---

---




UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549





FORM 10-Q





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




For the quarterly period ended June 30, 2001





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 001-14879





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 94404


(Address of principal executive offices) (Zip Code)





Registrants telephone number, including area code (650) 312-7200





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 filing requirements for the past 90 days. Yes x No  ̈





Indicate the number of shares outstanding of each of the registrants classes of common stock, as of
the latest practicable date.





|Common Stock, Par Value $.01
(Title of Class) |  | Outstanding at July 31, 2001
62,542,594 shares | 
|--------------------------------------------- |  | ---------------------------------------------- | 




---

---




FORM 10-Q





INDEX





BAY VIEW CAPITAL CORPORATION





|                                 |  |                                                                                       |  | Page(s)
|-------------------------------- |  | ------------------------------------------------------------------------------------- |  | -------
|PART I.    FINANCIAL INFORMATION |  |                                                                                      
|                                
|                                
|Item 1.                          |  | Financial Statements (Unaudited):                                                     |  |        
|                                
|                                
|                                 |  | Consolidated Statements of Financial Condition                                        |  | 4      
|                                
|                                
|                                 |  | Consolidated Statements of Operations and Comprehensive Income (Loss)                 |  | 5-6    
|                                
|                                
|                                 |  | Consolidated Statements of Stockholders Equity                                       |  | 7      
|                                
|                                
|                                 |  | Consolidated Statements of Cash Flows                                                 |  | 8-9    
|                                
|                                
|                                 |  | Notes to Consolidated Financial Statements                                            |  | 10-17  
|                                
|                                
|Item 2.                          |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 18-46  
|                                
|                                
|Item 3.                          |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 47-49  
|                                
|                                
|                                
|PART II.    OTHER INFORMATION    |  |                                                                                      
|                                
|                                
|Other Information                |  | 50                                                                                   
|                                
|                                
|Signatures                       |  | 52                                                                                   




Forward-Looking Statements





This Form 10-Q contains forward-looking statements which describe our future plans, strategies and
expectations. All forward-looking statements are based on assumptions and involve risks and uncertainties, many of which are beyond our control and which may cause our actual results, performance or achievements to differ materially from the
results, performance or achievements that we anticipate. Factors that might affect forward-looking statements include, among other things:





| |  | our ability to remain in compliance with certain written agreements with government agencies;
| | - | ---------------------------------------------------------------------------------------------




| |  | the demand for our products;
| | - | ----------------------------




| |  | actions taken by our competitors;
| | - | ---------------------------------




| |  | tax rate changes, new tax laws and revised tax law interpretations;
| | - | -------------------------------------------------------------------




| |  | adverse changes occurring in the securities markets;
| | - | ----------------------------------------------------




| |  | inflation and changes in prevailing interest rates that reduce our margins or the fair value of the financial instruments we
hold;
| | - | ----------------------------------------------------------------------------------------------------------------------------------




| |  | economic or business conditions, either nationally or in our market areas, that are worse than we expect;
| | - | ---------------------------------------------------------------------------------------------------------




| |  | legislative or regulatory changes that adversely affect our business;
| | - | ---------------------------------------------------------------------




| |  | the timing, impact and other uncertainties of our asset sales or securitizations;
| | - | ---------------------------------------------------------------------------------




| |  | technological changes that are more difficult or expensive than we expect;
| | - | --------------------------------------------------------------------------




| |  | increases in delinquencies and defaults by our borrowers and other loan delinquencies;
| | - | --------------------------------------------------------------------------------------




| |  | increases in our provision for losses on loans and leases;
| | - | ----------------------------------------------------------




| |  | our inability to sustain or improve the performance of our subsidiaries;
| | - | ------------------------------------------------------------------------




| |  | our inability to achieve the financial goals in our strategic plans, including any financial goals related to both
contemplated and consummated asset sales or acquisitions;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | the outcome of lawsuits or regulatory disputes;
| | - | -----------------------------------------------




| |  | credit and other risks of lending, leasing and investment activities; and
| | - | -------------------------------------------------------------------------




| |  | our inability to use the net operating loss carryforwards we currently have.
| | - | ----------------------------------------------------------------------------




As a result of the above, we cannot assure you that our future results of operations or financial condition
or any other matters will be consistent with those presented in any forward-looking statements. Accordingly, we caution you not to rely on these forward-looking statements. We do not undertake, and specifically disclaim any obligation, to update
these forward-looking statements, which speak only as of the date made.





PART I.    FINANCIAL INFORMATION





Item 1.    Financial Statements





Bay View Capital Corporation and Subsidiaries





Consolidated Statements of Financial Condition


(Unaudited)





|                                                                                                                                                                                               |  | June 30,

2001 |   | December 31,

2000
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | - | ------------------
|
|ASSETS                                                                                                                                                                                         |  |                |   |                   
|                                                                                                                                                                                               |  |                |   |                   
|Cash and cash equivalents:                                                                                                                                                                     |  |                |   |                   
|Cash and due from depository institutions                                                                                                                                                      |  | $    261,707   |   |                   
|Short-term investments                                                                                                                                                                         |  | 228,566        |   |                   
|                                                                                                                                                                                               |  |                |   |                   
|                                                                                                                                                                                               |  | 490,273        |   |                   
|Securities available-for-sale:                                                                                                                                                                 |  |                |   |                   
|Investment securities                                                                                                                                                                          |  | 68,298         |   |                   
|Mortgage-backed securities                                                                                                                                                                     |  | 322,147        |   |                   
|Securities held-to-maturity:                                                                                                                                                                   |  |                |   |                   
|Mortgage-backed securities                                                                                                                                                                     |  |               |   |                   
|Mortgage-backed securities due from creditor                                                                                                                                                   |  |               |   |                   
|Loans and leases held-for-sale                                                                                                                                                                 |  | 292,348        |   |                   
|Loans and leases held-for-investment, net of allowance for loan and lease losses of $54.6 million at

    June 30, 2001 and $73.7 million at December 31, 2000                                 |  | 2,334,063      |   |                   
|Investment in operating lease assets, net                                                                                                                                                      |  | 411,253        |   |                   
|Investment in stock of the Federal Home Loan Bank of San Francisco                                                                                                                             |  | 41,808         |   |                   
|Investment in stock of the Federal Reserve Bank                                                                                                                                                |  | 11,866         |   |                   
|Real estate owned, net                                                                                                                                                                         |  | 11,603         |   |                   
|Premises and equipment, net                                                                                                                                                                    |  | 14,884         |   |                   
|Intangible assets                                                                                                                                                                              |  | 129,181        |   |                   
|Other assets                                                                                                                                                                                   |  | 217,184        |   |                   
|                                                                                                                                                                                               |  |                |   |                   
|Total assets                                                                                                                                                                                   |  | $4,344,908     |   |                   
|                                                                                                                                                                                               |  |                |   |                   
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                           |  |                |   |                   
|                                                                                                                                                                                               |  |                |   |                   
|Deposits:                                                                                                                                                                                      |  |                |   |                   
|Transaction accounts                                                                                                                                                                           |  | $1,834,852     |   |                   
|Retail certificates of deposit                                                                                                                                                                 |  | 1,614,798      |   |                   
|Brokered certificates of deposit                                                                                                                                                               |  |               |   |                   
|                                                                                                                                                                                               |  |                |   |                   
|                                                                                                                                                                                               |  | 3,449,650      |   |                   
|Advances from the Federal Home Loan Bank of San Francisco                                                                                                                                      |  | 225,142        |   |                   
|Short-term borrowings                                                                                                                                                                          |  | 49,391         |   |                   
|Subordinated Notes, net                                                                                                                                                                        |  | 149,599        |   |                   
|Other borrowings                                                                                                                                                                               |  | 1,071          |   |                   
|Other liabilities                                                                                                                                                                              |  | 49,793         |   |                   
|                                                                                                                                                                                               |  |                |   |                   
|Total liabilities                                                                                                                                                                              |  | 3,924,646      |   |                   
|                                                                                                                                                                                               |  |                |   |                   
|Guaranteed Preferred Beneficial Interest in our Junior Subordinated Debentures (Capital Securities)                                                                                          |  | 90,000         |   |                   
|Stockholders equity:                                                                                                                                                                          |  |                |   |                   
|Serial preferred stock; authorized, 7,000,000 shares; outstanding, none                                                                                                                        |  |               |   |                   
|Common stock ($.01 par value); authorized, 80,000,000 shares; issued, 200162,607,646 shares;

            200032,640,039 shares; outstanding, 200162,542,594 shares; 200032,574,987 shares |  | 626            |   |                   
|Additional paid-in capital                                                                                                                                                                     |  | 592,840        |   |                   
|Accumulated deficit                                                                                                                                                                            |  | (260,193       | ) |                   
|Treasury stock, at cost; 65,052 shares                                                                                                                                                         |  | (1,081         | ) |                   
|Accumulated other comprehensive income (loss):                                                                                                                                                 |  |                |   |                   
|Unrealized gain (loss) on securities available-for-sale, net of
tax                                                                                                                            |  | (859           | ) |                   
|Debt of Employee Stock Ownership Plan                                                                                                                                                          |  | (1,071         | ) |                   
|                                                                                                                                                                                               |  |                |   |                   
|Total stockholders equity                                                                                                                                                                     |  | 330,262        |   |                   
|                                                                                                                                                                                               |  |                |   |                   
|Total liabilities and stockholders
equity                                                                                                                                                     |  | $4,344,908     |   |                   
|                                                                                                                                                                                               |  |                |   |                   




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





Bay View Capital Corporation and Subsidiaries





Consolidated Statements of Operations and Comprehensive Income (Loss)


(Unaudited)





|                                                                                                                                                                                                 |  | For the Three

Months Ended
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------
|
|
|Interest income:                                                                                                                                                                                 |  |                            
|Interest on loans and leases                                                                                                                                                                     |  | $    65,192                
|Interest on mortgage-backed securities                                                                                                                                                           |  | 11,406                     
|Interest and dividends on investment securities                                                                                                                                                  |  | 7,497                      
|                                                                                                                                                                                                 |  |                            
|                                                                                                                                                                                                 |  | 84,095                     
|Interest expense:                                                                                                                                                                                |  |                            
|Interest on deposits                                                                                                                                                                             |  | 39,453                     
|Interest on borrowings                                                                                                                                                                           |  | 11,183                     
|Interest on Subordinated Notes                                                                                                                                                                   |  | 3,715                      
|                                                                                                                                                                                                 |  |                            
|                                                                                                                                                                                                 |  | 54,351                     
|Net interest income                                                                                                                                                                              |  | 29,744                     
|Provision for losses on loans and leases                                                                                                                                                         |  | 52,433                     
|                                                                                                                                                                                                 |  |                            
|Net interest income (loss) after provision for losses on loans and leases                                                                                                                        |  | (22,689                    
|                                                                                                                                                                                                 |  |                            
|Noninterest income:                                                                                                                                                                              |  |                            
|Leasing income                                                                                                                                                                                   |  | 23,624                     
|Loan fees and charges                                                                                                                                                                            |  | 1,683                      
|Loan servicing income                                                                                                                                                                            |  | 1,550                      
|Account fees                                                                                                                                                                                     |  | 1,892                      
|Sales commissions                                                                                                                                                                                |  | 1,501                      
|Gain (loss) on sale of assets and liabilities, net                                                                                                                                               |  | (22,722                    
|Other, net                                                                                                                                                                                       |  | 523                        
|                                                                                                                                                                                                 |  |                            
|                                                                                                                                                                                                 |  | 8,051                      
|Noninterest expense:                                                                                                                                                                             |  |                            
|General and administrative                                                                                                                                                                       |  | 44,706                     
|General and administrativeFMAC loan production                                                                                                                                                  |  |                           
|General and administrativeBankers Mutual                                                                                                                                                        |  |                           
|Restructuring expenses                                                                                                                                                                           |  | 10,026                     
|Revaluation of FMAC-related assets                                                                                                                                                               |  | 53,083                     
|Leasing expenses                                                                                                                                                                                 |  | 27,286                     
|Dividend expense on Capital Securities                                                                                                                                                           |  | 2,287                      
|Real estate owned operations, net                                                                                                                                                                |  | 9                          
|Amortization of intangible assets                                                                                                                                                                |  | 2,804                      
|Amortization of intangible assetsFMAC                                                                                                                                                           |  |                           
|                                                                                                                                                                                                 |  |                            
|                                                                                                                                                                                                 |  | 140,201                    
|Loss before income taxes                                                                                                                                                                         |  | (154,839                   
|Income tax benefit                                                                                                                                                                               |  | (59,489                    
|                                                                                                                                                                                                 |  |                            
|Net income (loss)                                                                                                                                                                                |  | $  (95,350                 
|                                                                                                                                                                                                 |  |                            
|Basic earnings (loss) per share                                                                                                                                                                  |  | $      (2.11               
|                                                                                                                                                                                                 |  |                            
|Diluted earnings (loss) per share                                                                                                                                                                |  | $      (2.11               
|                                                                                                                                                                                                 |  |                            
|Weighted-average basic shares outstanding                                                                                                                                                        |  | 45,170                     
|                                                                                                                                                                                                 |  |                            
|Weighted-average diluted shares outstanding                                                                                                                                                      |  | 45,170                     
|                                                                                                                                                                                                 |  |                            
|Net income (loss)                                                                                                                                                                                |  | $  (95,350                 
|Other comprehensive income (loss), net of tax:                                                                                                                                                   |  |                            
|Change in unrealized gain (loss) on securities available-for-sale, net of tax expense (benefit) of ($602) and

    $150 for the three months ended June 30, 2001 and June 30, 2000, respectively |  | (854                       
|                                                                                                                                                                                                 |  |                            
|Comprehensive income (loss)                                                                                                                                                                      |  | $  (96,204                 
|                                                                                                                                                                                                 |  |                            
|Dividends declared per share                                                                                                                                                                     |  | $                         
|                                                                                                                                                                                                 |  |                            




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





Bay View Capital Corporation and Subsidiaries





Consolidated Statements of Operations and Comprehensive Income (Loss)


