<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-Q

<TABLE>
<S>       <C>

 X             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
---
                    OF THE SECURITIES EXCHANGE ACT OF 1934
 
               For the quarterly period ended September 30, 1998
                                      OR
               TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
---
                    OF THE SECURITIES EXCHANGE ACT OF 1934
</TABLE>

                  For the transition period from______to_____

                        Commission file number 0-17901


                         BAY VIEW CAPITAL CORPORATION
            (Exact name of registrant as specified in its charter)


                   Delaware                          94-3078031
        (State or other jurisdiction of           (I.R.S. Employer
         incorporation or organization)          Identification No.)

                1840 Gateway Drive, San Mateo, California  94404
               (Address of principal executive offices)  (Zip Code)

       Registrant's telephone number, including area code (650) 573-7300


     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            Outstanding at October 31, 1998
         (Title of Class)                         19,352,498 shares

                                       1
<PAGE>
 
                                   FORM 10-Q
                                     INDEX
                                        

                         BAY VIEW CAPITAL CORPORATION
                         ----------------------------
<TABLE>
<CAPTION>


PART I.         FINANCIAL INFORMATION                                   Page(s)
-------         ---------------------                                   -------
<S>     <C>                                                             <C>

Item 1. Financial Statements (Unaudited):

        Consolidated Statements of Financial Condition................... 4

        Consolidated Statements of Operations............................ 5-6

        Consolidated Statements of Stockholders' Equity.................. 7

        Consolidated Statements of Cash Flows............................ 8-9

        Notes to Consolidated Financial Statements....................... 10-14


Item 2. Management's Discussion and Analysis of
        Financial Condition and Results of Operations.................... 15-46


Item 3. Quantitative and Qualitative Disclosures About
        Market Risk...................................................... 47-50


PART II.        OTHER INFORMATION
--------        -----------------

        Other Information................................................ 51

        Signatures....................................................... 52

</TABLE>

                                       2
<PAGE>
 
                          FORWARD-LOOKING STATEMENTS
                                        
       Certain statements included in this Form 10-Q or in future filings by Bay
View Capital Corporation (the "Company") with the Securities and Exchange
Commission, in the Company's press releases or shareholder communications or in
oral statements made with the approval of an authorized executive officer,
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and are
subject to a number of risks and uncertainties. Any such forward-looking
statements should not be relied upon as predictions of future events. Certain
such forward-looking statements can be identified by the use of forward-looking
terminology such as "believes," "expects," "may," "are expected to," "will,"
"will allow," "will continue," "will likely result," "should," "would be,"
"seeks," "approximately," "intends," "plans," "projects," "estimates," or
"anticipates," or similar expressions or the negative thereof or other
variations thereof or comparable terminology, or by discussions of strategy,
plans or intentions. In addition, all information included herein or therein
with respect to projected results of operations, financial condition, financial
performance or other financial or statistical matters constitutes such forward-
looking statements. Such forward-looking statements are necessarily dependent on
assumptions, data or methods that may be incorrect or imprecise and that may be
incapable of being realized and in some instances are based on consensus
estimates of analysts not affiliated with the Company. In that regard, the
following factors, among others, could cause actual results and other matters to
differ materially from those in such forward-looking statements: increases in
defaults by borrowers and other loan delinquencies; increases in the provision
for loan losses; failure by the Company to realize expected cost savings or
revenue enhancements from the acquisition of America First Eureka Holdings, Inc.
("AFEH"); deposit attrition, customer loss or revenue loss; costs or
difficulties related to the integration of the businesses of the Company and
AFEH and their respective subsidiaries; the Company's ability to sustain or
improve the performance of its subsidiaries; the ability to identify suitable
future acquisition candidates; changes in interest rates which may, among other
things, adversely affect net interest margins, derivative positions and the
level of prepayments on loans and mortgage-backed securities; competition in the
banking, financial services and related industries; government regulation and
tax matters; the outcome of pending or threatened legal or regulatory disputes
and proceedings; credit and other risks of lending and investment activities;
changes in conditions in the securities markets including the value of the
Company's common stock; changes in regional and national business and economic
conditions and inflation; the inability to utilize net operating loss ("NOL")
carryforwards acquired in conjunction with the Company's acquisition of
EurekaBank; and unanticipated effects of Year 2000 on the Company and the
economy. As a result of the foregoing, no assurance can be given as to future
results of operations or financial condition or as to any other matters covered
by any such forward-looking statements, and the Company wishes to caution
investors not to rely on any such forward-looking statements. The Company does
not undertake, and specifically disclaims any obligation, to update any forward-
looking statements, which speak only as to the date made.


