ended December 31, 1998 was
as follows:

<TABLE>
<CAPTION>
(In thousands)                                                       June 30,          December 31,
                                                                      1999                1998
                                                                      ----                ----
<S>                                                                  <C>               <C>
Balance, beginning of period.................................        $ 2,988             $    -
Provisions(1)................................................          9,259                736
Charge-offs..................................................           (391)                 -
Transfer of allowance from loans held for sale...............              -              2,252
                                                                     -------             ------
Balance, end of period.......................................        $11,856             $2,988
                                                                     =======             ======
</TABLE>
----------
(1)  Does not include provisions for recourse liabilities for sold loans.

(7)  Retained Interest in Loan Securitizations

     Activity in retained interest in loan securitizations was as follows for
the six months ended June 30, 1999 and the year ended December 31, 1998:

<TABLE>
<CAPTION>
(In thousands)                                For the Six Months Ended June 30, 1999
                           ---------------------------------------------------------------------------
                           Beginning        Bond        Cash       Discount      Valuation     Ending
                            Balance        Amount     Received    Accretion(2)   Allowance     Balance
                           ----------      ------     --------    ------------   ---------     -------
<S>                        <C>             <C>        <C>         <C>            <C>           <C>
1994-A..................     $ 1,281       $    -      $  (200)      $   98          $   -     $ 1,179
1995-A..................         754            -            -           53              -         807
1996-A..................       6,196            -           (7)           -              -       6,189
1996-B..................         331            -            -            -              -         331
1997-A..................         379            -            -           20              -         399
1997-B..................         338            -            -           17              -         355
1997-C..................         295            -            -           15              -         310
1998-A..................         305            -            -           16              -         321
1998-B..................       3,628            -         (463)         351              -       3,516
1998-C..................       5,806            -         (560)         581              -       5,827
1998-1(1)...............       2,423            -         (721)           -              -       1,702
1998-D..................       9,666            -            -          244              -       9,910
Valuation Allowance.....      (1,450)           -            -            -           (458)     (1,908)
                             -------       -------     -------       ------          -----     -------
  Totals................     $29,952       $    -      $(1,951)      $1,395          $(458)    $28,938
                             =======       =======     =======       ======          =====     =======
<CAPTION>
                                               For the Year Ended December 31, 1998
                           ----------------------------------------------------------------------------
                           Beginning         Bond        Cash        Discount     Valuation     Ending
                            Balance         Amount     Received    Accretion(2)   Allowance     Balance
                           ---------        ------     --------    -----------    ---------     -------
<S>                        <C>              <C>        <C>         <C>            <C>           <C>
1994-A..................     $ 1,599        $    -     $   (541)      $  223        $     -     $ 1,281
1995-A..................         876             -         (241)         119              -         754
1996-A..................       6,626             -         (430)           -              -       6,196
1996-B..................         331             -            -            -              -         331
1997-A..................         344             -            -           35              -         379
1997-B..................         306             -            -           32              -         338
1997-C..................         266             -            -           29              -         295
1997-1(1)...............      11,704             -      (11,704)           -              -           -
1998-A..................           -           283            -           22              -         305
1998-B..................           -         3,652         (386)         362              -       3,628
1998-C..................           -         5,796         (280)         290              -       5,806
1998-1(1)...............           -         2,423            -            -              -       2,423
1998-D..................           -         9,666            -            -              -       9,666
Valuation Allowance.....        (400)            -            -            -         (1,050)     (1,450)
                             -------       -------     --------       ------        -------     -------
  Totals................     $21,652       $21,820     $(13,582)      $1,112        $(1,050)    $29,952
                             =======       =======     ========       ======        =======     =======
</TABLE>
----------
(1)  Equipment Finance transaction.
(2)  The weighted average discount rate on retained interests was 19.58% and
     18.0% at June 30, 1999 and December 31, 1998, respectively.

                                       9
<PAGE>

(8)  Servicing Rights

     Activity in servicing rights for the six months ended June 30, 1999 and the
year ended December 31, 1998 was as follows:

<TABLE>
<CAPTION>
(In thousands)                                                            June 30,         December 31,
                                                                            1999              1998
                                                                            ----              ----
<S>                                                                       <C>              <C>
Balance, beginning of period.....................................         $29,905           $ 2,213
Originated.......................................................           6,127             8,190
Purchased........................................................               -                 6
Amortization.....................................................          (1,900)           (2,291)
Acquired as a result of Bankers Mutual acquisition...............               -            21,787
                                                                          -------           -------
Balance, end of period...........................................         $34,132           $29,905
                                                                          =======           =======
</TABLE>


                                       10
<PAGE>

(9)  Borrowings

     Borrowings consisted of the following at June 30, 1999 and December 31,
1998:

<TABLE>
<CAPTION>
(dollars in thousands)
                                                                                                      June 30, 1999
                                                                                           -------------------------------------
                                               Expiration                                  Interest     Commitment    Principal
                  Lender                          Date               Index                  Rate(8)       Amount     Outstanding
                  ------                          ----               -----                 ---------    ----------   -----------
<S>                                           <C>          <C>                             <C>          <C>          <C>
Credit Suisse First Boston(1)(2)...........     12/31/99   One-month LIBOR                  6.54% to     $300,000      $175,047
                                                           plus 130 to 150 basis points        6.74%

Morgan Stanley(1)..........................     12/30/99   One-month LIBOR                  6.74% to      300,000        24,136
                                                           plus 150 to 175 basis points        6.99%

Banco Santander(1).........................     08/31/99   One-month LIBOR                     6.99%       50,000        24,426
                                                           plus 175 basis points

Sanwa Bank(1)..............................     08/31/99   One-month LIBOR                     6.84%       25,000        22,760
                                                           plus 160 basis points

Goldman Sachs Mortgage Company(1)(3).......     05/10/99   One-month LIBOR                     6.24%      100,000        44,842
                                                           plus 100 basis points

Residential Funding Corporation(4).........     08/31/99   One-month LIBOR                     6.24%      100,000        56,596
                                                           plus 100 basis points

Bank of America(1)(5)......................     08/30/99   Fixed rate                          1.00%       35,000         3,430


Residential Funding Corporation(6).........     05/31/04   One-month LIBOR                     7.49%       50,000        31,432
                                                           plus 225 basis points

Other borrowings(7)........................                                                       -             -       113,366
                                                                                                         --------      --------
  Totals...................................                                                              $960,000      $496,035
                                                                                                         ========      ========


(dollars in thousands)
                                                         December 31, 1998
                                                -------------------------------------
                                                Interest     Commitment    Principal
                  Lender                        Rate(8)        Amount     Outstanding
                  ------                        ---------    ----------   -----------
<S>                                             <C>          <C>          <C>
Credit Suisse First Boston(1)(2)...........      6.38% to    $  300,000      $122,356
                                                    6.58%

Morgan Stanley(1)..........................      6.58% to       300,000             -
                                                    6.83%

Banco Santander(1).........................         6.83%        50,000        34,669


Sanwa Bank(1)..............................         6.68%        25,000        14,369


Goldman Sachs Mortgage Company(1)(3).......         6.08%       100,000        46,989


Residential Funding Corporation(4).........         6.08%       200,000       124,763


Bank of America(1)(5)......................         1.00%        35,000        18,776


Residential Funding Corporation(6).........         7.33%        50,000        31,432


Other borrowings(7)........................             -             -        90,409
                                                             ----------      --------
  Totals...................................                  $1,060,000      $483,763
                                                             ==========      ========
</TABLE>
-----------
(1)  The above borrowings are collateralized by franchise loans and leases held
     for sale and investment.
(2)  The agreement with Credit Suisse First Boston ("CSFB") requires the Company
     to obtain a capital infusion of $100 million by May 31, 1999. The Company
     is currently in the process of obtaining a temporary waiver of this
     covenant from CSFB until the Bay View merger is completed.
(3)  The warehouse line of credit with Goldman Sachs Mortgage Company is used to
     fund loans through the Golf JV. The Company is currently in the process of
     dissolving the Golf JV at which time this warehouse line will be
     terminated.
(4)  The Residential Funding Corporation ("RFC") line of credit was temporarily
     increased from $100 million to $200 million until January 31,1999.
(5)  The Bank of America line of credit has a fixed interest rate of 1.00% when
     the Company maintains minimum deposit requirements.
(6)  The RFC line of credit is collateralized by the Company's loan servicing
     portfolio. As of May 31, 1999, this line of credit has converted to a term
     loan requiring principal payments of approximately $1.6 million payable
     quarterly until May 31, 2004.
(7)  As of June 30, 1999, other borrowings includes $4.2 million of sold loans
     that have been accounted for as a financing, $47.2 million of loans that
     have been financed through FMAC Star Fund, LLP, a $7.0 million repurchase
     agreement with Deutsche Bank for which the 1998-CE and 1998-CF certificates
     were pledged as collateral, $54.2 million related to a participation
     agreement with Bay View Bank, and a $0.8 million loan with Far East Bank.
     As of December 31, 1998, other borrowings includes $55.3 million of sold
     loans that have been accounted for as a financing, $29.0 million of loans
     that have been financed through FMAC Star Fund, LLP, and a $6.1 million
     repurchase agreement with Deutsche Bank for which the 1998-CE and 1998-CF
     certificates were pledged as collateral.
(8)  The weighted average interest rate on borrowings was 6.59% and 6.96% at
     June 30, 1999 and December 31, 1998, respectively.

                                       11
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

  The Company is a commercial finance company engaged in the business of
originating and servicing loans and equipment leases to small businesses, with a
primary focus on established national and regional franchise concepts and such
other branded concepts such as service stations or convenience stores. The
Company also engages in the business of originating and servicing multi-family
income producing property loans. Additionally, the Company's insurance services
subsidiary offers insurance products to businesses nationwide.