(Unaudited)





|                                                                                                                                                                                               |  | For the Six Months Ended
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------
|
|
|Interest income:                                                                                                                                                                               |  |                         
|Interest on loans and leases                                                                                                                                                                   |  | $  137,542              
|Interest on mortgage-backed securities                                                                                                                                                         |  | 23,621                  
|Interest and dividends on investment securities                                                                                                                                                |  | 17,391                  
|                                                                                                                                                                                               |  |                         
|                                                                                                                                                                                               |  | 178,554                 
|Interest expense:                                                                                                                                                                              |  |                         
|Interest on deposits                                                                                                                                                                           |  | 83,374                  
|Interest on borrowings                                                                                                                                                                         |  | 25,522                  
|Interest on Subordinated Notes                                                                                                                                                                 |  | 7,430                   
|                                                                                                                                                                                               |  |                         
|                                                                                                                                                                                               |  | 116,326                 
|Net interest income                                                                                                                                                                            |  | 62,228                  
|Provision for losses on loans and leases                                                                                                                                                       |  | 59,733                  
|                                                                                                                                                                                               |  |                         
|Net interest income after provision for losses on loans and leases                                                                                                                             |  | 2,495                   
|                                                                                                                                                                                               |  |                         
|Noninterest income:                                                                                                                                                                            |  |                         
|Leasing income                                                                                                                                                                                 |  | 48,007                  
|Loan fees and charges                                                                                                                                                                          |  | 3,089                   
|Loan servicing income                                                                                                                                                                          |  | 3,365                   
|Account fees                                                                                                                                                                                   |  | 3,922                   
|Sales commissions                                                                                                                                                                              |  | 2,798                   
|Gain (loss) on sale of assets and liabilities, net                                                                                                                                             |  | (12,096                 
|Other, net                                                                                                                                                                                     |  | 1,073                   
|                                                                                                                                                                                               |  |                         
|                                                                                                                                                                                               |  | 50,158                  
|Noninterest expense:                                                                                                                                                                           |  |                         
|General and administrative                                                                                                                                                                     |  | 80,123                  
|General and administrativeFMAC loan production                                                                                                                                                |  |                        
|General and administrativeBankers Mutual                                                                                                                                                      |  |                        
|Restructuring expenses                                                                                                                                                                         |  | 10,026                  
|Revaluation of FMAC-related assets                                                                                                                                                             |  | 70,028                  
|Leasing expenses                                                                                                                                                                               |  | 45,043                  
|Dividend expense on Capital Securities                                                                                                                                                         |  | 4,575                   
|Real estate owned operations, net                                                                                                                                                              |  | (9                      
|Amortization of intangible assets                                                                                                                                                              |  | 5,672                   
|Amortization of intangible assetsFMAC                                                                                                                                                         |  |                        
|                                                                                                                                                                                               |  |                         
|                                                                                                                                                                                               |  | 215,458                 
|Income (loss) before income taxes                                                                                                                                                              |  | (162,805                
|Income tax expense (benefit)                                                                                                                                                                   |  | (59,489                 
|                                                                                                                                                                                               |  |                         
|Net income (loss)                                                                                                                                                                              |  | $(103,316               
|                                                                                                                                                                                               |  |                         
|Basic earnings (loss) per share                                                                                                                                                                |  | $      (2.65            
|                                                                                                                                                                                               |  |                         
|Diluted earnings (loss) per share                                                                                                                                                              |  | $      (2.65            
|                                                                                                                                                                                               |  |                         
|Weighted-average basic shares outstanding                                                                                                                                                      |  | 38,938                  
|                                                                                                                                                                                               |  |                         
|Weighted-average diluted shares outstanding                                                                                                                                                    |  | 38,938                  
|                                                                                                                                                                                               |  |                         
|Net income (loss)                                                                                                                                                                              |  | $(103,316               
|Other comprehensive income (loss), net of tax:                                                                                                                                                 |  |                         
|Change in unrealized gain (loss) on securities available-for-sale, net of tax expense (benefit) of ($628)

    and $278 for the six months ended June 30, 2001 and June 30, 2000, respectively |  | (891                    
|                                                                                                                                                                                               |  |                         
|Comprehensive income (loss)                                                                                                                                                                    |  | $(104,207               
|                                                                                                                                                                                               |  |                         
|Dividends declared per share                                                                                                                                                                   |  | $                      
|                                                                                                                                                                                               |  |                         




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








Bay View Capital Corporation and Subsidiaries





Consolidated Statements of Stockholders Equity


(Unaudited)





|                                                                                                           |  | Number

of Shares

Issued |  | Common

Stock |  | Preferred

Stock |   | Additional

Paid-in

Capital |          | Retained

Earnings

(Accumulated

Deficit) |  | Treasury

Stock |   | Unrealized Gain

(Loss) on

Securities

Available-for-

Sale,

Net of Tax |         | Debt of

Employee

Stock

Ownership

Plan |  | Total

Stockholders

Equity
|---------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ------------- |  | ---------------- | - | ---------------------------- | -------- | ------------------------------------------ |  | --------------- | - | ------------------------------------------------------------------------- | ------- | ----------------------------------------- |  | ----------------------------
|
|Balance at December 31, 1999                                                                               |  | 32,629                    |  | $326          |  | $               |   |                              | $455,964 |                                            |  | $  179,100      |   |                                                                           | $(1,094 | )                                         |  | $(293                       
|                                                                                                          
|                                                                                                          
|                                                                                                          
|Exercise of stock options, including tax

     benefits                                                    |  | 6                         |  |              |  |                 |   |                              | 48       |                                            |  |                |   |                                                                           |        |                                           |  |                            
|Distribution of directors retirement plan

     shares                                                    |  | 5                         |  |              |  |                 |   |                              | 46       |                                            |  |                |   |                                                                           |        |                                           |  |                            
|Distribution of restricted shares                                                                          |  |                          |  |              |  |                 |   |                              | (13      | )                                          |  |                |   |                                                                           | 13      |                                           |  |                            
|Cash dividends declared ($0.30 per share)                                                                  |  |                          |  |              |  |                 |   |                              |         |                                            |  | (9,780          | ) |                                                                           |        |                                           |  |                            
|Unrealized gain on securities available-for-sale,

     net of tax                                         |  |                          |  |              |  |                 |   |                              |         |                                            |  |                |   |                                                                           |        |                                           |  | 303                         
|Repayment of debt                                                                                          |  |                          |  |              |  |                 |   |                              |         |                                            |  |                |   |                                                                           |        |                                           |  |                            
|Net loss                                                                                                   |  |                          |  |              |  |                 |   |                              |         |                                            |  | (326,197        | ) |                                                                           |        |                                           |  |                            
|                                                                                                           |  |                           |  |               |  |                  |   |                              |          |                                            |  |                 |   |                                                                           |         |                                           |  |                             
|Balance at December 31, 2000                                                                               |  | 32,640                    |  | 326           |  |                 |   |                              | 456,045  |                                            |  | (156,877        | ) |                                                                           | (1,081  | )                                         |  | 10                          
|                                                                                                          
|                                                                                                          
|                                                                                                          
|Distribution of directors retirement plan

     shares                                                    |  | 10                        |  |              |  |                 |   |                              | 73       |                                            |  |                |   |                                                                           |        |                                           |  |                            
|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 realized on stock options with below

     market strike price                                     |  |                          |  |              |  |                 |   |                              | 2,622    |                                            |  |                |   |                                                                           |        |                                           |  |                            
|Unrealized loss on securities available-for-sale,

     net of tax                                         |  |                          |  |              |  |                 |   |                              |         |                                            |  |                |   |                                                                           |        |                                           |  | (869                        
|Change in debt of ESOP                                                                                     |  |                          |  |              |  |                 |   |                              |         |                                            |  |                |   |                                                                           |        |                                           |  |                            
|Net loss                                                                                                   |  |                          |  |              |  |                 |   |                              |         |                                            |  | (103,316        | ) |                                                                           |        |                                           |  |                            
|                                                                                                           |  |                           |  |               |  |                  |   |                              |          |                                            |  |                 |   |                                                                           |         |                                           |  |                             
|Balance at June 30, 2001                                                                                   |  | 62,608                    |  | $626          |  | $               |   |                              | $592,840 |                                            |  | $(260,193       | ) |                                                                           | $(1,081 | )                                         |  | $(859                       
|                                                                                                           |  |                           |  |               |  |                  |   |                              |          |                                            |  |                 |   |                                                                           |         |                                           |  |                             




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








Bay View Capital Corporation and Subsidiaries





Consolidated Statements of Cash Flows


(Unaudited)





|                                                                                                                                                 |  | For the Six Months Ended
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------
|
|
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                                                             |  |                         
|Net (loss) income                                                                                                                                |  | $(103,316               
|Adjustments to reconcile net income (loss) to net cash used in operating

     activities:                                                       |  |                         
|Amortization of intangible assets                                                                                                                |  | 5,672                   
|Increase in franchise and multi-family loans held-for-sale                                                                                       |  |                        
|Provision for losses on loans and leases                                                                                                         |  | 59,733                  
|Depreciation and amortization of premises and equipment                                                                                          |  | 2,596                   
|Depreciation and amortization of investment in operating lease assets                                                                            |  | 29,607                  
|Amortization of premiums, net of discount accretion                                                                                              |  | 4,127                   
|Revaluation of FMAC-related assets                                                                                                               |  | 70,028                  
|(Gain) loss on sale of assets and liabilities, net                                                                                               |  | 12,096                  
|Increase in other assets                                                                                                                         |  | (67,482                 
|Decrease in other liabilities                                                                                                                    |  | (23,559                 
|Other, net                                                                                                                                       |  | 4,036                   
|                                                                                                                                                 |  |                         
|Net cash used in operating
activities                                                                                                            |  | (6,462                  
|                                                                                                                                                 |  |                         
|CASH FLOWS FROM INVESTING ACTIVITIES                                                                                                             |  |                         
|Acquisition of assets, net of cash and cash equivalents received                                                                                 |  |                        
|Proceeds from the sale of substantially all of the assets and certain liabilities

     of Bankers Mutual, net of cash and cash equivalents sold |  |                        
|Net decrease (increase) in loans and leases held-for-investment resulting

     from originations, net of repayments                             |  | 129,076                 
|Purchases of loans and leases, net                                                                                                               |  | (12,933                 
|Purchases of mortgage-backed securities                                                                                                          |  | (83,215                 
|Purchases of investment securities                                                                                                               |  | (45,742                 
|Principal payments on mortgage-backed securities                                                                                                 |  | 120,559                 
|Principal payments on investment securities                                                                                                      |  |                        
|Proceeds from securitizations and/or sales of loans and leases

     held-for-sale                                                               |  | 275,933                 
|Proceeds from sales of mortgage-backed securities available-for-sale                                                                             |  | 294,067                 
|Proceeds from sales of investment securities                                                                                                     |  | 6,456                   
|Proceeds from sale of real estate owned                                                                                                          |  | 1,037                   
|Additions to premises and equipment                                                                                                              |  | (177                    
|Decrease (increase) in investment in stock of the Federal Home Loan Bank

     of San Francisco                                                  |  | (1,618                  
|Decrease (increase) in investment in stock of the Federal Reserve Bank                                                                           |  | 7,724                   
|                                                                                                                                                 |  |                         
|Net cash provided by
investing activities                                                                                                        |  | 691,167                 
|                                                                                                                                                 |  |                         




Bay View Capital Corporation and Subsidiaries





Consolidated Statements of Cash Flows (continued)


(Unaudited)





|                                                                        |  | For the Six Months Ended
|----------------------------------------------------------------------- |  | ------------------------
|
|
|CASH FLOWS FROM FINANCING ACTIVITIES                                   
|Net (decrease) increase in deposits                                     |  | $(296,662               
|Proceeds from advances from the Federal Home Loan Bank of San Francisco |  | 205,000                 
|Repayment of advances from the Federal Home Loan Bank of San Francisco  |  | (783,600                
|Proceeds from reverse repurchase agreements                             |  |                        
|Repayment of reverse repurchase agreements                              |  | (103,241                
|Net decrease in warehouse lines outstanding                             |  | (44,743                 
|Net decrease in other borrowings                                        |  | (593                    
|Proceeds from issuance of common stock                                  |  | 108,073                 
|Proceeds from issuance of preferred stock                               |  | 26,400                  
|Dividends paid to stockholders                                          |  |                        
|                                                                        |  |                         
|Net cash used in financing
activities                                   |  | (889,366                
|                                                                        |  |                         
|Net decrease in cash and cash equivalents                               |  | (204,661                
|Cash and cash equivalents at beginning of period                        |  | 694,934                 
|                                                                        |  |                         
|Cash and cash equivalents at end of period                              |  | $  490,273              
|                                                                        |  |                         
|Cash paid during the year for:                                         
|Interest                                                                |  | $  130,056              
|Income taxes                                                            |  | $          83           
|Supplemental non-cash investing and financing activities:              
|Loans transferred to real estate owned                                  |  | $    11,714             
|Loans transferred from held-for-investment to held-for-sale             |  | $  227,120              
|Loans securitized and transferred to securities held-to-maturity        |  | $                      
|Securities transferred from held-to-maturity to available-for-sale      |  | $  641,663              
|Conversion of preferred stock to common stock                           |  | $    26,400             
|The acquisitions of assets involved the following:                     
|Fair value of assets acquired, other than cash and cash equivalents     |  | $                      
|Goodwill                                                                |  |                        
|                                                                        |  |                         
|Net cash and cash
equivalents paid                                      |  | $                      
|                                                                        |  |                         




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





BAY VIEW CAPITAL CORPORATION AND SUBSIDIARIES





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





June 30, 2001


(Unaudited)





Note 1.    Basis of Presentation





The accompanying unaudited consolidated financial statements include the accounts of Bay View Capital
Corporation, a bank holding company incorporated under the laws of the state of Delaware, and our wholly owned subsidiaries: Bay View Bank, N.A., 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, 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. Bay View Acceptance Corporation includes its wholly owned subsidiary, LFS-BV, Inc., a Nevada corporation. All significant intercompany accounts and transactions have been eliminated.





On November 1, 1999, we acquired Franchise Mortgage Acceptance Company, sometimes referred to as FMAC, which
included the operations of Bankers Mutual and FMAC Insurance Services. On June 30, 2000, substantially all of the assets and certain liabilities of Bankers Mutual were sold to Berkshire Mortgage Finance Limited Partnership. On September 11, 2000, we
announced the restructuring of FMACs franchise lending operations. The shutdown of this division was effective as of September 30, 2000 and involved the termination of all related production and marketing personnel. Effective February 28,
2001, substantially all of the assets and liabilities of FMAC Insurance Services were sold. 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.





During the second quarter of 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 have begun to implement a new strategic plan adopted by our Board of Directors. The new strategic plan includes exiting businesses inconsistent
with a California-focused bank and includes 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 the second quarter and for the first
six months of 2001 include specific charges consistent with our new strategic plan. Specific charges recognized during the first six months of 2001 include $70.0 million related to the revaluation of franchise-related assets, $10.0 million of
additional provision for impairment primarily as a result of revising the estimated residual values associated with the auto lease portfolio and $10.0 million in restructuring charges primarily related to the reduction in our workforce. The
restructuring charges consisted of $6.7 million of severance and $3.3 million of facilities charges. As previously announced, the reduction in our workforce will affect about 100 employees primarily from business lines that we are exiting, such as
franchise operations, and certain redundant operations. Our results for the first six months of 2001 also included $12.1 million in net losses on sales of assets, including losses on the sale of BVFMAC and the home equity loans offset by gains
received during the first quarter of 2001 on December 2000 asset sales and net gains on the sale of mortgage-backed and franchise loans during the first half of the year. The year-to-date loan loss provision totaled $59.7 million reflecting the
charge-offs related to the mark-to-market on loans transferred from held-for-investment to held-for-sale, primarily during the second quarter, as well as additional reserves provided on the remaining franchise loan portfolio.





The information provided in these interim financial statements reflects all adjustments which are, in the
opinion of management, necessary for a fair presentation of our financial condition as of June 30, 2001 and December 31, 2000, the results of our operations for the three- and six-month periods ended June 30, 2001 and 2000, and our cash flows for
the six-month periods ended June 30, 2001 and 2000. These adjustments are of a
normal, recurring nature unless otherwise disclosed in this Form 10-Q. As necessary, reclassifications have been made to prior period amounts to conform to the current period presentation. These reclassifications had no effect on our financial
condition, results of operations or stockholders equity. These interim financial statements have been prepared in accordance with the instructions to Form 10-Q, and therefore do not include all of the necessary information and footnotes for a
presentation in conformity with generally accepted accounting principles.





The information included in Managements Discussion and Analysis of Financial Condition and
Results of Operations was written assuming that you have read or have access to our 2000 Annual Report on Form 10-K, which contains the latest audited consolidated financial statements and notes, along with Managements Discussion and
Analysis of Financial Condition as of December 31, 2000 and 1999 and Results of Operations for the years ended December 31, 2000, 1999 and 1998. Accordingly, only certain changes in financial condition and results of operations are discussed in this
Form 10-Q. Furthermore, the interim financial results for the three- and six-month periods ended June 30, 2001 are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.





Note 2.    Earnings Per Share





Basic earnings per share are calculated by dividing net earnings 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 or warrants. 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.