 

                                       3
<PAGE>
 
<TABLE>
<CAPTION>

                                                   PART 1. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
-----------------------------
                                                   BAY VIEW CAPITAL CORPORATION
                                          CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                                            (UNAUDITED)
                                                                                    SEPTEMBER 30,            DECEMBER 31, 
                                                                                        1998                     1997    
                                                                                 -------------------      -------------------
                                                                                           (DOLLARS IN THOUSANDS)
ASSETS
Cash and cash equivalents:
<S>                                                                              <C>                      <C>
   Cash and due from depository institutions                                            $   34,330               $   40,885
   Interest-bearing deposits and short-term investments                                     80,526                  190,937
                                                                                        ----------               ---------- 
                                                                                           114,856                  231,822
Securities available-for-sale:
   Investment securities                                                                     6,488                    5,639
   Mortgage-backed securities                                                               14,715                   54,402
Securities held-to-maturity:
   Investment securities                                                                         -                    5,000
   Mortgage-backed securities                                                              558,043                  415,859
Loans, net of allowance for loan losses                                                  4,313,342                2,373,113
Investment in operating leased assets, net                                                 126,341                        -
Investment in stock of the FHLB of San Francisco                                            85,802                   61,012
Real estate owned, net                                                                       3,740                    4,146
Premises and equipment, net                                                                 25,716                   16,164
Intangible assets                                                                          135,774                   29,507
Other assets                                                                               137,557                   49,812
                                                                                        ----------               ----------
               Total assets                                                             $5,522,374               $3,246,476
                                                                                        ==========               ==========
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Customer deposits:
   Transaction accounts                                                                 $1,438,387               $  553,820
   Certificates of deposit                                                               1,791,557                1,123,315
                                                                                        ----------               ----------
                                                                                         3,229,944                1,677,135
Advances from the FHLB of San Francisco                                                  1,664,480                1,110,270
Securities sold under agreements to repurchase                                              60,381                   90,134
Subordinated notes, net                                                                     99,420                   99,372
Senior debentures                                                                           50,000                   50,000
Other borrowings                                                                             5,259                    6,200
Other liabilities                                                                           31,859                   39,738
                                                                                        ----------               ----------
               Total liabilities                                                         5,141,343                3,072,849
                                                                                        ----------               ----------
 
Stockholders' equity:
   Serial preferred stock: Authorized, 7,000,000 shares; Outstanding, none                       -                        -
   Common stock ($.01 par value): Authorized, 60,000,000 shares;
       Issued, 9/30/98 - 20,369,612 shares; 12/31/97 - 15,125,874 shares;
       Outstanding, 9/30/98 - 19,586,498 shares; 12/31/97 - 12,070,474 shares                  204                      151
   Additional paid-in capital                                                              250,870                  103,052
   Retained earnings (substantially restricted)                                            150,342                  141,065
    Treasury stock, at cost, 9/30/98 - 783,114 shares; 
     12/31/97 - 3,055,400 shares                                                           (16,556)                 (66,352)
    Accumulated other comprehensive income:
       Unrealized loss on securities available-for-sale, net of tax                            (70)                     (72)
    Debt of Employee Stock Ownership Plan                                                   (3,759)                  (4,217)
                                                                                        ----------               ----------
               Total stockholders' equity                                                  381,031                  173,627
                                                                                        ----------               ----------
               Total liabilities and stockholders' equity                               $5,522,374               $3,246,476
                                                                                        ==========               ==========


</TABLE> 

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

                                       4
<PAGE>
 
<TABLE>
<CAPTION>
                                                   BAY VIEW CAPITAL CORPORATION
                                               CONSOLIDATED STATEMENTS OF OPERATIONS
                                                            (UNAUDITED)
                                                                                            THREE MONTHS ENDED
                                                                                              SEPTEMBER 30,
                                                                                 -------------------------------------
                                                                                        1998                  1997
                                                                                 ---------------       ---------------
                                                                                    (DOLLARS IN THOUSANDS, EXCEPT PER
                                                                                             SHARE AMOUNTS)
<S>                                                                                <C>                   <C>
Interest income:
  Interest on loans                                                                     $ 91,531               $50,674
  Interest on mortgage-backed securities                                                  10,054                 8,374
  Interest and dividends on investment securities                                          2,983                 2,689
                                                                                        --------               -------
                                                                                         104,568                61,737
Interest expense:
  Interest on customer deposits                                                           36,507                18,599
  Interest on senior debentures and notes                                                  3,527                 1,978
  Interest on borrowings                                                                  25,270                18,792
                                                                                        --------               -------
                                                                                          65,304                39,369
 