  Unless the context indicates otherwise, all references hereinafter to the
Company refer to Franchise Mortgage Acceptance Company, along with all its
predecessor entities, including Franchise Mortgage Acceptance Company LLC.

  On March 11, 1999, Bay View Capital Corporation ("Bay View") and the Company
executed an Agreement and Plan of Merger and Reorganization ("Merger Agreement")
providing for the merger of the Company and Bay View. Under the terms of the
Merger Agreement, Bay View will acquire all of the Company's common stock for
consideration valued at approximately $309 million. Each share of the Company's
common stock will be exchanged for, at the election of its holder, either $10.25
in cash or 0.5125 shares of Bay View's common stock. The Company's stockholder
elections are subject to the aggregate number of shares of the Company's common
stock to be exchanged for Bay View's common stock being equal to 60% of the
number of shares of the Company's common stock outstanding immediately prior to
closing the transaction and no Company stockholder owning more than 9.99% of Bay
View's common stock after the merger, other than any former Company stockholder
who had been expressly approved by the appropriate banking regulatory
authorities to own more than 9.99% of Bay View's common stock. The Merger
Agreement also provides for additional payments of up to $30 million in
connection with the earn-out provision of the Company's April 1998 purchase of
Bankers Mutual, $7.5 million of which was paid by the Company during the second
quarter of 1999. The Company and Bay View are currently in discussions regarding
a possible restructuring of the transaction to increase the primary equity
component of the consideration price. During the second quarter of 1999, Bay
View received regulatory approval for the merger from the Federal Reserve Bank
and on August 18, 1999, Bay View received approval by the Office of the
Comptroller of the Currency. The acquisition, which is subject to approval by
both the Company's and Bay View's stockholders, is expected to close by the end
of the third quarter or the beginning of the fourth quarter of 1999.

  On April 30, 1999, the Company sold certain of its assets relating to its
Equipment Finance Group to Federated Capital Corporation ("Federated"). As a
condition of this agreement, Federated will service the Company's current
equipment finance transactions and act as sub-servicer on the Company's 1998-1
securitization. The Company will still offer equipment loans to its borrowers,
however, it will do so through its other operating units.


Results of Operations

 Three and Six Months Ended June 30, 1999 Compared to Three and Six Months Ended
 June 30, 1998

  Total revenues decreased 46.6% to $16.9 million for the three months ended
June 30, 1999 from $31.6 million for the comparable period in 1998. During the
same periods, the Company's total expenses increased 82.7% to $26.6 million from
$14.5 million. As a result, the Company experienced a net loss of $5.2 million
for the three months ended June 30, 1999 as compared to net income of $9.8
million for the same period in 1998.

  Total revenues decreased 25.2% to $40.2 million for the six months ended June
30, 1999 from $53.8 million for the comparable period in 1998. During the same
periods, the Company's total expenses increased 70.3% to $41.3 million from
$24.3 million. As a result, the Company experienced a net loss of $116,000 for
the six months ended June 30, 1999 as compared to net income of $17.1 million
for the same period in 1998.

  The decrease in revenues for the three and six months ended June 30, 1999 was
primarily attributable to decreases in gain on sale of loans and leases. During
1999, the Company has been selling its loans through whole loan sales as opposed
to selling them through securitizations as it did in 1998. As a result, it has
experienced lower

                                       12
<PAGE>

net gain at the time of sale. The Company plans to securitize loans again in the
future but is trying to time such securitizations so as to optimize pricing. In
addition to the lower profitability from the sale of loans, the Company wrote
down its equipment loans and leases held for sale by $1.7 million during the
three months ended June 30, 1999 in anticipation of a sale which is expected to
close in the third quarter of 1999.

  Net interest income did not change significantly for the three months ended
June 30, 1999 increasing 6.7% to $4.1 million as compared to $3.9 million during
the same period in 1998. Net interest income decreased 16.0% to $6.8 million for
the six months ended June 30, 1999 from $8.1 million for the comparable period
in 1998. This decrease is primarily due to the addition of the Multi-Family
Finance Group which originates its loan products at a lower net interest spread
than the Company's other lending groups.

  Loan servicing income increased 14.6% to $5.3 million for the three months
ended June 30, 1999 as compared to $4.6 million for the same period in 1998.
Loan servicing income increased 101.1% to $11.8 million for the six months ended
June 30, 1999 as compared to $5.9 million for the same period in 1998. This was
due to an increase in loans and leases serviced which resulted from the
securitizations and whole loan sales during 1998 with servicing rights retained
by the Company as well as an increase of serviced loans directly related to the
addition of Multi-Family Finance Group. As of June 30, 1999, the Company's loan
servicing portfolio totaled approximately $6.0 billion as compared to $4.5
billion at June 30, 1998.