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





|                                                           |  | For the Three Months Ended, |   | For the Six Months Ended,
|---------------------------------------------------------- |  | --------------------------- | - | -------------------------
|
|
|Net earnings (loss) available to

     common stockholders |  | $(95,350                    | ) |                          
|Weighted-average basic shares

     outstanding            |  | 45,170                      |   |                          
|Add: Dilutive potential common

     shares                |  |                            |   |                          
|                                                           |  |                             |   |                          
|Weighted-average diluted shares

     outstanding          |  | 45,170                      |   |                          
|                                                           |  |                             |   |                          
|Basic earnings (loss) per share                            |  | $    (2.11                  | ) |                          
|                                                           |  |                             |   |                          
|Diluted earnings (loss) per share                          |  | $    (2.11                  | ) |                          
|                                                           |  |                             |   |                          




Note 3.    Stock Options





As of June 30, 2001, 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, 270,756, 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.





The following table illustrates the stock options available for grant as of June 30, 2001:





|                             |  | Employee Stock Option

and Incentive Plans |   | Non-Employee

Director Stock Option

and Incentive Plans |            | Total
|---------------------------- |  | ------------------------------------------ | - | -------------------------------------------------------- | ---------- | -----
|Shares reserved for issuance |  | 8,130,006                                  |   |                                                          | 1,250,000  |      
|Granted                      |  | (8,899,892                                 | ) |                                                          | (1,102,000 | )    
|Forfeited                    |  | 1,964,351                                  |   |                                                          | 88,000     |      
|Expired                      |  | (369,688                                   | ) |                                                          | (63,000    | )    
|                             |  |                                            |   |                                                          |            |      
|Total available for grant    |  | 824,777                                    |   |                                                          | 173,000    |      
|                             |  |                                            |   |                                                          |            |      




At June 30, 2001, we had outstanding options under the plans with expiration dates ranging from the year
2002 through 2013, as illustrated in the following table:





|                                 |  | Number of

Option Shares |   | Exercise

Price Range |             | Weighted-Average

Exercise Price
|-------------------------------- |  | ------------------------ | - | --------------------- | ----------- | --------------------------------
|Outstanding at December 31, 2000 |  | 2,821,490                |   |                       | $5.41-34.41 |                                 
|Granted                          |  | 3,407,000                |   |                       | 4.59        |                                 
|Forfeited                        |  | (226,392                 | ) |                       | 5.41-34.41  |                                 
|                                 |  |                          |   |                       |             |                                 
|Outstanding at June 30, 2001     |  | 6,002,098                |   |                       | $4.59-34.41 |                                 
|                                 |  |                          |   |                       |             |                                 
|Exercisable at June 30, 2001     |  | 2,716,250                |   |                       | $4.59-34.41 |                                 
|                                 |  |                          |   |                       |             |                                 




During the second quarter of 2001, we recognized a $2.6 million expense related to the issuance of stock
options with below market strike prices. We will amortize an additional $6.4 million of compensation expense over the next two years.





Note 4.    Merger and Acquisition-Related Activity





| | Franchise Mortgage Acceptance Company
| | -------------------------------------




We completed our acquisition of Franchise Mortgage Acceptance Company and its wholly owned division, Bankers
Mutual, collectively referred to as FMAC, on November 1, 1999. Under the terms of the agreement, as amended, we acquired all of the common stock of FMAC for consideration valued at approximately $285 million. Each share of FMAC common stock was
exchanged for, at the election of the holder, either $9.80 in cash or 0.5444 shares of our common stock. In total, cash elections were limited to 15% of the shares of FMAC common stock outstanding immediately prior to closing and the elections for
our common stock were limited to 85% of the shares of FMAC common stock outstanding immediately prior to closing. We paid approximately $48 million in cash, including payments for certain acquisition costs, and issued 13,868,805 shares of our common
stock, a portion of which were issued from our shares in treasury. Upon consummation of the acquisition, we contributed substantially all of FMACs assets and liabilities to newly formed subsidiaries of Bay View Bank. The acquisition of FMAC
was accounted for under the purchase method of accounting. The amount of goodwill recorded as of the merger date, which represented the excess of the total purchase price over the estimated fair value of net assets acquired, was approximately $199
million. This amount was associated entirely with FMACs lending operations, which was the core business acquired, and was initially amortized on a straight-line basis over 15 years.


BAY VIEW CAPITAL CORPORATION AND SUBSIDIARIES





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)








On June 30, 2000, substantially all of the assets and certain liabilities of Bankers Mutual were sold to
or assumed by Berkshire Mortgage Finance Limited Partnership for approximately $40 million in cash. On September 11, 2000, we announced the restructuring of FMACs franchise lending operations. The shutdown of this division was effective as of
September 30, 2000 and involved the termination of all related production and marketing personnel. In connection with this restructuring, goodwill of $192.6 million was written off, representing the entire unamortized balance associated with FMAC.
On June 22, 2001, we completed the stock sale by Bay View Bank of the legal entity Bay View Franchise Mortgage Acceptance Company and its related servicing platform to a group of independent investors who were formerly part of BVFMAC management. The
Company realized a loss of $23 million as a result of the sale.





| | Goodman Factors, Inc.
| | ---------------------




On February 1, 2000, we acquired the assets and operations of Goodman Factors, Inc., a Texas-based general
purpose factoring company for a total purchase price of $24.3 million. The average balance of the factoring receivable assets acquired was approximately $15.3 million. The amount of goodwill related to this acquisition was approximately $9.0
million, which is being amortized on a straight-line basis over 12 years. This goodwill amount represents the excess of the total purchase price over the estimated fair value of net assets acquired.





| | Concord Growth Corporation
| | --------------------------




We completed our acquisition of EXXE Data Corporation and its wholly owned commercial finance subsidiary,
Concord Growth Corporation, on March 17, 1997. At the close of the transaction, EXXE became a stand-alone subsidiary of Bay View Capital Corporation. Subsequent to the close of the transaction, EXXE was merged into Concord Growth Corporation and
liquidated and Concord Growth Corporation became a first-tier, stand-alone subsidiary of Bay View Capital Corporation. The former holders of EXXE capital stock, warrants and options received an initial aggregate cash payment of $19.8 million and
were entitled to potential future cash payments of up to $34 million, expiring in 2000, depending upon the financial performance of Concord Growth Corporation. We accrued for cash payments of $10.0 million pursuant to this agreement in 2000 which
are considered part of the total purchase price. A cash payment of $9.0 million was made in January 2001 and a final payment of $700,000 was made during the second quarter of 2001. The balance of $300,000 was used to discharge certain
pre-acquisition legal liabilities of Concord Growth Corporation in March 2001. During 1998, Concord Growth Corporation was renamed Bay View Commercial Finance Group. Effective March 1, 1999, Bay View Capital Corporation contributed the capital stock
of Bay View Commercial Finance Group to Bay View Bank in conjunction with the March 1, 1999 conversion of Bay View Bank from a federal stock savings bank to a nationally chartered commercial bank.





Note 5.    Agreements with Regulatory Agencies





During the third quarter of 2000, we entered into formal agreements with the Office of the Comptroller of
the Currency, sometimes referred to as the 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, require that Bay View Banks Board of Directors adopt a new budget as well as new strategic, earnings and capital plans. The new strategic plan establishes objectives for Bay View Banks overall risk profile,
earnings performance, growth, and capital 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 require that we adopt a new budget and new strategic, earnings and capital plans. The agreement also states that the 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 June 30, 2001, Bay View Capital Corporation exceeded the minimum requirements for Tier 1 risk-based
capital while its Total risk-based capital ratio of 7.92% and Tier 1 leverage ratio of 3.60%, fell below the minimum required amount. We have filed a capital plan, pursuant to the terms of our regulatory agreement with the Federal Reserve Bank of
San Francisco, indicating our intention to meet and maintain the required minimum capital ratios. At this time, the financial impact, if any, of the regulatory actions that may result from our failure to meet the minimum capital requirements cannot
be determined. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. Additionally, execution of this capital plan depends on certain future events and circumstances, the outcome
of which cannot be guaranteed. Nevertheless, management believes, at this time, that the institution will meet all the provisions of the plan and therefore achieve the plans regulatory capital goals.





Note 6.    Investment Securities





During the second quarter of 2001, we transferred $641.7 million in held-to-maturity securities to our
available-for-sale portfolio. We sold $282 million of GNMA securities in June 2001 and realized a gain of $11.9 million. We recorded an unrealized loss totaling $846,000 on our remaining available-for-sale investment portfolio. As a result of the
transfer and subsequent sales of investment securities from our held-to maturity portfolio, we do not intend to hold any investment securities as held-to-maturity for the foreseeable future.





Note 7.    Income Taxes





We recorded a tax benefit of $59.5 million on the pre-tax loss of $162.8 million for the first six months of
2001. The effective tax rate for 2001 is a 36.5% tax benefit. This effective tax rate benefit differs from the statutory rate primarily due to the impact of state taxes and nondeductible goodwill amortization.





No tax benefit was recorded on the pre-tax loss of $7.97 million in the first quarter of 2001. At that time,
management determined that we would likely not realize the benefits from these additional deferred tax assets. Based on the completion of the rights offering and the adoption of the new strategic plan during the second quarter of 2001, in
managements judgement, the realizability of deferred tax assets is now more likely than not. Therefore, the $2.9 million tax benefit previously unrecognized on the $7.97 million pre-tax loss reported in the first quarter of 2001 has been
reported in the second quarter of 2001. The total net deferred tax asset at June 30, 2001 was $152.6 million, which is net of the $26 million valuation allowance as established in 2000.





Note 8.    Commitments and Contingencies





| | Litigation
| | ----------




On November 9, 2000, Morgan Guaranty Trust filed a claim in the U.S. District Court, Southern District of
New York, against Bay View Franchise Mortgage Acceptance Company alleging breach of certain representations and warranties in connection with the sale of loans to Morgan Guaranty Trust by the former Franchise Mortgage Acceptance Company. The
liability, if any, cannot be estimated at this time. The matter will continue to be vigorously defended.


BAY VIEW CAPITAL CORPORATION AND SUBSIDIARIES





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)








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





Note 9.    Subsequent Events





On July 10, 2001, we announced the agreement to sell approximately $300 million in franchise loans to
Goldman Sachs Mortgage Company, which is expected to close in phases in the third quarter. On August 1, 2001, $205 million in franchise loans were sold in connection with the agreement. The remainder of the $300 million is anticipated to close later
in the third quarter. Loans transferred from held-for-investment to held-for-sale in the second quarter were marked to market with a corresponding charge to the allowance for loan and lease losses of $47.3 million. Franchise loans previously
classified as held-for-sale were marked to market and a loss of $31.7 million was recorded in revaluation of franchise-related assets.





Note 10.    Segment and Related Information





We have 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 are as follows:





A Retail Platform which is 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 are derived from customers throughout the United States.





A Commercial Platform which is comprised of multi-family and commercial real estate loans, franchise loans,
franchise asset-backed securities, asset-based loans, factoring loans, commercial leases, and business banking products and services. The Commercial Platforms revenues are derived from customers throughout the United States.





Each of our business platforms contributes to our overall profitability. We evaluate 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 are used primarily to fund franchise loans held-for-sale, is allocated directly to the Commercial Platform. The interest expense associated with our remaining funding sources, including the noninterest expense associated with our 9.76% Capital
Securities, is allocated to each platform on a pro-rata basis determined by the relative amount of average interest-bearing liabilities, excluding warehouse lines, that are required to fund the platforms interest-earning assets.





The Retail Platform incurs the direct general and administrative expenses related to operating our branch
network which serves 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 is allocated to the Commercial Platform based upon the
relative amount of average interest-bearing liabilities that are 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 are included in indirect corporate overhead. Indirect corporate overhead includes expenses associated with our administrative and support functions.


BAY VIEW CAPITAL CORPORATION AND SUBSIDIARIES





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)








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 and income tax expense.





|                                                                 |  | For the Three Months Ended June 30, 2001
|---------------------------------------------------------------- |  | ----------------------------------------
|
|
|Interest income                                                  |  | $      40,244                           
|Interest expense                                                 |  | (31,761                                 
|Provision for losses on loans and leases                         |  | (1,600                                  
|Noninterest income                                               |  | 28,708                                  
|Direct general and administrative expenses                       |  | (27,238                                 
|Allocation of branch network general and administrative expenses |  | 6,879                                   
|Restructuring expenses                                           |  | (4,998                                  
|Revaluation of FMAC-related assets                               |  | (2,733                                  
|Leasing expenses                                                 |  | (27,286                                 
|Dividend expense on Capital Securities                           |  | (1,325                                  
|Real estate owned operations, net                                |  | (9                                      
|Amortization of intangible assets                                |  | (2,076                                  
|                                                                 |  |                                         
|Contribution by platform                                         |  | $    (23,195                            
|                                                                 |  |                                         
|Indirect corporate overhead                                      |  |                                         
|Income tax benefit                                               |  |                                         
|                                                                 |  |                                         
|Net loss                                                         |  |                                         
|                                                                 |  |                                         
|At June 30, 2001:                                                |  |                                         
|Interest-earning assets plus operating lease assets              |  | $1,931,453                              
|                                                                 |  |                                         
|Noninterest-earning assets                                       |  |                                         
|                                                                 |  |                                         
|Total assets                                                     |  |                                         
|                                                                 |  |                                         
|                                                                
|
|
|
|Interest income                                                  |  | $      54,296                           
|Interest expense                                                 |  | (38,671                                 
|Provision for losses on loans and leases                         |  |                                        
|Noninterest income                                               |  | 24,390                                  
|Direct general and administrative expenses                       |  | (17,945                                 
|Allocation of branch network general and administrative expenses |  | 4,808                                   
|Leasing expenses                                                 |  | (16,934                                 
|Dividend expense on Capital Securities                           |  | (1,316                                  
|Real estate owned operations, net                                |  | 12                                      
|Amortization of intangible assets                                |  | (2,187                                  
|                                                                 |  |                                         
|Contribution by platform                                         |  | $        6,453                          
|                                                                 |  |                                         
|Indirect corporate overhead                                      |  |                                         
|Income tax benefit                                               |  |                                         
|                                                                 |  |                                         
|Net income                                                       |  |                                         
|                                                                 |  |                                         
|At June 30, 2000:                                                |  |                                         
|Interest-earning assets plus operating lease assets              |  | $3,068,214                              
|                                                                 |  |                                         
|Noninterest-earning assets                                       |  |                                         
|                                                                 |  |                                         
|Total assets                                                     |  |                                         
|                                                                 |  |                                         

BAY VIEW CAPITAL CORPORATION AND SUBSIDIARIES





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





|                                                                 |  | For the Six Months Ended June 30, 2001
|---------------------------------------------------------------- |  | --------------------------------------
|
|
|Interest income                                                  |  | $  83,761                             
|Interest expense                                                 |  | (66,581                               
|Provision for losses on loans and leases                         |  | (5,609                                
|Noninterest income                                               |  | 60,661                                
|Direct general and administrative expenses                       |  | (50,034                               
|Allocation of branch network general and administrative expenses |  | 14,027                                
|Restructuring expenses                                           |  | (4,998                                
|Revaluation of FMAC-related assets                               |  | (2,733                                
|Leasing expenses                                                 |  | (45,043                               
|Dividend expense on Capital Securities                           |  | (2,609                                
|Real estate owned operations, net                                |  | 9                                     
|Amortization of intangible assets                                |  | (4,214                                
|                                                                 |  |                                       
|Contribution by platform                                         |  | $(23,363                              
|                                                                 |  |                                       
|Indirect corporate overhead                                      |  |                                       
|Income tax benefit                                               |  |                                       
|                                                                 |  |                                       
|Net loss                                                         |  |                                       
|                                                                 |  |                                       
|                                                                
|
|
|
|Interest income                                                  |  | $112,660                              
|Interest expense                                                 |  | (79,435                               
|Provision for losses on loans and leases                         |  | (5,200                                
|Noninterest income                                               |  | 54,792                                
|Direct general and administrative expenses                       |  | (37,286                               
|Allocation of branch network general and administrative expenses |  | 8,687                                 
|Leasing expenses                                                 |  | (32,315                               
|Dividend expense on Capital Securities                           |  | (2,683                                
|Real estate owned operations, net                                |  | 6                                     
|Amortization of intangible assets                                |  | (4,452                                
|                                                                 |  |                                       
|Contribution by platform                                         |  | $  14,774                             
|                                                                 |  |                                       
|Indirect corporate overhead                                      |  |                                       
|Income tax expense                                               |  |                                       
|                                                                 |  |                                       
|Net income                                                       |  |                                       
|                                                                 |  |                                       




Item 2.    Managements Discussion and Analysis of Financial Condition and Results of Operations





Strategic Overview





Bay View Capital Corporation is a commercial bank holding company headquartered in San Mateo, California.
Our principal subsidiary is Bay View Bank, N.A. We operate two distinct business platforms representing the two basic distribution channels of our primary businesses, retail and commercial banking.