Net interest income                                                                       39,264                22,368
Provision for loan losses                                                                  2,754                   651
                                                                                        --------               -------
Net interest income after provision for loan losses                                       36,510                21,717
 
Noninterest income:
  Loan fees and charges                                                                    1,500                 1,713
  Leasing income                                                                           3,637                     -
  Gain on sale of securities, net                                                            655                     -
  Other income                                                                             3,204                   861
                                                                                        --------               -------
                                                                                           8,996                 2,574
Noninterest expense:
  General and administrative                                                              30,246                18,605
  Leasing expenses                                                                         2,459                     -
  Real estate owned operations, net                                                          (27)                  (63)
  Net losses on real estate                                                                   19                    42
  Amortization of intangible assets                                                        2,864                 1,045
                                                                                        --------               -------
                                                                                          35,561                19,629
 
Income before income tax expense                                                           9,945                 4,662
Income tax expense                                                                         4,920                 1,598
                                                                                        --------               -------
 
Net income                                                                              $  5,025               $ 3,064
                                                                                        ========               =======
 
 
Basic earnings per share                                                                $   0.25               $  0.24
                                                                                        ========               =======
Diluted earnings per share                                                              $   0.25               $  0.23
                                                                                        ========               =======
 
Average basic shares outstanding                                                          20,095                12,868
                                                                                        ========               =======
Average diluted shares outstanding                                                        20,335                13,189
                                                                                        ========               =======
 
Net income                                                                              $  5,025               $ 3,064
Other comprehensive income, net of tax:
  Unrealized gain (loss) on securities available-for-sale, net of tax
   expense (benefit) of ($608) and $472 for the three months ended
   September 30, 1998 and 1997, respectively                                                (862)                  652
                                                                                        --------               ------- 
Comprehensive income                                                                    $  4,163               $ 3,716
                                                                                        ========               =======
</TABLE> 

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

                                       5
<PAGE>
 
<TABLE>
<CAPTION>

                                                   BAY VIEW CAPITAL CORPORATION
                                         CONSOLIDATED STATEMENTS OF OPERATIONS, CONTINUED
                                                            (UNAUDITED)
                                                                                            NINE MONTHS ENDED
                                                                                              SEPTEMBER 30,
                                                                                 -------------------------------------
                                                                                        1998                  1997
                                                                                 ---------------       ---------------
                                                                                    (DOLLARS IN THOUSANDS, EXCEPT PER
                                                                                             SHARE AMOUNTS)
<S>                                                                                <C>                   <C>
Interest income:
  Interest on loans                                                                     $257,447              $145,744
  Interest on mortgage-backed securities                                                  38,598                26,453
  Interest and dividends on investment securities                                          7,935                 7,122
                                                                                        --------              --------
                                                                                         303,980               179,319
Interest expense:
  Interest on customer deposits                                                          115,105                56,723
  Interest on senior debentures and notes                                                 10,580                 4,206
  Interest on borrowings                                                                  63,753                53,199
                                                                                        --------              --------
                                                                                         189,438               114,128
 
Net interest income                                                                      114,542                65,191
Provision for loan losses                                                                  5,114                 1,828
                                                                                        --------              --------
Net interest income after provision for loan losses                                      109,428                63,363
 
Noninterest income:
  Loan fees and charges                                                                    4,938                 4,617
  Leasing income                                                                           4,689                     -
  Gain on sale of securities, net                                                          1,067                   925
  Other income                                                                             8,633                 4,364
                                                                                        --------              --------
                                                                                          19,327                 9,906
Noninterest expense:
  General and administrative                                                              87,218                49,438
  Leasing expenses                                                                         3,167                     -
  Real estate owned operations, net                                                         (105)                 (154)
  Net recovery of losses on real estate                                                      (89)                 (484)
  Amortization of intangible assets                                                        8,475                 2,675
                                                                                        --------              --------
                                                                                          98,666                51,475
 
Income before income tax expense                                                          30,089                21,794
Income tax expense                                                                        14,769                 8,964
                                                                                        --------              --------
 
Net income                                                                              $ 15,320              $ 12,830
                                                                                        ========              ========
 