  Trading income for the three and six months ended June 30, 1999 was $1.8
million and $3.5 million, respectively and represents hedging gains and losses
on the Company's loans held for sale. The Company also recorded $1.3 million in
insurance brokerage fee income for the six months ended June 30, 1999. Other
income (loss) for the six months ended June 30, 1999 includes a $1.8 million
write-off of accrued interest receivable related to prior periods.

  Total expenses increased 82.7% to $26.6 million for the three months ended
June 30, 1999 as compared to $14.5 million for the same period of the prior
year. Total expenses increased 70.3% to $41.3 million for the six months ended
June 30, 1999 as compared to $24.3 million for the same period of the prior
year. Certain of the expense increases in the three and six months ended June
30, 1999 were related to activities in anticipation of the Bay View merger.
Increases in professional services, occupancy and general and administrative
expenses include expenses of preparing for the Year 2000 computer issue which
were expanded in anticipation of the Bay View merger; legal and consulting
expenses associated with warehouse line renewals and negotiations, sale of the
Equipment Finance Group and divestiture of the Company's joint ventures and
equity holdings in anticipation of the Bay View merger; expenses of FMAC Golf
Finance Group LLC ("Golf JV"); expenses of the Insurance Services division which
did not begin operations until the end of the second quarter of 1998; and
depreciation and office-related expenses associated with the expansion and
moving of several large offices in the latter half of 1998.

  The provision for losses had the most significant impact on total expenses for
both the three and six months ended June 30, 1999 increasing to $9.9 million and
$10.2 million, respectively, from $0.6 million and $0.6 million for the three
and six months ended June 30, 1998, respectively. $2.2 million of this provision
relates to the remaining equipment loans and leases which were not part of the
sale of the Company's Equipment Finance Group. $2.3 million relates to loans
remaining with the Golf JV. $0.5 million is related to the Company's retained
interests in securitizations. A portion of the remaining provision relates to
five problem loans for which new information reflected a deteriorating valuation
during the second quarter of 1999, enabling the Company to better estimate the
value of the collateral. The remainder of the provision was related to two loans
which are not past due but are experiencing some reduction in their fixed charge
coverage ratios.


Liquidity and Capital Resources

  The Company requires access to short-term warehouse lines of credit and
repurchase facilities in order to fund loan and lease originations pending sale
or securitization of such loans and leases. Warehouse lines of credit,
repurchase facilities and working capital lines of credit at June 30, 1999 and
December 31, 1998 consisted of the following:

                                       13
<PAGE>

<TABLE>
<CAPTION>
(In thousands)                                                      June 30, 1999            December 31, 1998
                                                                    -------------            -----------------
                                                 Expiration   Commitment     Principal   Commitment      Principal
                   Lender                           Date        Amount      Outstanding    Amount       Outstanding
                   ------                           ----        ------      -----------    ------       -----------
<S>                                              <C>          <C>           <C>          <C>            <C>
Credit Suisse First Boston(1)(2).............     12/31/99     $300,000      $175,047    $  300,000      $122,356
Morgan Stanley(1)............................     12/30/99      300,000        24,136       300,000             -
Banco Santander(1)...........................     08/31/99       50,000        24,426        50,000        34,669
Sanwa Bank(1)................................     08/31/99       25,000        22,760        25,000        14,369
Goldman Sachs Mortgage Company(1)(3).........     05/10/99      100,000        44,842       100,000        46,989
Residential Funding Corporation(1)(4)........     08/31/99      100,000        56,596       200,000       124,763
Bank of America(1)(5)........................     08/30/99       35,000         3,430        35,000        18,776
Residential Funding Corporation(6)...........     05/31/04       50,000        31,432        50,000        31,432
Other Borrowings(7)..........................                         -       113,366             -        90,409
                                                               --------      --------    ----------      --------
  Totals.....................................                  $960,000      $496,035    $1,060,000      $483,763
                                                               ========      ========    ==========      ========
</TABLE>
_____
(1)  The above borrowings are collateralized by franchise loans and leases held
     for sale and investment.
(2)  The agreement with Credit Suisse First Boston ("CSFB") requires the Company
     to obtain a capital infusion of $100 million by May 31, 1999. The Company
     is currently in the process of obtaining a temporary waiver of this
     covenant from CSFB until the Bay View merger is completed.
(3)  The warehouse line of credit with Goldman Sachs Mortgage Company is used to
     fund loans through the Golf JV. The Company is currently in the process of
     dissolving the Golf JV at which time this warehouse line will be
     terminated.
(4)  The Residential Funding Corporation ("RFC") line of credit was temporarily
     increased from $100 million to $200 million until January 31,1999.
(5)  The Bank of America line of credit has a fixed interest rate of 1.00% when
     the Company maintains minimum deposit requirements.
(6)  The RFC line of credit is collateralized by the Company's loan servicing
     portfolio. As of May 31, 1999, this line of credit has converted to a term
     loan requiring principal payments of approximately $1.6 million payable
     quarterly until May 31, 2004.
(7)  As of June 30, 1999, other borrowings includes $4.2 million of sold loans
     that have been accounted for as a financing, $47.2 million of loans that
     have been financed through FMAC Star Fund, LLP, a $7.0 million repurchase
     agreement with Deutsche Bank for which the 1998-CE and 1998-CF certificates
     were pledged as collateral, $54.2 million related to a participation
     agreement with Bay View Bank, and a $0.8 million loan with Far East Bank.
     As of December 31, 1998, other borrowings includes $55.3 million of sold
     loans that have been accounted for as a financing, $29.0 million of loans
     that have been financed through FMAC Star Fund, LLP, and a $6.1 million
     repurchase agreement with Deutsche Bank for which the 1998-CE and 1998-CF
     certificates were pledged as collateral.