Our Retail Platform includes 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. The platforms results include the income and expenses related to these business activities.





Our Commercial Platform includes multi-family and commercial real estate loans, franchise loans, asset-based
loans, factoring loans, commercial leases, and other business banking products and services. The platforms results include the income and expenses related to these business activities.





Our Mission and 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. On March 28, 2001, our Board of Directors approved a $110 million common stock rights offering. Common stockholders of record as of April 23, 2001 received one transferable right for each share of common stock held, which entitled the
holder to purchase .734 additional shares of Bay View common stock at a price of $4.59 per share. These rights expired on May 14, 2001. Our Board of Directors also approved a $27.5 million concurrent offering of securities to certain institutional
and other investors who would act as standby purchasers in the rights offering. We entered into agreements with these standby purchasers in the rights offering pursuant to which they agreed to purchase up to $82.5 million of the shares that were not
subscribed for in the rights offering. Keefe Ventures, LLC. acted as our financial consultant in identifying these standby purchasers. The rights offering and the concurrent offering to the standby purchasers were completed during the second quarter
and generated aggregate gross proceeds of $137.5 million. With this additional capital, we have begun to implement a new strategic plan adopted by our Board of Directors. The new strategic plan includes exiting businesses inconsistent with a
California-focused bank and includes assumptions related to the liquidation of our remaining franchise-related assets and operations and our remaining high loan-to-value home equity loans. During the second quarter, we completed the stock sale of
the legal entity BVFMAC and its related servicing platform, sold home equity loans totaling $143 million in outstanding principal which included approximately $90 million of high loan-to-value home equity loans and negotiated the sale of
approximately $300 million of franchise loans, expected to close in phases in the third quarter.





Retail Platform Strategy





One of the principal businesses of the Retail Platform is Bay View Banks 57 full-service branch
banking network. A primary objective of the Retail Platform is to enhance the value of our deposit franchise by focusing on deposit growth and expanding and enhancing products and services. A primary component of the Retail Platforms deposit
growth strategy has been to focus on lower-cost transaction accounts (e.g., checking, savings and money market accounts) as a source of financing. We also offer a full array of consumer banking products and services. We continued to make progress on
our goal of expanding our deposit base by growing transaction accounts and business deposits. Our transaction accounts grew $226.4 million, or 14.1%, during the first six months of 2001 and increased to 53.2% of total retail deposits at June 30,
2001, as compared to 46.2% at December 31, 2001, reflecting the continued strength of our deposit franchise.





The Retail Platform includes our single-family loan portfolio. We discontinued originating single-family
loans in 1996 to reduce our concentration risk and facilitate the change-out of our balance sheet from mortgage-based assets to higher-yielding commercial bank-like assets. As a result, the portfolio of single-family loans is decreasing over time as
these loans are repaid or sold.





The Retail Platforms home equity loan portfolio includes conventional home equity loans and lines of
credit and certain high loan-to-value home equity loans. We define conventional home equity loans and lines of credit as having combined loan-to-value ratios of less than or equal to 100% at origination. We define high loan-to-value home equity
loans as having combined loan-to-value ratios of greater than 100% at origination. Our home equity loan production efforts are focused on conventional home equity loans and lines of credit originated through our branch-banking network. A significant
portion of our high loan-to-value home equity loans was sold during 2000. Substantially all of the remaining high loan-to-value home equity loan portfolio was sold in June 2001.





The Retail Platform also originates and purchases fixed-rate loans secured by new and used autos. In
executing our strategy, we identify product niches which are not the primary focus of traditional competitors in the auto lending area, such as banks and captive finance companies. One such niche includes auto loans 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.





Commercial Platform Strategy





The Commercial Platforms objective is to increase our earnings potential and enhance our deposit
franchise by providing commercial bank-like products and services to small and middle-market businesses within California. The Commercial Platforms strategy centers on originating and purchasing commercial loans with higher risk-adjusted
returns.





The Commercial Platform originates multi-family and commercial real estate loans, asset-based loans and
factoring loans. We also purchased and originated franchise loans until the restructuring of our franchise lending division, which was shut down in September 2000. In connection with this restructuring, we intend to reduce our concentration of
franchise assets by selling our remaining franchise loans classified as held-for-sale. We sold $41.0 million and $136.2 million of franchise loans during the second quarter of 2001 and first six months of 2001, respectively. We had $284.7 million in
franchise loans held-for-sale as of June 30, 2001.





Results of Operations





Our net loss for the second quarter of 2001 was $95.4 million, or $2.11 per diluted share, as compared to
net income of $204,000 or $0.01 per diluted share, for the second quarter of 2000. Net loss for the first six months of 2001 was $103.3 million or $2.65 per diluted share, as compared with $722,000, or $0.02 per diluted share, for the first six
months of 2000. Results for the first six months of 2001 include specific charges consistent with our new strategic plan which has been implemented following the successful completion of our $137.5 million rights offering.





Specific charges recognized during the first six months of 2001 included $70 million in pre-tax charges
associated with the revaluation of franchise-related assets, $10 million of additional provision for impairment primarily as a result of revising the estimated residual values associated with the auto lease portfolio and $10 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 anticipated sale of approximately
$300 million in loans to Goldman Sachs Mortgage Co., as well as writedowns of other franchise-related assets, including $15.5 million in adjustments to servicing assets, $11.1 million in adjustments to residual interests on securitizations, and $5.0
million in adjustments to equity investments. The year-to-date loan loss provision totaled $59.7 million reflecting the charge-offs related to the mark-to-market on loans transferred from held-for-investment to held-for-sale primarily during the
second quarter as well as additional reserves provided on the remaining franchise loan portfolio.





Our results for the first six months of 2001 also included $12.1 million in net losses on sales of assets,
including losses on the sale of BVFMAC and the home equity loans offset by gains received during the first quarter of 2001 on our December 2000 asset sales and net gains on the sale of $282 million of Government National Mortgage Association
(GNMA) mortgage-backed securities and $136.2 million of franchise loans during the first half of the year.





Net Interest Income and Net Interest Margin





Net interest income was $29.7 million for the second quarter of 2001 as compared to $43.2 million for the
second quarter of 2000. Net interest income for the first six months of 2001 was $62.2 million as compared to $86.4 million for the first six months of 2000. Net interest margin was 2.83% for the second quarter of 2001 as compared to 3.25% for the
second quarter of 2000. Net interest margin was 2.88% for the first six months of 2001 as compared to 3.19% for the first six months of 2000. The following tables illustrate net interest income and net interest margin, by platform, for the periods
indicated:





|                    |  | For the Three Months Ended
|------------------- |  | --------------------------
|
|
|
|Retail Platform(1)  |  | $  8,483                  
|Commercial Platform |  | 21,261                    
|                    |  |                           
|Total               |  | $29,744                   
|                    |  |                           
|                   
|                   
|                   
|
|
|
|
|Retail Platform(1)  |  | $17,180                   
|Commercial Platform |  | 45,048                    
|                    |  |                           
|Total               |  | $62,228                   
|                    |  |                           




|(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 decreases in net interest income for the second quarter of 2001, as compared to the second quarter of
2000, and for the first six months of 2001, as compared to the first six months of 2000, were due to lower average interest-earning asset balances and lower net interest margin. The decrease in average interest-earning
assets was due primarily to franchise and home equity loan sales throughout the period from June 2000 to June 2001 as well as the December 2000 sales of franchise asset-backed and mortgage-backed securities, 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 decreased due to lower asset yields partially offset by lower funding costs. The decreases in both asset yields and funding
costs were primarily due to the lower interest rate environment. Our net interest margin, calculated in accordance with generally accepted accounting principles (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. For a discussion of normalized net interest income and net interest margin, including the revenue impact of our auto leasing activities, see Non-GAAP Performance MeasuresNormalized Net Interest Income and Net Interest
Margin.





Net interest income and net interest margin by platform reflect our strategy to sell off our higher-risk
assets, specifically high loan-to-value home equity loans and franchise 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 discussion of Interest Income and Interest Expense. The following tables illustrate average interest-earning
assets, excluding our auto-related operating lease assets, by platform, for the periods indicated:





|                    |  | Average Balances for the

Three Months Ended
|------------------- |  | --------------------------------------------
|
|
|Retail Platform     |  | $2,230,780                                  
|Commercial Platform |  | 1,948,223                                   
|                    |  |                                             
|Total               |  | $4,179,003                                  
|                    |  |                                             
|                   
|                   
|                   
|
|
|
|Retail Platform     |  | $2,241,031                                  
|Commercial Platform |  | 2,041,634                                   
|                    |  |                                             
|Total               |  | $4,282,665                                  
|                    |  |                                             




The decrease in the Retail Platforms average interest-earning assets, which exclude our auto-related
operating lease assets, reflects the impact of loan sales from June 2000 through June 2001 as discussed elsewhere herein or as previously disclosed. The decrease in the Commercial Platforms average interest-earning assets reflects franchise
loan sales from June 2000 through June 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 from September 2000 to June 2001.





The following table illustrates interest-earning assets, excluding our auto-related operating lease
assets, by platform, as of the dates indicated:





|                    |  | At June 30,

2001 |  | At

December

31, 2000 |  | At June 30,

2000
|------------------- |  | ----------------- |  | ---------------------- |  | -----------------
|
|Retail Platform     |  | $1,520,200        |  | $1,727,537             |  | $2,535,901       
|Commercial Platform |  | 1,833,502         |  | 2,178,619              |  | 2,619,686        
|                    |  |                   |  |                        |  |                  
|Total               |  | $3,353,702        |  | $3,906,156             |  | $5,155,587       
|                    |  |                   |  |                        |  |                  




The decrease in the Retail Platforms interest-earning assets, excluding our auto-related operating
lease assets, at June 30, 2001, as compared to December 31, 2000, was due primarily to the sale of $282 million in GNMA securities and $143 million of home equity loans during the second quarter of 2001. The loan sales were partially offset by the
deployment of loan sales proceeds from non interest-earning cash at December 31, 2000 into interest-earning short-term investments during the first quarter of 2001. The decrease in the Commercial Platforms interest-earning assets was due
primarily to the sale of $136.2 million of franchise loans during the first six months of 2001 combined with the impact of the writedowns related to the revaluation of our franchise-related 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 were calculated by dividing interest income by the average balance of interest-earning assets and by dividing interest expense by the average balance of
interest-bearing liabilities, for the periods indicated. Average balances of interest-earning assets and interest-bearing liabilities were calculated by averaging the relevant month-end amounts for the respective periods.





|                                           |  | AVERAGE BALANCES, YIELDS AND RATES
|------------------------------------------ |  | ----------------------------------
|
|
|
|Assets                                    
|                                           |  |                                   
|Interest-earning assets:                  
|Loans and leases                           |  | $2,938,419                        
|Mortgage-backed securities(1)              |  | 634,370                           
|Investments(1)                             |  | 606,214                           
|                                           |  |                                   
|Total interest-earning assets              |  | 4,179,003                         
|                                           |  |                                   
|Other assets                               |  | 686,203                           
|                                           |  |                                   
|Total assets                               |  | $4,865,206                        
|                                           |  |                                   
|Liabilities and Stockholders Equity      
|                                           |  |                                   
|Interest-bearing liabilities:             
|Deposits                                   |  | $3,561,939                        
|Borrowings(2)                              |  | 882,642                           
|                                           |  |                                   
|Total interest-bearing liabilities         |  | 4,444,581                         
|                                           |  |                                   
|Other liabilities                          |  | 79,115                            
|                                           |  |                                   
|Total liabilities                          |  | 4,523,696                         
|                                           |  |                                   
|Stockholders equity                       |  | 341,510                           
|                                           |  |                                   
|Total liabilities and stockholders
equity |  | $4,865,206                        
|                                           |  |                                   
|Net interest income/net interest spread    |  |                                   
|                                           |  |                                   
|Net interest-bearing liabilities           |  | $  (265,578                       
|                                           |  |                                   
|Net interest margin(3)                     |  |                                   
|                                           |  |                                   




|(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 includes interest expense on interest rate swaps and caps of $0.2 million and $0.1 million
for the three months ended June 30, 2001 and 2000, respectively. Interest expense for borrowings excludes expenses related to our Capital Securities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Annualized net interest income divided by average interest-earning assets.
|--- | --------------------------------------------------------------------------

|                                           |  | AVERAGE BALANCES, YIELDS AND RATES
|------------------------------------------ |  | ----------------------------------
|
|
|
|Assets                                    
|                                           |  |                                   
|Interest-earning assets:                  
|Loans and leases                           |  | $3,035,765                        
|Mortgage-backed securities(1)              |  | 643,899                           
|Investments(1)                             |  | 603,001                           
|                                           |  |                                   
|Total interest-earning assets              |  | 4,282,665                         
|                                           |  |                                   
|Other assets                               |  | 733,811                           
|                                           |  |                                   
|Total assets                               |  | $5,016,476                        
|                                           |  |                                   
|Liabilities and Stockholders Equity      
|                                           |  |                                   
|Interest-bearing liabilities:             
|Deposits                                   |  | $3,622,590                        
|Borrowings (2)                             |  | 961,391                           
|                                           |  |                                   
|Total interest-bearing liabilities         |  | 4,583,981                         
|                                           |  |                                   
|Other liabilities                          |  | 111,729                           
|                                           |  |                                   
|Total liabilities                          |  | 4,695,710                         
|Stockholders equity                       |  | 320,766                           
|                                           |  |                                   
|Total liabilities and stockholders
equity |  | $5,016,476                        
|                                           |  |                                   
|Net interest income/net interest spread    |  |                                   
|                                           |  |                                   
|Net interest-bearing liabilities           |  | $  (301,316                       
|                                           |  |                                   
|Net interest margin(3)                     |  |                                   
|                                           |  |                                   




|(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 includes interest expense on interest rate swaps and caps of $0.4 million and $0.3 million
for the six months ended June 30, 2001 and 2000, respectively. Interest expense for borrowings excludes expenses related to our Capital Securities.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Annualized net interest income divided by average interest-earning assets.
|--- | --------------------------------------------------------------------------




Interest Income





Interest income was $84.1 million for the second quarter of 2001 as compared to $114.7 million for the
second quarter of 2000. Interest income was $178.6 million for the first six months of 2001 as compared to $229.1 million for the first six months of 2000. The average yield on interest-earning assets was 8.04% for the second quarter of 2001 as
compared to 8.69% for the second quarter of 2000. The average yield on interest-earning assets was 8.35% for the first six months of 2001 as compared to 8.53% for the first six months of 2000. The following tables illustrate interest income, by
platform, for the periods indicated:





|                           |  | For the Three Months Ended
|-------------------------- |  | --------------------------
|
|
|
|Retail Platform:           |  |                           
|Loans                      |  | $1,005,259                
|Mortgage-backed securities |  | 634,370                   
|Investments                |  | 591,151                   
|                           |  |                           
|Total Retail
Platform      |  | 2,230,780                 
|                           |  |                           
|Commercial Platform:       |  |                           
|Loans and leases           |  | 1,933,160                 
|Investments                |  | 15,063                    
|                           |  |                           
|Total Commercial
Platform  |  | 1,948,223                 
|                           |  |                           
|Total                      |  | $4,179,003                
|                           |  |                           
|                          
|                          
|                          
|
|
|
|
|Retail Platform:           |  |                           
|Loans                      |  | $1,010,931                
|Mortgage-backed securities |  | 643,899                   
|Investments                |  | 586,201                   
|                           |  |                           
|Total Retail
Platform      |  | 2,241,031                 
|                           |  |                           
|Commercial Platform:       |  |                           
|Loans and leases           |  | 2,024,834                 
|Investments                |  | 16,800                    
|                           |  |                           
|Total Commercial
Platform  |  | 2,041,634                 
|                           |  |                           
|Total                      |  | $4,282,665                
|                           |  |                           




| | Retail Platform
| | ---------------




Interest income for the Retail Platform was $40.2 million for the second quarter of 2001 as compared to
$54.3 million for the second quarter of 2000. Interest income for the Retail Platform was $83.8 million for the first six months of 2001 as compared to $112.7 million for the first six months of 2000. The average yield on interest-earning assets for
the Retail Platform was 7.21% for the second quarter of 2001 as compared to 8.08% for the second quarter of 2000. The average yield on interest-earning assets for the Retail Platform was 7.49% for the first six months of 2001 as compared to 7.87%
for the first six months of 2000.





The Retail Platforms interest income on loans was $21.5 million for the second quarter of 2001 as
compared to $32.2 million for the second quarter of 2000. The Retail Platforms interest income on loans was $43.9 million for the first six months of 2001 as compared to $75.0 million for the first six months of 2000. The Retail
Platforms average loan yield was 8.59% for the second quarter of 2001 as compared to 8.62% for the second quarter of 2000. The Retail Platforms average loan yield was 8.72% for the first six months of 2001 as compared to 8.36% for the
first six months of 2000. The decrease in interest income on loans for the second quarter of 2001, as compared to the second quarter of 2000, was due to lower average loan balances, as previously discussed, combined with a lower yield due to the
lower interest rate environment. The decrease in interest income for the first six months of 2001, as compared to the first six months of 2000, was due to lower average loan balances, partially offset by an increase in the platforms average
loan yield, which was primarily due to a change in the mix of average retail loans from mortgage loans to relatively higher-yielding auto loans.





The Retail Platforms interest income on mortgage-backed securities was $11.4 million for the second
quarter of 2001 as compared to $16.4 million for the second quarter of 2000. The Retail Platforms interest income on mortgage-backed securities was $23.6 for the first six months of 2001 as compared to $28.6 million for the first six months of
2000. The Retail Platforms average yield on mortgage-backed securities was 7.19% for the second quarter of 2001 as compared to 7.20% for the second quarter of 2000. The Retail Platforms average yield on mortgage-backed securities was
7.34% for the first six months of 2001 as compared to 6.95% for the first six months of 2000. The decrease in net interest income on mortgage-backed securities for the second quarter of 2001, as compared to the second quarter of 2000, was due to
lower average balances. The decrease in net interest income on mortgage-backed securities for the first six months of 2001, as compared to the first six months of 2000, was due to lower average balances partially offset by a higher yield. The
average balance decreased as purchases of mortgage-backed securities were more than offset by sales, including the sale of $231 million of Government National Mortgage Association (sometimes referred to as GNMA) securities during December 2000.
These securities were transferred from our held-for-investment portfolio to available-for-sale in connection with our adoption of Statement No. 133 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. The increase in average yield was due to purchases of relatively higher-yielding GNMA securities during 2000. These securities, which have a zero
risk-based regulatory capital requirement, had yields higher than our existing mortgage-backed securities portfolio.





The Retail Platforms interest income on investment securities, which consist primarily of short-term
investments and our retained interests in auto loan securitizations, was $7.3 million for the second quarter of 2001 as compared to $5.7 million for the second quarter of 2000. The Retail Platforms interest income on investment securities was
$16.2 million for the first six months of 2001 as compared to $9.1 million for the first six months of 2000. The Retail Platforms average yield on investment securities was 4.88% for the second quarter of 2001 as compared to 8.09% for the
second quarter of 2000. The Retail Platforms average yield on investment securities was 5.53% for the first six months of 2001 as compared to 7.37% for the first six months of 2000. The increases in interest income on investments for the
second quarter of 2001, as compared to the second quarter of 2000, and for the first six months of 2001, as compared to the first six months of 2000, were due primarily to a higher average balance partially offset by a decrease in average yield
attributable to the lower interest rate environment. In addition, proceeds from our loan sales and/or securitizations from June 2000 through December 2000 were deployed into short-term investments which have a lower yield relative to the total
investment securities portfolio.





| | Commercial Platform
| | -------------------




Interest income for the Commercial Platform was $43.9 million for the second quarter of 2001 as compared to
$60.4 million for the second quarter of 2000. Interest income for the Commercial Platform was $94.8 million for the first six months of 2001 as compared to $116.5 million for the first six months of 2000. The average yield on interest-earning assets
for the Commercial Platform was 8.98% for the second quarter of 2001 as compared to 9.31% for the second quarter of 2000. The average yield on interest-earning assets for the Commercial Platform was 9.30% for the first six months of 2001 as compared
to 9.28% for the first six months of 2000.





The Commercial Platforms interest income on loans was $43.7 million for the second quarter of 2001
as compared to $55.3 million for the second quarter of 2000. The Commercial Platforms interest income on loans was $93.7 million for the first six months of 2001 as compared to $109.7 million for the first six months of 2000. The Commercial
Platforms average loan and lease yield was 9.01% for the second quarter of 2001 as compared to 9.37% for the second quarter of 2000. The Commercial Platforms average loan and leases yield was 9.26% for the first six months of 2001 as
compared to 9.23% for the first six months of 2000. The decreases in interest income on loans and leases for the second quarter of 2001, as compared to the second quarter of 2000, and for the first six months of 2001, as compared to the first six
months of 2000, were due to lower average loan and lease balances resulting from loan sales and/or securitizations from June 2000 to June 2001 and the writedowns related to the revaluation of franchise loans from September 2000 to June
2001.





The Commercial Platforms interest income on investment securities, which consist of asset-backed
securities and residual interests in franchise loan securitizations, was $0.2 million for the second quarter of 2001 as compared to $5.1 million for the second quarter of 2000. The Commercial Platforms interest income on investment securities
was $1.1 million for the first six months of 2001 as compared to $6.8 million for the first six months of 2000. The Commercial Platforms average yield on investment securities was 5.97% for the second quarter of 2001 as compared to 8.71% for
the second quarter of 2000. The Commercial Platforms average yield on investment securities was 13.77% for the first six months of 2001 as compared to 10.11% for the first six months of 2000. The decreases in interest income on investment
securities for the second quarter of 2001, as compared to the second quarter of 2000, and the first six months of 2001, as compared to the first six months of 2000, were due to lower average balances primarily resulting from the December 2000 sale
of franchise asset-backed securities and the revaluation of residual interests in franchise loan securitizations during 2000 and the first six months of 2001 (see Revaluation of FMAC-related Assets for further discussion).





Interest Expense





| | Deposits
| | --------




Interest expense on our deposits was $39.5 million for the second quarter of 2001 as compared to $41.2
million for the second quarter of 2000. Interest expense on our deposits was $83.4 million for the first six months of 2001 as compared to $81.1 million for the first six months of 2000. The average cost of deposits was 4.44% for the second quarter
of 2001 as compared to 4.53% for the second quarter of 2000. The average cost of deposits was 4.64% for the first six months of 2001 as compared to 4.44% for the first six months of 2000. The decrease in interest expense for the second quarter of
2001, as compared to the second quarter of 2000, was primarily due to the lower interest rate environment combined with an increase in our transaction accounts as a percentage of our total retail deposits. Our transaction accounts, which are
generally lower-cost deposits relative to retail certificates of deposits, increased to 53.2% of total retail deposits at June 30, 2001 from 51.3% at June 30, 2000. The increase in interest expense on deposits for the first six months of 2001, as
compared to the first six months of 2000, was primarily due to retail certificates of deposit priced in the second half of 2000 at higher interest rates.





The following table summarizes our deposit costs by type and our transaction accounts as a percentage of
retail deposits for the periods indicated:





|                                                        |  | At or For the Three Months Ended
|------------------------------------------------------- |  | --------------------------------
|
|Transaction accounts                                    |  | 3.18                            
|Retail certificates of deposit                          |  | 5.58                            
|                                                        |  |                                 
|Total retail deposits                                   |  | 4.35                            
|Brokered certificates of deposit                        |  | 7.30                            
|                                                        |  |                                 
|Total deposits                                          |  | 4.44                            
|                                                        |  |                                 
|Transaction accounts as a percentage of retail deposits |  | 53.2                            
|                                                        |  |                                 




| | Borrowings
| | ----------




Interest expense on our borrowings was $14.9 million for the second quarter of 2001 as compared to $30.3
million for the second quarter of 2000. Interest expense on our borrowings was $33.0 million for the first six months of 2001 as compared to $61.7 million for the first six months of 2000. The average cost of borrowings was 6.76% for the second
quarter of 2001 as compared to 6.39% for the second quarter of 2000. The average cost of borrowings was 6.89% for the first six months of 2001 as compared to 6.35% for the first six months of 2000. In accordance with GAAP, these amounts exclude the
expense associated with our Capital Securities. The decreases in interest expense on borrowings for the second quarter of 2001, as compared to the second quarter of 2000, and for the first six months of 2001, as compared to the first six months of
2000, were due primarily to lower average balances, partially offset by higher funding costs. The decrease in average balances was 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 the latter half of 2000 and the first six months of 2001. The increase in borrowing costs was due to the higher interest rate environment during the second half of 2000 and higher
costs associated with our warehouse lines.





The following tables illustrate 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 three- and six-month periods ended June 30, 2001 as compared to the three- and six-month periods ended June 30, 2000. 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 Three Months Ended

June 30, 2001 vs. 2000
|-------------------------- |  | --------------------------------------------------
|
|
|Interest income:          
|Loans and leases           |  | $(1,989                                           
|Mortgage-backed securities |  | (23                                               
|Investment securities      |  | (5,606                                            
|                           |  |                                                   
|                           |  | (7,618                                            
|                           |  |                                                   
|Interest expense:         
|Deposits                   |  | (763                                              
|Borrowings                 |  | 1,872                                             
|                           |  |                                                   
|                           |  | 1,109                                             
|                           |  |                                                   
|Net interest income        |  | $(8,727                                           
|                           |  |                                                   




|                           |  | For the Six Months Ended

June 30, 2001 vs. 2000
|-------------------------- |  | ------------------------------------------------
|
|
|Interest income:          
|Loans and leases           |  | $  4,747                                        
|Mortgage-backed securities |  | 1,733                                           
|Investment securities      |  | (1,763                                          
|                           |  |                                                 
|                           |  | 4,717                                           
|                           |  |                                                 
|Interest expense:         
|Deposits                   |  | 2,146                                           
|Borrowings                 |  | 5,813                                           
|                           |  |                                                 
|                           |  | 7,959                                           
|                           |  |                                                 
|Net interest income        |  | $(3,242                                         
|                           |  |                                                 




Provision for Losses on Loans and Leases





The provision for losses on loans and leases for the second quarter of 2001 was $52.4 million as compared to
$9.5 million for the second quarter of 2000. The provision for losses on loans and leases for the first six months of 2001 was $59.7 million as compared to $17.5 million for the first six months of 2000. The increases in the provision for losses on
loans and leases for the second quarter of 2001, as compared to the second quarter of 2000, and for the first six months of 2001, as compared to the first six months of 2000, were primarily due to $52.1 million in charge-offs related to the
mark-to-market on loans transferred from held-for-investment to held-for-sale during the quarter as well as additional reserves provided 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 Three Months Ended
|------------------- |  | --------------------------
|
|
|Retail Platform     |  | $  1,600                  
|Commercial Platform |  | 50,833                    
|                    |  |                           
|Total               |  | $52,433                   
|                    |  |                           
|                   
|                   
|                   
|
|
|
|Retail Platform     |  | $  5,609                  
|Commercial Platform |  | 54,124                    
|                    |  |                           
|Total               |  | $59,733                   
|                    |  |                           




Noninterest Income





Noninterest income for the second quarter of 2001 was $8.1 million as compared to $33.6 million for the
second quarter of 2000. Noninterest income for the first six months of 2001 was $50.2 million as compared to $68.1 million for the first six months of 2000. The decreases in noninterest income for the second quarter of 2001, as compared to the
second quarter of 2000, and for the first six months of 2001, as compared to the first six months of 2000, were largely attributable to higher net losses on sales of assets and liabilities in the Commercial Platform. The following tables illustrate
noninterest income, by platform, for the periods indicated:





|                    |  | For the Three Months Ended
|------------------- |  | --------------------------
|
|
|Retail Platform     |  | $  28,708                 
|Commercial Platform |  | (20,657                   
|                    |  |                           
|Total               |  | $    8,051                
|                    |  |                           
|                   
|                   
|                   
|
|
|
|Retail Platform     |  | $  60,661                 
|Commercial Platform |  | (10,503                   
|                    |  |                           
|Total               |  | $  50,158                 
|                    |  |                           




Noninterest income for the second quarter of 2001 included losses on sales of assets totaling $22.7
million, consisting of net losses of $23.9 million within the Commercial Platform partially offset by net gains of $1.2 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. The gain within the Retail Platform was primarily due to the $11.9 gain on the sale of GNMA mortgage-backed securities offset by the $11.0 loss on the sale of home equity loans. Noninterest income for the first quarter of 2001 included
$10.1 million of contingent gains received during the first quarter of 2001 related to December 2000 asset sales, consisting of $6.5 million within the Commercial Platform and $3.6 million within the Retail Platform.





Noninterest income for the second quarter of 2000 included a $10.0 million gain on the auction of $180
million of Federal Home Loan Bank liabilities with below-market interest rates and net gains of $1.0 million on sales of loans and leases, all of which were in the Commercial Platform. These gains were partially offset by a $4.7 million loss on the
sale of substantially all of the assets and certain liabilities of Bankers Mutual in the Commercial Platform and $5.1 million in losses in the Retail Platform primarily related to the revaluation of our retained interests in our 2000 auto loan
securitization combined with charges associated with the anticipated exercise of the cleanup call on our 1997 auto loan securitization. Noninterest income for the first quarter of 2000 included a $2.1 million gain for the Retail Platform associated
with the sale of servicing rights and $1.3 million in gains for the Commercial Platform from the sales of multi-family mortgage loans.





Noninterest Expense





| | General and Administrative Expenses
| | -----------------------------------




General and administrative expenses for the second quarter of 2001 were $44.7 million as compared to $42.8
million for the second quarter of 2000. General and administrative expenses for the first six months of 2001 were $80.1 million as compared to $84.1 million for the first six months of 2000. Excluding special mention items, as discussed below, the
decreases in general and administrative expenses for the second quarter of 2001, as compared to the second quarter of 2000, and for the first six months of 2001, as compared to the first six months of 2000, were due to the elimination of BVFMAC loan
production expenses with the shutdown of the division effective September 2000 and the elimination of Bankers Mutual expenses with the sale of that subsidiary effective June 2000.