     The above facilities, with the exception of Bank of America, have variable
interest rates based on London Interbank Offered Rate plus a spread. The line of
credit with Bank of America has a fixed interest rate of 1.00% when minimum
deposit requirements are maintained. The warehouse line with Banco Santander has
been used primarily for funding loans and leases of the Equipment Finance Group.
Due to the divestiture of this division, the Company may not elect to renew this
facility. The Company is currently negotiating the renewal of the warehouse line
of credit with Sanwa Bank which may include an increase of the commitment
amount. The weighted average interest rate on the outstanding principal balances
of these facilities was 6.59% and 6.96% at June 30, 1999 and December 31, 1998,
respectively.

     The Company also has a master purchase and sale agreement with Southern
Pacific Bank (''SPB"), a wholly owned subsidiary of Imperial Credit Industries,
Inc. to originate loans for SPB under mutual agreement, and subject to SPB
underwriting each such loan prior to sale of such loans. Under this agreement,
the Company also has the ability to repurchase loans, under mutual agreement
with SPB. There is no specified commitment by either party, and each individual
sale is negotiated separately as to pricing. This agreement has no expiration
date. For the six months ended June 30, 1999 and year ended December 31, 1998,
loans originated for SPB (and not repurchased), including participations,
totaled approximately $6.3 million and $26.5 million, respectively.

     The Company's sources of operating cash flow include: (i) loan origination
income and fees; (ii) net interest income on loans and leases held for sale and
investment; (iii) cash servicing income; (iv) premiums obtained in sales of
whole loans (v) cash proceeds from loan securitization and (vi) insurance
brokerage fees. Cash from loan origination fees, net interest income on loans
held for sale and loan servicing fees, as well as available borrowings generally
provide adequate liquidity to fund current operating expenses, excluding the
difference between the amount funded on loans originated and the amount advanced
under the Company's current warehouse facilities.

     For the six months ended June 30, 1999, net cash used in operating
activities was $15.0 million. This excludes cash used in net loan origination
activities of $2.9 million. The net use of cash in the six months ended June 30,
1999 was primarily related to the lower profitability of loan sales resulting
from the decision to sell loans to Bay View in

                                       14
<PAGE>

anticipation of the merger. For the six months ended June 30, 1998, net cash
provided by operating activities was $45.0 million, exclusive of cash used in
net loan origination activities of $230.2 million.

  For the six months ended June 30, 1999, net cash used in investing activities
was $6.8 million, which was primarily attributable to payment of $7.5 million to
Bankers Mutual and Bankers Mutual Mortgage Inc. (together "Bankers") according
to the earn-out clause of the Asset Purchase Agreement dated March 9, 1998 by
and among the Company, Bankers, and the holders of the outstanding shares of
Bankers. For the six months ended June 30, 1998, net cash used in investing
activities was $47.2 million, which was primarily attributable to the purchase
of Bankers and the sale of a $22.9 million security, which was related to the
Company's 1997-B securitization.

  For the six months ended June 30, 1999, net cash provided by financing
activities was $12.8 million, which was primarily attributable to an increase in
borrowings from warehouse lines of credit to finance loan originations during
the period. For the six months ended June 30, 1998, net cash provided by
financing activities was $231.2 million, which was primarily attributable to an
increase in borrowings from warehouse lines of credit to finance loan
originations during the period.

  The Company anticipates that its current cash, together with cash generated
from operations and funds available under its credit facilities, will be
sufficient to fund its operations for at least the next twelve months if the
Company's future operations are consistent with management's expectations.
However, the Company is dependent upon its ability to sell and securitize its
loans as well as access warehouse lines of credit and repurchase facilities to
fund new loan originations. The Company currently expects to be able to maintain
existing warehouse lines of credit and repurchase facilities as current
arrangements expire or become fully utilized; however, there can be no assurance
that such financing will be available on favorable terms, if at all.