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. General and administrative expenses for the second quarter of 2001 included $8.7 million in special
mention items primarily consisting of $2.6 million related to the Companys issuance of stock options during the quarter with below market strike prices, $2.4 million related to the prepayment of FHLB advances and $2.4 million in legal and
professional fees related to the implementation of the Companys new strategic plan. There were no special mention items included in general and administrative expenses for the first quarter of 2001. General and administrative expenses for the
second quarter of 2000 included $1.3 million in special mention items largely related to BVFMAC transition costs and other operational restructuring charges. General and administrative expenses for the first quarter of 2000 included $2.4 million in
transition and restructuring charges, including the consolidation of certain loan servicing operations, the closure of an FMAC satellite loan production office and the outsourcing of our internal audit function.





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





|                               |  | For the

Three Months Ended
|------------------------------ |  | ---------------------------
|
|
|Retail Platform                |  | $27,238                    
|Commercial Platform            |  | 7,406                      
|                               |  |                            
|Subtotal                       |  | 34,644                     
|Indirect corporate overhead(1) |  | 10,062                     
|                               |  |                            
|Total                          |  | $44,706                    
|                               |  |                            
|                              
|                              
|
|
|
|Retail Platform                |  | $50,034                    
|Commercial Platform            |  | 15,050                     
|                               |  |                            
|Subtotal                       |  | 65,084                     
|Indirect corporate overhead(1) |  | 15,039                     
|                               |  |                            
|Total                          |  | $80,123                    
|                               |  |                            




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




The following tables illustrate 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

Three Months Ended
|----------------------------------------------------------------------------------------------------------------------- |  | ---------------------------
|
|
|General and administrative expenses                                                                                     |  | $      44,706              
|Average total assets, including auto-related securitized assets                                                         |  | $5,022,054                 
|                                                                                                                        |  |                            
|Annualized general and administrative expenses to average total assets,

     including auto-related securitized assets |  | 3.56                       
|                                                                                                                        |  |                            
|                                                                                                                       
|
|
|
|General and administrative expenses                                                                                     |  | $      80,123              
|Average total assets, including auto-related Securitized assets                                                         |  | $5,185,124                 
|                                                                                                                        |  |                            
|Annualized general and administrative expenses to Average total assets,

     including auto-related securitized assets |  | 3.09                       
|                                                                                                                        |  |                            




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 tables illustrate the efficiency ratio for the periods indicated:





|                                    |  | For the Three

Months Ended
|----------------------------------- |  | ---------------------------
|
|
|General and administrative expenses |  | $44,706                    
|Operating revenues, as defined      |  | $43,820                    
|                                    |  |                            
|Efficiency ratio                    |  | 102.0                      
|                                    |  |                            




|                                    |  | For the Six

Months Ended
|----------------------------------- |  | -------------------------
|
|
|General and administrative expenses |  | $  80,123                
|Operating revenues, as defined      |  | $101,130                 
|                                    |  |                          
|Efficiency ratio                    |  | 79.2                     
|                                    |  |                          




The increase in the efficiency ratio for the second quarter of 2001, as compared to the second quarter of
2000, was due to lower net interest income, noninterest income, and net leasing-related rental income combined with higher general and administrative expenses. The increase in the efficiency ratio for the first six months of 2001, as compared to the
first six months of 2000, was due to lower net interest income partially offset by higher noninterest income and lower general and administrative expenses.





| | Restructuring Expenses
| | ----------------------




As part of the Companys ongoing efforts to focus on its core banking operations, $10.0 million in
restructuring charges were recorded during the second quarter of 2001 primarily related to the reduction in our workforce, expected to be completed by the end of 2001. The restructuring charges consisted of $6.7 million of severance and $3.3 million
of facilities charges. As previously announced, the reduction in our workforce will affect about 100 employees primarily from business lines that we are exiting, such as franchise operations, and certain redundant operations.





| | Revaluation of FMAC-Related Assets
| | ----------------------------------




A revaluation of certain FMAC-related assets resulted in a $70 million pre-tax adjustment for the first six
months of 2001. The revaluation included a $31.7 million adjustment related to the anticipated sale of approximately $300 million in loans to Goldman Sachs Mortgage Co. as well as writedowns of other franchise-related assets. 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.





| | Leasing Expenses
| | ----------------




Leasing expenses represent 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. Leasing expenses were $27.3 million for the second quarter of 2001 as compared to $16.9 million for the second quarter of 2000. Leasing expenses were $45.0 million for the first six months of 2001 as compared to $32.3
million for the first six months of 2000. The increase in leasing expenses was due to the $10.0 million of additional provision for impairment primarily as a result of
revising the estimated residual values associated with the auto lease portfolio that was recorded during the second quarter. We ceased purchasing auto leases on June 30, 2000.





| | 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 incur quarterly cumulative dividends at an annual rate of 9.76% of the liquidation value of $25 per share. Dividend expense on the Capital Securities was $2.3 million for the second
quarter of 2001 as compared to $2.2 million for the second quarter of 2000. Dividend expense on the Capital Securities was $4.6 million for the first six months of 2001 and $4.5 million for the first six months of 2000.





In September of 2000, we entered into an agreement with the Federal Reserve Bank which requires that we
obtain their approval prior to disbursing any dividends associated with our Capital Securities. For the third and fourth quarters of 2000 and the first and second quarters of 2001, our requests for approval were denied. As a result, pursuant to the
terms of the Capital Securities, we have deferred distributions until such time as approval can be obtained. We fully intend to continue to seek such approval; however, we cannot predict when approval may be obtained. 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.





| | Amortization of Intangible Assets
| | ---------------------------------




Amortization expense related to intangible assets was $2.8 million for the second quarter of 2001 as
compared to $6.5 million for the second quarter of 2000. Amortization expense related to intangible assets was $5.7 million for the first six months of 2001 as compared to $12.8 million for the first six months of 2000. The decreases in amortization
expense were due to lower amortization expense in the Commercial Platform related to the elimination of goodwill related to the BVFMAC loan production unit and Bankers Mutual. As previously discussed, our BVFMAC loan production and related
operations were shut down as of September 30, 2000 and our Bankers Mutual subsidiary was sold effective June 30, 2000.





| | Income Taxes
| | ------------




Our income tax benefit was $59.5 million for the second quarter and the first six months of 2001 as compared
to income tax benefit of $1.3 million for the second quarter of 2000 and income tax expense of $2.5 million for the first six months of 2000. Our effective tax rate for the first six months of 2001, based on our projected 2001 pre-tax loss, is a
36.5% tax benefit. This compares to an effective tax rate of 77.8% tax expense for the first six months of 2000.





No tax benefit was recorded on the pre-tax loss of $7.97 million in the first quarter of 2001. At that time,
management determined that we would likely not realize the benefits from these additional deferred tax assets. Based on the completion of the rights offering and the adoption of the new strategic plan during the second quarter of 2001, in
managements judgement, the realizability of deferred tax assets is now more likely than not. Therefore, the $2.9 million tax benefit previously unrecognized on the $7.97 million pre-tax loss reported in the first quarter 2001 has been reported
in the second quarter of 2001. The total net deferred tax asset at June 30, 2001 was $152.6 million, which is net of the $26 million valuation allowance as established in 2000.





Non-GAAP Performance Measures





The following measures of normalized net interest income and normalized net interest margin are not measures
of performance in accordance with GAAP. These measures should not be considered alternatives to net interest income and net interest margin as indicators of our operating performance. These measures are included because we believe they are useful
tools to assist you in assessing our performance and trends. These measures may not be comparable to similarly titled measures reported by other companies.





Normalized Net Interest Income and Net Interest Margin





Normalized net interest income and net interest margin include net rental income from our auto leasing
activities (that is, the excess of rental income over depreciation expense on auto-related lease assets), which are principally funded by our deposits, and also include expenses related to our Capital Securities. Because our auto leases are
accounted for as operating leases, the rental income is reflected as noninterest income and the related expenses, including depreciation expense, are reflected as noninterest expenses, in accordance with GAAP. Normalized net interest income also
excludes certain non-recurring interest income and interest expense items.





Normalized net interest income for second quarter of 2001 was $36.5 million as compared to $50.5 million for
the second quarter of 2000. Normalized net interest income for the first six months of 2001 was $76.0 million as compared to $100.2 million for the first six months of 2000. Normalized net interest margin for the second quarter of 2001 was 3.13% as
compared to 3.46% for the second quarter of 2000. Normalized net interest margin for the first six months of 2001 was 3.17% as compared to 3.39% for the first six months of 2000. The following tables illustrate normalized net interest income and net
interest margin, by platform, for the periods indicated:





|                    |  | For the Three Months Ended
|------------------- |  | --------------------------
|
|
|
|Retail Platform     |  | $16,168                   
|Commercial Platform |  | 20,299                    
|                    |  |                           
|Total               |  | $36,467                   
|                    |  |                           
|                   
|                   
|                   
|
|
|
|
|Retail Platform     |  | $32,934                   
|Commercial Platform |  | 43,082                    
|                    |  |                           
|Total               |  | $76,016                   
|                    |  |                           




The decreases in normalized net interest income and normalized net interest margin for the second quarter of
2001, as compared to the second quarter of 2000, and for the first six months of 2001, as compared to the first six months of 2000, were largely attributable to decreases in average interest-earning assets and lower asset yields, as previously
discussed, partially offset by lower funding costs.





The following tables illustrate average interest-earning assets, including our auto-related operating
lease assets, by platform, for the periods indicated:





|                    |  | Average Interest-Earning

Assets for the

Three Months Ended
|------------------- |  | ------------------------------------------------------------
|
|
|Retail Platform     |  | $2,682,723                                                  
|Commercial Platform |  | 1,948,223                                                   
|                    |  |                                                             
|Total               |  | $4,630,946                                                  
|                    |  |                                                             
|                   
|                   
|                   
|
|
|
|Retail Platform     |  | $2,706,616                                                  
|Commercial Platform |  | 2,041,634                                                   
|                    |  |                                                             
|Total               |  | $4,748,250                                                  
|                    |  |                                                             




The decrease in the Retail Platforms average interest-earning assets, including our auto-related
operating lease assets, reflects the impact of loan sales from June 2000 through June 2001 as discussed elsewhere herein or as previously disclosed. The decrease in the Commercial Platforms average interest-earning assets reflects franchise
loan sales and securitizations from June 2000 through June 2001, the December 2000 sale of franchise asset-backed securities and the impact of the writedowns related to the revaluation of our franchise-related assets from September 2000 to June
2001.





The following tables illustrate interest-earning assets, including our auto-related operating lease assets,
by platform, as of the dates indicated:





|                    |  | At

June 30,

2001 |  | At

December 31,

2000 |  | At

June 30,

2000
|------------------- |  | ------------------ |  | ---------------------- |  | ------------------
|
|Retail Platform     |  | $1,931,453         |  | $2,207,366             |  | $3,068,214        
|Commercial Platform |  | 1,833,502          |  | 2,178,619              |  | 2,619,686         
|                    |  |                    |  |                        |  |                   
|Total               |  | $3,764,955         |  | $4,385,985             |  | $5,687,900        
|                    |  |                    |  |                        |  |                   




The decrease in the Retail Platforms interest-earning assets, including our auto-related operating
lease assets, at June 30, 2001, as compared to December 31, 2000, reflects the impact of the sales of mortgage-backed securities and home equity loans during the second quarter of 2001, offset by an increase in short-term investments, as previously
discussed. The decrease in the Commercial Platforms interest earning assets reflects the impact of franchise loan sales during the first six months of 2001 and the writedowns related to the revaluation of our franchise-related
assets.





Balance Sheet Analysis





Our total assets were $4.3 billion at June 30, 2001, as compared to $5.4 billion at December 31, 2000. The
decrease in total assets was primarily due to a decline in cash and short-term investments as we utilized these funds to reduce borrowings during the first six months of 2001, the sale of investment securities, loan and lease sales and paydowns, and
the revaluation of our franchise-related assets, partially offset by loan and lease originations.





Securities





The following table illustrates our securities portfolio, including mortgage-backed securities due from
creditor, as of the dates indicated:





|                                            |  | June 30, 2001 |  | December 31, 2000
|------------------------------------------- |  | ------------- |  | -----------------
|
|
|Available-for-sale                          |  |               |  |                  
|Investment securities:                      |  |               |  |                  
|Federal National Mortgage Association stock |  | $      580    |  | $      814       
|Federal Home Loan Bank callable notes       |  | 10,000        |  | 9,988            
|Sallie Mae floating-rate bond               |  | 19,735        |  | 19,812           
|Asset-backed securities                     |  | 17,417        |  | 17,391           
|Retained interests in securitizations       |  | 20,293        |  | 20,293           
|                                            |  |               |  |                  
|Total investment
securities                 |  | 68,025        |  | 68,298           
|                                            |  |               |  |                  
|Mortgage-backed securities:                 |  |               |  |                  
|Issued by GNMA                              |  | 90,065        |  | 90,163           
|Issued by Freddie Mac and Fannie Mae        |  | 221,813       |  | 220,057          
|Issued by other financial intermediaries    |  | 9,345         |  | 9,455            
|CMOs                                        |  | 2,470         |  | 2,472            
|                                            |  |               |  |                  
|Total mortgage-backed
securities            |  | 323,693       |  | 322,147          
|                                            |  |               |  |                  
|Total securities
available-for-sale         |  | $391,718      |  | $390,445         
|                                            |  |               |  |                  
|                                           
|                                           
|                                           
|Held-to-maturity                            |  |               |  |                  
|Mortgage-backed securities:                 |  |               |  |                  
|Issued by GNMA                              |  |              |  |                 
|Issued by Freddie Mac and Fannie Mae        |  |              |  |                 
|Issued by other financial intermediaries    |  |              |  |                 
|CMOs                                        |  |              |  |                 
|                                            |  |               |  |                  
|Total mortgage-backed
securities            |  |              |  |                 
|                                            |  |               |  |                  
|Total securities
held-to-maturity           |  | $            |  | $               
|                                            |  |               |  |                  




Our securities activities are primarily conducted by Bay View Bank. Bay View Bank has historically purchased
securities to supplement 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.





During the second quarter of 2001, we transferred our remaining held-to-maturity securities to
available-for-sale. The decrease in our total securities at June 30, 2001, as compared to December 31, 2000, was primarily due to the sale of $282.0 million of GNMA securities during the second quarter of 2001 combined with the $11.1 million
revaluation of our retained interests in loan and lease securitizations, as previously discussed. The decrease was partially offset by purchases of $83.2 million of GNMA mortgage-backed securities, $19.7 million of Sallie Mae floating-rate bonds,
$16.0 million of asset-backed securities, and $10.0 million of Federal Home Loan Bank callable notes during the first six months of 2001. As a result of the transfer and subsequent sales of investment securities from our held-to-maturity portfolio,
we do not intend to hold any investment securities as held-to-maturity in the foreseeable future.





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 than 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.