Year 2000 Computer Issue

  The Year 2000 ("Y2K") computer issue affects virtually all companies and
organizations. Many currently installed computer systems were designed to use
only a two-digit date field. This can cause problems in the systems
distinguishing a 21/st/ century date (i.e. 20--) from a 20/th/ century date
(i.e. 19--). Until the date fields are updated, systems or programs could fail
or give erroneous results when referencing dates following December 31, 1999.

  The Company is committed to ensuring that all of its computer systems and
operations are Y2K ready. Further, the Company is making such efforts, as it
deems appropriate, to determine that its value chain participants will also be
Y2K ready. The Company has established its Year 2000 Readiness and Compliance
Project ("Y2K Project") as a major project internally, and as such has full
support from the Company's senior management and Board of Directors. Project
awareness is continuously being performed through meetings and documented
communications. The Company is committing the necessary internal and external
resources along with the necessary budgets to ensure successful completion of
the Y2K Project.

  The Company has organized a Y2K Project Steering Committee that includes
members of all Company operations groups. There is a dedicated Y2K Project Core
Team made up of full time internal and external resources to perform all
necessary project tasks. In addition, the Company has retained the services of
an outside independent consulting firm to assist on the project and provide
objective guidance. Both the Y2K Project Steering Committee and the Y2K Project
Core Team meet regularly to review progress.

  The Company has developed a comprehensive strategic plan for its Y2K Project.
The plan consists of the following three major phases: Phase I covers awareness
and impact assessment of all internal systems, which commenced in September 1998
and will continue until the Y2K Project is completed; Phase II covers testing
and remediation of all mission critical systems, which commenced in January 1999
and concluded in April 1999; Phase III covers testing and remediation of all
non-mission critical systems, which commenced in December 1998 and concluded in
July 1999.

  The Company's plan is comprehensive, including an assessment and compliance
review of the following:

    . Internal hardware and software systems, including data interchange with
      external systems

                                       15
<PAGE>

    . Value chain participants
    . Business infrastructure
    . Customers, including Y2K readiness of potential new customers

  The assessment of all value chain participants is substantially complete.
Ongoing value chain participant monitoring programs are now being put into
place. All high and medium priority borrower assessments have been completed,
with the remainder to be completed in August 1999. To date, the Company has not
identified any critical Y2K issues with either its value chain participants or
its borrowers.

  The Company has established dedicated budgets for its Y2K Project. Currently,
the projected total cost of the Y2K Project is approximately $1.0 million but is
subject to change if any unanticipated situations arise. Any expenses related to
Y2K issues are being expensed as incurred. As of July 31, 1999, the Company has
incurred approximately $638,000 in Y2K Project related expenditures.

  The Company is substantially complete with the assessment, testing and
remediation of all internal systems. All non-compliant systems have either been
replaced or retired.

  To date, the risks associated with the Company's internal Y2K issues do not
appear to be material due to the current compliance status of most all hardware
and the vendor assurances on the third-party supplied software systems. Risks
related to third-party business partners and borrowers are not completely known
at this time. The Company's ongoing Awareness and Impact Assessment phase will
result in the identification of substantially all Y2K related risks in these
areas. There can be no guarantee that the systems of other organizations on
which the Company's systems rely will be Y2K compliant or will be compatible
with the Company' systems, each of which could have a material adverse effect on
the Company.

  The Company is currently building specific contingency plans as they relate to
the Y2K issues. A formal process is currently underway to address all determined
business risks in a comprehensive contingency plan. This plan will address all
system, facilities, business partner and borrower areas as they specifically
relate to the Y2K risks that are identified.

  The Company is working to identify and analyze the most reasonably likely
worst case scenarios for third-party relationships affected by the Y2K issues.
These scenarios could include possible infrastructure collapse, unforeseen
product shortages, major transportation disruptions, any one of which could have
major and material effects on the Company's business. While the Company is
developing contingency plans to address most issues under its control, an
infrastructure problem outside of its control could result in a delay in the
Company's delivering its products and services depending on the nature and
severity of the problems.

  Although the Company is dedicating substantial resources towards obtaining Y2K
readiness, there is no assurance that it will be successful in its efforts to
identify and address all Y2K issues. Even if the Company acts in a timely manner
to complete all of its assessments, identify, develop and implement remediation
plans believed to be adequate, and develop contingency plans, some problems may
not be identified or corrected in time to prevent material adverse consequences
to the Company. The estimates and conclusions herein are forward-looking
statements and are based on management's best estimates of future events. Risks
of completing the plan include the availability of resources, the ability to
discover and correct potential Y2K sensitive problems which could have a serious
impact on certain operations and the ability of the Company's service providers
to bring their systems into Y2K compliance. As the Company continues to progress
with its Y2K initiatives, it may discover that actual results will differ
materially from these estimates. The Company's Y2K efforts are continual and the
Y2K Project will evolve, as new information becomes available.