Loans and Leases





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





|                                                         |  | June 30,

2001 |   | December 31,

2000
|-------------------------------------------------------- |  | -------------- | - | ------------------
|
|Loans and leases receivable:                             |  |                |   |                   
|Retail Platform:                                         |  |                |   |                   
|Single-family mortgage
loans                             |  | $    334,559   |   |                   
|High loan-to-value home
equity loans and lines of credit |  | 15,297         |   |                   
|Other home equity loans
and lines of credit              |  | 115,051        |   |                   
|Auto loans(1)                                            |  | 366,808        |   |                   
|                                                         |  |                |   |                   
|Total retail loans                                       |  | 831,715        |   |                   
|Commercial Platform:                                     |  |                |   |                   
|Multi-family mortgage
loans                              |  | 633,437        |   |                   
|Commercial mortgage
loans                                |  | 314,605        |   |                   
|Franchise loans                                          |  | 171,433        |   |                   
|Asset-based loans,
factoring loans and commercial leases |  | 347,050        |   |                   
|Business loans                                           |  | 75,742         |   |                   
|                                                         |  |                |   |                   
|Total commercial loans and leases                        |  | 1,542,267      |   |                   
|                                                         |  |                |   |                   
|Gross loans and leases held for investment               |  | 2,373,982      |   |                   
|Premiums and discounts and deferred fees and costs, net  |  | 14,687         |   |                   
|Allowance for losses on loans and leases                 |  | (54,606        | ) |                   
|                                                         |  |                |   |                   
|Loans and leases held-for-investment, net                |  | 2,334,063      |   |                   
|Loans and leases held-for-sale(2)                        |  | 292,348        |   |                   
|                                                         |  |                |   |                   
|Loans and leases receivable                              |  | $2,626,411     |   |                   
|                                                         |  |                |   |                   




|(1) | Amounts exclude auto-related operating lease assets reported separately from loans and leases totaling $411.3 million at June
30, 2001 and $479.8 million at December 31, 2000.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes loans with an unpaid principal balance of $409.3 million at June 30, 2001 and $388.3 million at December 31,
2000.
|--- | ---------------------------------------------------------------------------------------------------------------------------




Consistent with our strategy to divest higher-risk assets and concentrate on our core retail and
commercial banking operations, we sold $143.0 million of home equity loans, which included approximately $90 million of high loan-to-value home equity loans, and $136.2 million of franchise loans during the first six months of 2001. Loans and leases
held-for-sale totaled $292.3 million as of June 30, 2001, of which approximately $284.7 million represented franchise loans held-for-sale and the remainder represented single-family loans held-for-sale. As previously announced, we have entered into
an agreement to sell approximately $300 million in unpaid principal balance of franchise loans to Goldman Sachs Mortgage Co. The sale is expected to close in phases during the third quarter. We are actively pursuing opportunities to sell our
remaining held-for-sale franchise loan portfolio as the potential sale of these loans would not only free-up capital to facilitate the paydown of our higher-cost funding, but also effectively reduce our concentration in franchise assets.





We currently focus our loan and lease origination efforts on high-quality consumer and commercial loans and
leases as opposed to mortgage loans. The following tables illustrate our loan and lease originations for the periods indicated:





|                                                         |  | For the Three Months Ended
|-------------------------------------------------------- |  | --------------------------
|
|
|Loan and lease originations:                             |  |                           
|Home equity loans and lines of credit                    |  | $  21,464                 
|Auto loans and leases(1)                                 |  | 80,041                    
|Multi-family and commercial mortgage loans               |  | 74,542                    
|Franchise loans                                          |  |                          
|Bankers Mutual multi-family mortgage loans(2)            |  |                          
|Asset-based loans, factoring loans and commercial leases |  | 33,894                    
|Business loans                                           |  | 14,457                    
|                                                         |  |                           
|Total
originations                                       |  | $224,398                  
|                                                         |  |                           
|                                                        
|                                                        
|                                                        
|
|
|
|Loan and lease originations:                             |  |                           
|Home equity loans and lines of credit                    |  | $  37,902                 
|Auto loans and leases(1)                                 |  | 153,164                   
|Multi-family and commercial mortgage loans               |  | 95,732                    
|Franchise loans                                          |  |                          
|Bankers Mutual multi-family mortgage loans(2)            |  |                          
|Asset-based loans, factoring loans and commercial leases |  | 48,182                    
|Business loans                                           |  | 25,264                    
|                                                         |  |                           
|Total
originations                                       |  | $360,244                  
|                                                         |  |                           




|(1) | Includes auto-related operating lease assets totaling $52.1 million for the three months ended June 30, 2000 and $114.6
million for the six months ended June 30, 2000 which are not included in our total loan and lease portfolio in accordance with GAAP.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | 100% of Bankers Mutual multi-family loans were originated and sold through seller-servicer programs administered by Fannie
Mae and Freddie Mac.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------




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:





|                            |  | June 30,

2001 |  | December 31,

2000
|--------------------------- |  | -------------- |  | ------------------
|
|Nonaccrual loans and leases |  | $79,931        |  | $100,148          
|Real estate owned           |  | 11,603         |  | 1,041             
|Other repossessed assets    |  | 447            |  | 524               
|                            |  |                |  |                   
|Nonperforming assets        |  | $91,981        |  | $101,713          
|                            |  |                |  |                   




The decrease in nonaccrual loans and leases at June 30, 2001, as compared to December 31, 2000, was
primarily due to foreclosures and resolutions of specific franchise problem credits during the second quarter. Non-franchise nonaccrual loans and leases decreased to $19.6 million at June 30, 2001 from $29.4 million at December 31, 2000. The
increase in real estate owned was primarily due to the foreclosure of certain franchise properties.





The following table illustrates, by platform, nonperforming assets and nonperforming assets as a percentage
of consolidated total assets:





|                                                                         |  | Nonperforming Assets

as a Percentage of Consolidated Total Assets
|------------------------------------------------------------------------ |  | ------------------------------------------------------------------
|
|
|Retail Platform:                                                         |  |                                                                   
|Single-family mortgage loans                                             |  | $  4,030                                                          
|Home equity loans and lines of credit                                    |  | 90                                                                
|Auto loans                                                               |  | 709                                                               
|                                                                         |  |                                                                   
|Total retail
platform                                                    |  | 4,829                                                             
|Commercial Platform:                                                     |  |                                                                   
|Multi-family mortgage loans                                              |  | 306                                                               
|Commercial real estate loans                                             |  | 12,877                                                            
|Franchise loans                                                          |  | 72,421                                                            
|Asset-based loans, factoring loans and

               commercial leases |  | 955                                                               
|Business loans                                                           |  | 593                                                               
|                                                                         |  |                                                                   
|Total commercial
platform                                                |  | 87,152                                                            
|                                                                         |  |                                                                   
|Total                                                                    |  | $91,981                                                           
|                                                                         |  |                                                                   




The following table illustrates, by platform, loans and leases delinquent 60 days or more as a percentage of
gross loans and leases:





|                    |  | Loans and Leases Delinquent 60 Days or More

as a Percentage of Gross Loans and Leases
|------------------- |  | --------------------------------------------------------------------------------------
|
|
|Retail Platform     |  | $10,730                                                                               
|Commercial Platform |  | 75,365                                                                                
|                    |  |                                                                                       
|Total               |  | $86,095                                                                               
|                    |  |                                                                                       




Allowance for Loan and Lease Losses





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. While we follow underwriting and credit monitoring procedures which we believe are appropriate in both growing and managing the loan and lease portfolio, in the event of
nonperformance by these other parties, our potential exposure to credit losses could significantly affect our consolidated financial position and results of operations.





Lending money involves an inherent risk of nonpayment. Management seeks to reduce such credit risk by
administering lending policies and underwriting procedures combined with its monitoring of the loan and lease portfolio. The allowance for losses on loans and leases represents managements estimate of probable inherent losses which have
occurred as of the date of the financial statements. The process of determining the necessary levels of allowances for loan and lease losses is subjective and requires considerable judgement. In accordance with applicable guidelines, this process
results in an allowance for losses on loans and leases that consists of three components as described below:





| | 1.  Reserves for loans and leases that have been individually
evaluated and identified as loans or leases which have probable losses.    These loans and leases are generally larger-balance commercial or income producing real estate loans or leases which are evaluated on an individual
basis. Reserves for these loans and leases are attributable to specific weaknesses in these loans or leases evidenced by factors such as a deterioration in the borrowers ability to meet its obligations, a deterioration in the quantity or
quality of the collateral securing the loan or lease, payment delinquency, or other events of default under the terms of the loan or lease agreement or promissory note.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 2.  Reserves for groups of smaller-balance homogenous loans and
leases that are collectively evaluated for impairment and for groups of performing larger-balance loans and leases which currently exhibit no identifiable weaknesses.    The smaller-balance homogenous 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-balance loans and leases generally consist of commercial or income producing
real estate loans and leases. These loans and leases have specific characteristics which indicate that it is probable that a loss has been incurred in a group of loans or leases with those similar characteristics. Reserves for these groups of loans
and leases are determined based on a combination of factors including historical loss experience, asset concentrations, levels and trends of classified assets, and loan and lease delinquencies. Reserves for these groups of loans and leases also
include an additional reserve for certain products we have introduced more recently, such as high loan-to-value home equity loans and franchise loans and leases, where we do not have extensive historical data, other than industry experience, upon
which to base our reserve levels. This additional reserve is intended to provide for those situations where our experience may be different from industry experience.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 3.  Unallocated Reserves.    Management
determines the unallocated portion of the allowance for losses on loans and leases based on factors that are not necessarily associated with a specific credit, group of loans or leases or loan or lease category. These factors include, but are not
limited to, managements
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | evaluation of economic conditions in regions where we lend money, loan and lease concentrations, lending policies or underwriting
procedures, and trends in delinquencies and nonperforming assets. The unallocated portion of the allowance for losses on loans and leases reflects managements efforts to ensure that the overall allowance appropriately reflects the probable
losses inherent in the loan and lease portfolio.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




The allowance for losses on loans and leases at June 30, 2001 was $54.6 million as compared to $73.7
million at December 31, 2000. The decrease in the allowance for losses on loans and leases was primarily related to the decrease in loans held-for-investment during the first six months of 2001 due to loan sales and transfer of loans to
held-for-sale. The following table illustrates the allowance for losses on loans and leases as a percentage of both nonperforming assets and gross loans and leases, excluding loans and leases held-for-sale:





|                                                                       |  | Allowance for Losses on Loans and Leases as a

Percentage of Specified Assets
|---------------------------------------------------------------------- |  | -----------------------------------------------------------------------------
|
|
|
|Nonperforming assets                                                   |  | $      91,981                                                                
|Gross loans and leases, excluding loans and

     leases held-for-sale |  | $2,388,669                                                                   




The following table illustrates the changes in the allowance for losses on loans and leases for the periods
indicated:





|                                                                         |  | Three Months

Ended

June 30, 2001 |   | Six Months

Ended

June 30, 2001 |           | Year Ended

December 31, 2000
|------------------------------------------------------------------------ |  | ---------------------------------- | - | -------------------------------- | --------- | -----------------------------
|
|Beginning balance                                                        |  | $  71,422                          |   |                                  | $  73,738 |                              
|Transfers of loans to held-for-sale                                      |  |                                   |   |                                  |          |                              
|Charge-offs:                                                             |  |                                    |   |                                  |           |                              
|Mortgage                                                                 |  | (167                               | ) |                                  | (208      | )                            
|Home Equity                                                              |  | (8,068                             | ) |                                  | (13,014   | )                            
|Auto                                                                     |  | (748                               | ) |                                  | (1,385    | )                            
|Asset-based loans, factoring loans and commercial

               leases |  | (3,025                             | ) |                                  | (5,285    | )                            
|Franchise                                                                |  | (57,845                            | ) |                                  | (60,626   | )                            
|Business                                                                 |  | (1,897                             | ) |                                  | (1,971    | )                            
|                                                                         |  |                                    |   |                                  |           |                              
|                                                                         |  | (71,750                            | ) |                                  | (82,489   | )                            
|Recoveries:                                                              |  |                                    |   |                                  |           |                              
|Mortgage                                                                 |  | 25                                 |   |                                  | 52        |                              
|Home Equity                                                              |  | 987                                |   |                                  | 1,455     |                              
|Auto                                                                     |  | 300                                |   |                                  | 655       |                              
|Asset-based loans, factoring loans and commercial

               leases |  | 1,189                              |   |                                  | 1,462     |                              
|Franchise                                                                |  |                                   |   |                                  |          |                              
|                                                                         |  |                                    |   |                                  |           |                              
|                                                                         |  | 2,501                              |   |                                  | 3,624     |                              
|Net charge-offs                                                          |  | (69,249                            | ) |                                  | (78,865   | )                            
|Provision for losses on loans and leases                                 |  | 52,433                             |   |                                  | 59,733    |                              
|                                                                         |  |                                    |   |                                  |           |                              
|Ending balance                                                           |  | $  54,606                          |   |                                  | $  54,606 |                              
|                                                                         |  |                                    |   |                                  |           |                              
|Net charge-offs to average loans and leases (annualized)                 |  | 9.43                               | % |                                  | 5.20      | %                            
|                                                                         |  |                                    |   |                                  |           |                              




The increases in the annualized percentage of net charge-offs to average loans and leases for the second
quarter of 2001 and the six months ended June 30, 2001, as compared to the year ended December 31, 2000, were primarily due to $52.1 million in net charge-offs related to the mark-to-market on loans transferred from held-for-investment to
held-for-sale related to the anticipated sale of approximately $300 million in loans to Goldman Sachs Mortgage Co., $4.8 million in net charge-offs related to the mark-to-market on home equity loans sold, and lower average loan and lease
balances.





Deposits





As a primary part of our business, we generate deposits for the purpose of funding loans, leases and
securities. The following table illustrates deposits as of the dates indicated:





|                                 |  | June 30, 2001 |  | December 31, 2000
|-------------------------------- |  | ------------- |  | -----------------
|
|
|Transaction accounts             |  | $1,834,852    |  | 53.2             
|Retail certificates of deposit   |  | 1,614,798     |  | 46.8             
|                                 |  |               |  |                  
|Total retail deposits            |  | 3,449,650     |  | 100.0            
|Brokered certificates of deposit |  |              |  |                 
|                                 |  |               |  |                  
|Total                            |  | $3,449,650    |  | 100.0            
|                                 |  |               |  |                  




Borrowings





In addition to deposits, we utilize collateralized advances from the Federal Home Loan Bank of San Francisco
and other borrowings, such as subordinated debt, capital securities, warehouse lines, and securities sold under agreements to repurchase, on a collateralized and noncollateralized basis, for various purposes including the funding of loans, leases
and securities as well as to support the execution of our business strategies.





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





|                                                                |  | June 30, 2001 |  | December 31, 2000
|--------------------------------------------------------------- |  | ------------- |  | -----------------
|
|Advances from the Federal Home Loan Bank of San

     Francisco |  | $225,142      |  | $    804,837     
|Securities sold under agreements to repurchase                  |  |              |  | 103,241          
|Warehouse lines                                                 |  | 49,391        |  | 94,134           
|Subordinated Notes, net                                         |  | 149,599       |  | 149,567          
|Other borrowings                                                |  | 1,071         |  | 1,664            
|Capital Securities                                              |  | 90,000        |  | 90,000           
|                                                                |  |               |  |                  
|Total                                                           |  | $515,203      |  | $1,243,443       
|                                                                |  |               |  |                  




The lower borrowing level at June 30, 2001, as compared to December 31, 2000, was primarily due to a $580
million decrease in Federal Home Loan Bank advances resulting from a second quarter prepayment of approximately $414 million combined with $166 million in maturities during the first six months of 2001 that were not renewed. In addition, we paid
down our securities sold under agreements to repurchase used primarily to fund the securities generated from our June 2000 on-balance sheet franchise loan securitization that was subsequently sold as well as our warehouse lines related to franchise
loans during the first six months of 2001.





Liquidity





The objective of our liquidity management program is to ensure that funds are available in a timely manner
to meet loan demand and depositors needs, 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.





We regularly assess the amount and likelihood of projected funding requirements through a review of factors
such as historical deposit volatility and funding patterns, present and forecasted market and economic conditions, and existing and planned business activities. Our Asset and Liability Committee (ALCO) provides oversight to the liquidity
management process and recommends policy guidelines, subject to Board of Directors approval, and courses of action to address our actual and projected liquidity needs.





The ability to attract a stable, low-cost base of deposits is a significant source of liquidity. Other
sources of liquidity available to us include short-term borrowings, which consist of advances from the Federal Home Loan Bank of San Francisco, repurchase agreements, warehouse lines and other short-term borrowing arrangements. Our liquidity
requirements can also be met through the use of our portfolio of liquid assets. 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.





On September 6, 2000, Bay View Bank entered into an agreement with the Office of the Comptroller of the
Currency. This agreement states that Bay View Bank may not declare or distribute any dividends without prior approval of the Office of the Comptroller of the Currency.