Inflation

  The impact of inflation is reflected in the increased costs of the Company's
operations. Unlike industrial companies, nearly all of the assets and
liabilities of the Company's operations are monetary in nature. As a result,
interest rates have a greater impact on the Company's operations' performance
than do the effects of general levels of

                                       16
<PAGE>

inflation. Inflation affects the Company's operations primarily through its
effect on interest rates, since interest rates normally increase during periods
of high inflation and decrease during periods of low inflation. During periods
of significantly increasing interest rates, demand for loans may be adversely
affected.

                                       17
<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk Management

Quantitative Information about Interest Rate Risk

     The following table presents the Company's financial instruments that are
sensitive to changes in interest rates, categorized by expected maturity and the
instruments' fair values at June 30, 1999:

<TABLE>
<CAPTION>
                                                                                                                Total        Fair
(Dollars in thousands)                 1999         2000       2001       2002        2003      Thereafter     Balance       Value
                                       ----         ----       ----       ----        ----      ----------     -------       -----
<S>                                  <C>          <C>         <C>        <C>        <C>         <C>           <C>          <C>
Interest-sensitive assets:

Loans held for sale
  Permanent commercial loans.......  $      -     $   150     $    -     $    -     $   231      $235,028     $235,409     $235,409
    Average interest rate..........         -       12.00%         -          -       11.60%         9.37%        9.37%

  Multi-family loans...............         -           -          -          -           -        60,096       60,096       60,096
    Average interest rate..........         -           -          -          -           -          7.48%        7.48%

  Equipment loans and leases.......         -          29        659      2,638       5,522        45,728       54,576       54,576
    Average interest rate..........         -       10.69%     11.52%     12.33%      12.00%        10.97%       11.14%

Loans held for investment
  Permanent commercial loans(1)....     1,786         126        872          -           -        41,965       44,749       44,749
    Average interest rate..........      9.63%       8.75%      9.36%         -           -          9.32%        9.33%

  Short-term commercial loans(1)...    66,092      12,509          -          -           -        15,574       94,175       94,175
    Average interest rate..........      9.35%       8.59%         -          -           -          9.33%        9.24%

  Equipment loans and leases(1)....         -           -          -         30          69           652          751          751
    Average interest rate..........         -           -          -      14.59%      10.66%        12.25%       12.19%

Securities available for sale(2)...     1,008       1,868      1,584      1,263       1,200         7,465       14,388       14,388

Retained interest in loan
 securitizations(3)................     1,955       3,484      2,684      2,087       1,534        17,194       28,938       28,938

Servicing rights...................     2,090       4,202      3,827      3,493       3,354        17,166       34,132       34,132
                                     ----------------------------------------------------------------------------------------------
Total interest-sensitive assets....  $ 72,931     $22,368     $9,626     $9,511     $11,910      $440,868     $567,214     $567,214
                                     ==============================================================================================
Interest-sensitive liabilities:

Borrowings.........................  $467,747     $ 6,286     $6,286     $6,286     $ 6,286      $  3,144     $496,035     $496,035
    Average interest rate..........      6.51%       7.49%      7.49%      7.49%       7.49%         7.49%        6.59%
                                     ----------------------------------------------------------------------------------------------
Total interest-sensitive liabilities $467,747     $ 6,286     $6,286     $6,286     $ 6,286      $  3,144     $496,035     $496,035
                                     ==============================================================================================
</TABLE>
_____
(1)  Future cash flows for loans held for investment are shown net of valuation
     allowances.
(2)  As of June 30, 1999, the weighted average interest rate on securities held
     for sale was 8.84%.
(3)  Future cash flows from retained interest are dependent upon actual credit
     losses and prepayment speed of the loans underlying the security. The
     Company applies a discount rate to the expected cash flows of each retained
     interest which includes estimated credit losses, prepayment speed and time
     value of money. As of June 30, 1999, the weighted average discount rate
     used on the retained interests was 19.58% with 8.96% weighted average
     accretion of income.

     Financial instruments include loans and leases held for sale, loans and
leases held for investment, securities available for sale, retained interest in
loan securitizations, servicing rights and borrowings. Fair value estimates are
subjective in nature and involve uncertainties and matters of judgment and
therefore cannot be determined with precision. Changes in assumptions could
significantly affect the estimates. In addition, the fair value estimates
presented do not include the value of anticipated future business and the value
of assets and liabilities that are not considered financial instruments.

                                       18
<PAGE>

  The carrying values of interest-bearing deposits approximate fair value due to
their short-term nature. The fair value of securities available for sale was
based on discounted cash flow. The fair value of loans and leases held for sale
and loans and leases held for investment are estimated by discounting expected
future cash flows at an estimated market rate of interest. A market rate of
interest is estimated based on the AAA Corporate Bond Rate, adjusted for credit
risk and the Company's cost to administer such loans. The fair value of retained
interest in loan securitizations was estimated by discounting future cash flows
using rates that an unaffiliated third-party purchaser would require on
instruments with similar terms and remaining maturities. The fair values of
borrowings were estimated by discounting cash flows at interest rates for debt
having similar credit ratings and maturities.