On September 29, 2000, Bay View Capital Corporation entered into an agreement with the Federal Reserve Bank
of San Francisco. In addition to requiring prior approval to pay common stock dividends, the agreement requires us to obtain prior approval to disburse dividends associated with our 9.76% Capital Securities. We requested but did not receive approval
to disburse the quarterly dividend in the third and fourth quarters of 2000 and the first and second quarters of 2001. Pursuant to the terms of the Capital Securities, we have deferred distributions on the debentures. 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). We fully intend to continue to seek permission to distribute the dividends at the earliest available opportunity, as the interest on these unpaid dividends is one of our highest borrowing
costs.





At June 30, 2001, we had liquidity levels with cash and overnight deposits in excess of $490.3 million,
representing approximately 14.2% of total retail deposits.





To assist you in analyzing our liquidity, you should review our Consolidated Statements of Cash Flows at
Item 1. Financial Statements and Supplementary Data.





Capital Resources





Management seeks to maintain adequate capital to support anticipated asset growth and credit risks, and to
ensure that Bay View Capital Corporation and Bay View Bank are in compliance with all regulatory capital guidelines. Stockholders equity totaled $330.3 million at June 30, 2001, as compared to $297.8 million at December 31, 2000. Tangible
stockholders equity, which excludes intangible assets, was $201.1 million at June 30, 2001, as compared to $162.9 million at December 31, 2000. Both increases were due to the net proceeds from our $137.5 million rights offering offset by the
losses incurred for the first six months of 2001.





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





|                              |  | At June 30,

2001 |   | At

December 31,

2000
|----------------------------- |  | ----------------- | - | ----------------------
|
|Stockholders equity          |  | $  330,262        |   |                       
|Intangible assets             |  | (129,181          | ) |                       
|                              |  |                   |   |                       
|Tangible stockholders equity |  | $  201,081        |   |                       
|                              |  |                   |   |                       
|Book value per share          |  | $        5.28     |   |                       
|                              |  |                   |   |                       
|Tangible book value per share |  | $        3.22     |   |                       
|                              |  |                   |   |                       




The following table illustrates the changes in our tangible stockholders equity for the periods
indicated:





|                                                                                                                 |  | Six Months

Ended

June 30,

2001 |   | Year

Ended

December

31, 2000
|---------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | - | -------------------------------
|
|Beginning tangible stockholders equity                                                                          |  | $  162,913                        |   |                                
|Net (loss) income                                                                                                |  | (103,316                          | ) |                                
|Additional intangible assets related to acquisitions accounted for under

     the purchase method of accounting |  |                                  |   |                                
|Write-off of intangible assets related to Bankers Mutual                                                         |  |                                  |   |                                
|Write-off of intangible assets related to FMAC                                                                   |  |                                  |   |                                
|Proceeds from issuance of common stock                                                                           |  | 108,000                           |   |                                
|Proceeds from issuance of preferred stock                                                                        |  | 26,400                            |   |                                
|Expense realized on stock options with below market strike price                                                 |  | 2,622                             |   |                                
|Amortization of intangible assets                                                                                |  | 5,672                             |   |                                
|Exercise of stock options and distribution of directors retirement plan

     shares                            |  | 73                                |   |                                
|Cash dividends declared                                                                                          |  |                                  |   |                                
|Other                                                                                                            |  | (1,283                            | ) |                                
|                                                                                                                 |  |                                   |   |                                
|Ending tangible stockholders equity                                                                             |  | $  201,081                        |   |                                
|                                                                                                                 |  |                                   |   |                                




Intangible assets generated from our acquisitions accounted for under the purchase method of accounting are
deducted from stockholders equity in the above calculation to arrive at tangible stockholders equity. Conversely, the amortization of intangible assets increases tangible stockholders equity as well as Bay View Capital
Corporations and Bay View Banks Tier 1 regulatory capital.





Bay View Bank is subject to various regulatory capital guidelines administered by the Office of the
Comptroller of the Currency. 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.





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 June 30, 2001 exceeded the minimum requirements to be
considered adequately capitalized as illustrated in the following table:





|                  |  | Actual   |  | Minimum

Requirement
|----------------- |  | -------- |  | --------------------
|
|
|Tier 1 leverage   |  | $208,407 |  | 4.85                
|Tier 1 risk-based |  | $208,407 |  | 6.85                
|Total risk-based  |  | $296,747 |  | 9.75                




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 June 30, 2001, Bay View Capital Corporation exceeded the minimum requirements for Tier 1 risk-based
capital while the Tier 1 leverage ratio and the Total risk-based capital ratio fell below the minimum required amounts as illustrated in the following table:





|                  |  | Actual   |  | Minimum

Requirement
|----------------- |  | -------- |  | --------------------
|
|
|Tier 1 leverage   |  | $158,559 |  | 3.60                
|Tier 1 risk-based |  | $158,559 |  | 4.44                
|Total risk-based  |  | $282,690 |  | 7.92                




Share Repurchase Program





In August 1998, our Board of Directors authorized the repurchase of up to $50 million in shares of our
common stock. During 1999 we repurchased 460,000 shares of our common stock for $8.3 million at an average price of $18.22 per share. In November 1999, our treasury shares were reissued in conjunction with the acquisition of FMAC. At June 30, 2001,
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.





Impact of New Accounting Standards





In July 2001, the FASB issued Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and
Other Intangible Assets. Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. Statement
141 also specifies the criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill, noting that any purchase price allocable to an assembled workforce may not be accounted
for separately. Statement 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. Statement 142
will also require that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The Company is required to adopt the provisions of Statement 141 effective July 1, 2001 and Statement 142 effective January 1, 2002.





Statement 141 will require, upon adoption of Statement 142, that the Company evaluate its existing
intangible assets and goodwill that were acquired in a prior purchase business combination, and to make any necessary reclassifications in order to conform with the new criteria in Statement 141 for recognition apart from goodwill. Upon adoption of
Statement 142, the Company will be required to reassess the useful lives and
residual values of all intangible assets acquired in purchase business combinations, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is
identified as having an indefinite useful life, the Company will be required to test the intangible asset for impairment in accordance with the provisions of Statement 142 within the first interim period. Any impairment loss will be measured as of
the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period.





In connection with the transitional goodwill impairment evaluation, Statement 142 will require the Company
to perform an assessment of whether there is an indication that goodwill (and equity-method goodwill) is impaired as of the date of adoption. To accomplish this, the Company must identify its reporting units and determine the carrying value of each
reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the date of adoption. The Company will then have up to six months from the date of adoption to determine
the fair value of each reporting unit and compare it to the reporting units carrying amount. To the extent a reporting units carrying amount exceeds its fair value, an indication exists that the reporting units goodwill may be
impaired and the Company must perform the second step of the transitional impairment test. In the second step, the Company must compare the implied fair value of the reporting units goodwill, determined by allocating the reporting units
fair value to all of its assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation in accordance with Statement 141, to its carrying amount, both of which would be measured as of the date of adoption.
This second step is required to be completed as soon as possible, but no later than the end of the year of adoption. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in the
Companys statement of earnings.





And finally, any unamortized negative goodwill (and negative equity-method goodwill) existing at the date
Statement 142 is adopted must be written off as the cumulative effect of a change in accounting principle.





As of the date of adoption, the Company expects to have unamortized goodwill in the amount of $119.4 million
and unamortized identifiable intangible assets in the amount of $4.0 million, all of which will be subject to the transition provisions of Statements 141 and 142. Amortization expense related to goodwill and other identifiable intangible assets was
$20.8 million for the year ended December 31, 2000 and $5.7 million for the six months ended June 30, 2001. Because of the extensive effort needed to comply with adopting Statements 141 and 142, it is not practicable to reasonably estimate the
impact of adopting these Statements on the Companys financial statements at the date of this report, including whether any transitional impairment losses will be required to be recognized as the cumulative effect of a change in accounting
principle.





Item 3.    Quantitative and Qualitative Disclosures About Market Risk





Asset and Liability Management





The objective of our asset and liability management activities is 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 seek to optimize our financial returns within safe and sound
parameters. Our operating strategies for attaining this objective include 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 includes 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 seek 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 use 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, included interest rate exchange agreements, or swaps, forward sales contracts, and 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 perform internal analyses to measure, evaluate and monitor risk.





Interest Rate Risk





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. Interest rate risk occurs when interest rate sensitive assets and liabilities do not reprice simultaneously and in equal volumes. ALCO provides oversight to 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.





| | Swaps
| | -----




We have historically used interest rate exchange agreements, or swaps, to offset mismatches in the rate and
maturity of certain of our assets and their funding sources and to mitigate the risk of the effects of interest rate fluctuations on the value of our fixed-rate loans classified as held-for-sale. Interest rate swaps involve the exchange of
fixed-rate and variable-rate interest payment obligations without the exchange of the underlying notional amounts. We were a party to interest rate swaps with notional principal amounts of $194.0 million at December 31, 2000. These swaps were
reported at their fair value with realized gains and losses charged to earnings when incurred. By June 30, 2001, all of our open swap positions either matured or were closed-out.





| | Treasury Futures Contracts
| | --------------------------




We had open positions related to United States Treasury futures contracts with notional amounts of $154.7
million at December 31, 2000. These contracts were used to offset fixed-rate franchise loans classified as held-for-sale. These contracts were settled daily and were reported at their fair value with realized gains and losses charged to earnings
when incurred. By June 30, 2001, we closed-out all of our remaining open United States Treasury futures positions.





| | Forward Sale Contracts
| | ----------------------




We had open forward contract positions related to Fannie Mae benchmark notes with notional amounts of $10.0
million at June 30, 2001 and $70.0 million at December 31, 2000. These contracts are used to offset fixed-rate franchise loans classified as held-for-sale. These contracts are reported at fair value with realized gains and losses charged to earnings
when incurred. During July 2001, we closed out all open forward contract positions.





| | 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. As of June
30, 2001 and December 31, 2000, we had interest rate caps with notional amounts totaling $180 million and 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
gains and losses charged to earnings when incurred.





Interest rate risk is the most significant market risk impacting us; however, 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.





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.





The following table illustrates our combined asset and liability repricing as of June 30,
2001:





|                                                                    |  | Repricing Period
|------------------------------------------------------------------- |  | ----------------
|
|
|Assets:                                                            
|                                                                    |  |                 
|Cash and investments                                                |  | $    327,956    
|Mortgage-backed securities and loans and

     leases(1)            |  | 2,145,036       
|                                                                    |  |                 
|Total interest rate
sensitive assets                                |  | $2,472,992      
|                                                                    |  |                 
|Liabilities:                                                       
|                                                                    |  |                 
|Deposits:                                                          
|Transaction accounts(2)                                             |  | $1,381,337      
|Retail certificates of deposit                                      |  | 1,487,579       
|Borrowings(3)                                                       |  | 74,592          
|                                                                    |  |                 
|Total interest rate
sensitive

                         liabilities |  | $2,943,508      
|                                                                    |  |                 
|Repricing gap-positive (negative)                                   |  | $  (470,516     
|                                                                    |  |                 
|Cumulative repricing gap-positive (negative)                        |  | $  (470,516     
|                                                                    |  |                 




|(1) | Based on assumed annual prepayment and amortization rates, which approximate our historical experience.
|--- | -------------------------------------------------------------------------------------------------------

|(2) | We estimate transaction accounts repricing based on historical trends and the nature and types of our transaction
accounts.
|--- | ---------------------------------------------------------------------------------------------------------------------------

|(3) | Includes Capital Securities.
|--- | ----------------------------




The simulation model discussed above also provides ALCO with the ability to simulate our net interest
income. In order to measure, at June 30, 2001, the sensitivity of our forecasted net interest income to changing interest rates, both a 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 or decreased, on an instantaneous and sustained basis, by 100 and 200 basis points. At June 30,
2001, our net interest income related to these hypothetical changes in market interest rates was within our policy guidelines as illustrated in the following table:





|                                                                    |  | Net Interest Income
|------------------------------------------------------------------- |  | -------------------
|
|Projected effect:                                                   |  |                    
|Net interest income                                                 |  | $167,585           
|% Increase (decrease) from base net interest

               income |  | 9.24               
|Policy guideline                                                    |  | 0.00               




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.





PART II.    

OTHER INFORMATION





Item 1.    Legal Proceedings





On November 9, 2000, Morgan Guaranty Trust filed a claim in the U.S. District Court, Southern District of
New York, against Bay View Franchise Mortgage Acceptance Company alleging breach of certain representations and warranties in connection with the sale of loans to Morgan Guaranty Trust by the former Franchise Mortgage Acceptance Company. The
liability, if any, cannot be estimated at this time. The matter will continue to be vigorously defended.





Item 2.    Changes in Securities





None





Item 3.    Defaults Upon Senior Securities





None





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





At the annual meeting of our stockholders, held June 28, 2001, the stockholders considered the following
proposals:





I. The election of three directors of Bay View Capital Corporation:





| | The following were re-elected:
| | ------------------------------

| | Robert M. Greber
| | ----------------

| | Robert B. Goldstein
| | -------------------

| | Robert G. Cox
| | -------------




| | The vote on the election of the directors at the annual meeting was as
follows:
| | -------------------------------------------------------------------------------




|                    |  | For        |  | Withheld or Against
|------------------- |  | ---------- |  | -------------------
|Robert M. Greber    |  | 45,969,567 |  | 3,278,609          
|Robert B. Goldstein |  | 46,446,151 |  | 5,454,655          
|Robert G. Cox       |  | 48,171,509 |  | 3,729,297          




II. Amend the Restated Certificate of Incorporation of Bay View Capital Corporation to increase the number
of authorized shares of common stock to 80,000,000:





| |  | For        |  | Withheld or Against
| |  | ---------- |  | -------------------
| |  | 35,191,980 |  | 3,670,089          




III. Adopt the 2001 equity incentive plan for employees:





| |  | For        |  | Withheld or Against
| |  | ---------- |  | -------------------
| |  | 33,457,846 |  | 5,160,752          




IV. Adopt the 2001 Non-employee director stock option plan:





| |  | For        |  | Withheld or Against
| |  | ---------- |  | -------------------
| |  | 33,457,846 |  | 5,404,223          




Item 5.    Other Information





None





Item 6.    Exhibits and Reports on Form 8-K





| | a(i) Material Contracts (Exhibit 10)
| | ------------------------------------

|Employment Contract with Robert B. Goldstein |  | 10.b.1
|-------------------------------------------- |  | ------
|Employment Contract with Barbara H. Teaford  |  | 10.b.2
|Employment Contract with Charles G. Cooper   |  | 10.b.3
|Employment Contract with John W. Rose        |  | 10.b.4




| | a(ii)  Computation of Ratios of Earnings to Fixed Charges (Exhibit 12)
| | ----------------------------------------------------------------------




| | b(i) | The Registrant filed the following report on Form 8-K dated May 30, 2001 during the three months ended June 30,
2001:
| | ---- | ---------------------------------------------------------------------------------------------------------------------




| | In a press release dated May 29, 2001, Bay View Capital Corporation announced
the appointment of John W. Rose as chief financial officer succeeding Mark Lefanowicz.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------




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.





| | BAY
VIEW
CAPITAL
CORPORATION
| | ----------------------------

| | 
| | 

| | Registrant
| | ----------




DATE: August 13, 2001


| | /s/    JOHN
W. ROSE
| | -------------------

| | BY:
| | ---

| | 
| | 

| | John W. Rose
| | ------------

| | Executive Vice President and Chief Financial Officer (Principal Financial Officer)
| | ----------------------------------------------------------------------------------




| | /s/    JEFFREY
O. BUTCHER
| | -------------------------

| | BY:
| | ---

| | 
| | 

| | Jeffrey O. Butcher
| | ------------------

| | Senior Vice President and Controller (Principal Accounting Officer)
| | -------------------------------------------------------------------