Qualitative Information about Interest Rate Risk

  The following discussion about the Company's risk management activities
includes "forward-looking statements" that involve risk and uncertainties.

  The Company's profits depend, in part, on the difference, or ''spread,''
between the effective rate of interest received by the Company on the loans it
originates or purchases and the interest rates payable by the Company under its
warehouse financing facilities or for securities issued in its securitizations.
The spread can be adversely affected because of interest rate increases during
the period from the date the loans are originated or purchased until the closing
of the sale or securitization of such loans.

  The Company is required by its warehouse lending facilities to hedge all of
its fixed-rate principal loan balances securing such facilities. The Company's
hedging strategy normally includes selling U.S. Treasury futures in such amounts
and maturities as to effectively hedge the interest rate volatility of its
portfolio. The Company does not maintain naked or leveraged hedge positions.

  In addition, the Company from time to time may use various other hedging
strategies to provide a level of protection against interest rate risks on its
fixed-rate loans. These strategies may include forward sales of loans or loan-
backed securities, interest rate caps and floors and buying and selling of
futures and options on futures. The Company's management determines the nature
and quantity of hedging transactions based on various factors, including market
conditions and the expected volume of loan originations and purchases. While the
Company believes its hedging strategies are cost-effective and provide some
protection against interest rate risks, no hedging strategy can completely
protect the Company from such risks. Further, the Company does not believe that
hedging against the interest rate risks associated with variable-rate loans is
cost-effective, and does not utilize the hedging strategies described above with
respect to its variable-rate loans.

                                       19
<PAGE>

                          PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

  The predecessor entity to Franchise Mortgage LLC, and Mr. Knyal, among others,
were named as defendants in De Wald, et al. vs. Knyal, et al. filed on November
15, 1996 in Los Angeles County Superior Court. The complaint sought an
accounting, monetary and punitive damages for alleged breach of contract, breach
of fiduciary duty, breach of implied covenant of good faith and fair dealing and
fraud arising from an alleged business relationship. On March 25, 1999, the
Superior Court entered an order in connection with the action, a portion of
which was stayed on March 29, 1999. The stayed portion included, among other
things, an order to dissolve Franchise Mortgage Acceptance Co., L.P. ("FMACLP"),
a partnership of which FLRT, Inc. is the general partner and which was formed in
1991 to originate and securitize franchise loans, and an order requiring an
accounting by FLRT, Inc. and Mr. Knyal to the limited partners of FMACLP. The
unstayed portion of the order includes a finding, among other things, that Mr.
Knyal and FLRT, Inc. breached the FMACLP partnership agreement and that the
limited partners of FMACLP have a right to a portion of the shares of the
Company owned by FLRT, Inc. or Mr. Knyal, and of the proceeds realized from any
sale of FLRT, Inc.'s or Mr. Knyal's Company shares after November 1997. The
order also states that Mr. Knyal and FLRT, Inc. may not dispose of or encumber
any shares of the Company held by either of them, and that Mr. Knyal may not
dispose of or encumber any shares of FLRT, Inc. held by him.

  On April 6, 1999, a verdict was rendered in the Superior Court whereby Mr.
Knyal and FLRT, Inc. were ordered to pay approximately $24.3 million in
compensatory damages and $8 million in punitive damages for breach of fiduciary
duty and fraud. Counsel to the predecessor entity and Mr. Knyal believe that the
verdict is without basis, that reversible error occurred during the course of
the trial and in connection with the rendering of the verdict and such counsel
and Mr. Knyal intend to vigorously appeal the verdict. Although the Company is
not a party to the action, Imperial Credit Industries, Inc. ("ICII"), Mr. Knyal
and FLRT, Inc. have agreed to indemnify the Company against any and all
liability that the Company and its stockholders (other than ICII, Mr. Knyal and
FLRT, Inc.) may incur as a result of this lawsuit.

  On July 22, 1999, the Court of Appeal issued an order staying any attempts by
the plaintiffs to execute against Mr. Knyal and/or FLRT, Inc. The plaintiffs
have agreed that Mr. Knyal and FLRT, Inc. can vote their shares of the Company's
stock in favor of the Bay View merger and, if the merger is completed, such
shares will be entitled to be exchanged for shares of Bay View stock.

  The Company has been named as a defendant in other legal actions, which legal
actions have arisen in the ordinary course of business, none of which management
believes to be material.

                                       20
<PAGE>

                                  SIGNATURES

Pursuant to the requirements 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.


                              FRANCHISE MORTGAGE ACCEPTANCE COMPANY



Date:  August 20, 1999        By: /s/  Raedelle Walker
                                  ------------------------------------
                                  Raedelle Walker
                                  Executive Vice President and Chief Financial
                                   Officer
                                  (Principal Financial Officer and Principal
                                   Accounting Officer)

                                       21