 
Basic earnings per share                                                                $   0.76              $   0.98
                                                                                        ========              ========
Diluted earnings per share                                                              $   0.74              $   0.96
                                                                                        ========              ========
 
Average basic shares outstanding                                                          20,224                13,039
                                                                                        ========              ========
Average diluted shares outstanding                                                        20,570                13,355
                                                                                        ========              ========
 
Net income                                                                              $ 15,320              $ 12,830
Other comprehensive income, net of tax:
  Unrealized gain on securities available-for-sale, net of tax
   expense of $1 and $105 for the nine months ended
   September 30, 1998 and 1997, respectively                                                   2                   145
                                                                                        --------              -------- 
Comprehensive income                                                                    $ 15,322              $ 12,975
                                                                                        ========              ========

</TABLE> 
                The accompanying notes are an integral part of 
                   these consolidated financial statements.

                                       6
<PAGE>
 
<TABLE>
<CAPTION>

                                                   BAY VIEW CAPITAL CORPORATION
                                          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                                            (UNAUDITED)

                                                                                        ADDITIONAL                             
                                                          NUMBER OF        COMMON         PAID-IN        RETAINED      TREASURY
                                                           SHARES          STOCK          CAPITAL       EARNINGS*       STOCK  
                                                      -------------------------------------------------------------------------
                                                               (AMOUNTS AND DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)  
<S>                                                     <C>              <C>           <C>              <C>           <C>      
Balance at December 31, 1996                                15,005          $150         $100,436        $131,324      $(26,497)
Repurchase of common stock                                                                                              (39,855)
Exercise of stock options, including tax benefits              121             1            2,616                              
Cash dividends declared ($0.34 per share)                                                                  (4,280)             
Unrealized gain, net of tax                                                                                                    
Repayment of debt                                                                                                              
Net income                                                                                                 14,021              
                                                           -------          ----         --------        --------      -------- 
     Balance at December 31, 1997                           15,126           151          103,052         141,065       (66,352)
                                                                                                                               
Issuance of common stock (AFEH acquisition):                                                                                   
     From shares held in treasury                                                                                        65,258
     From authorized but unissued shares                     5,087            51          144,691                              
Repurchase of common stock                                                                                              (15,462)
Exercise of stock options, including tax benefits              157             2            3,127                              
Cash dividends declared ($0.30 per share)                                                                  (6,043)             
Unrealized gain, net of tax                                                                                                    
Repayment of debt                                                                                                              
Net income                                                                                                 15,320              
                                                           -------          ----         --------        --------      -------- 
     Balance at September 30, 1998                          20,370          $204         $250,870        $150,342      $(16,556)
                                                           =======          ====         ========        ========      ========
</TABLE>

<TABLE> 
<CAPTION> 
                                                                  UNREALIZED                   
                                                                 GAIN (LOSS)                   
                                                                ON SECURITIES      DEBT OF EMPLOYEE            TOTAL
                                                             AVAILABLE-FOR-SALE,    STOCK OWNERSHIP         STOCKHOLDERS'
                                                                  NET OF TAX             PLAN                  EQUITY
                                                             ------------------    ----------------         -------------           

                                                                (AMOUNTS AND DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                               <C>                  <C>                  <C>      
Balance at December 31, 1996                                         $(713)             (4,638)               $200,062
Repurchase of common stock                                                                                     (39,855)
Exercise of stock options, including tax benefits                                                                2,617
Cash dividends declared ($0.34 per share)                                                                       (4,280)
Unrealized gain, net of tax                                            641                                         641
Repayment of debt                                                                          421                     421
Net income                                                                                                      14,021
                                                                     -----             -------                -------- 
     Balance at December 31, 1997                                      (72)             (4,217)                173,627
                                                                                                                      
Issuance of common stock (AFEH acquisition):                                                                          
     From shares held in treasury                                                                               65,258
     From authorized but unissued shares                                                                       144,742
Repurchase of common stock                                                                                     (15,462)
Exercise of stock options, including tax benefits                                                                3,129
Cash dividends declared ($0.30 per share)                                                                       (6,043)
Unrealized gain, net of tax                                              2                                           2
Repayment of debt                                                                           458                    458
Net income                                                                                                      15,320
                                                                     -----             -------                -------- 
     Balance at September 30, 1998                                   $ (70)            $(3,759)               $381,031
                                                                     =====             =======                ========

</TABLE> 
*  Substantially restricted

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

                                       7
<PAGE>
 
<TABLE>
<CAPTION>

                                                   BAY VIEW CAPITAL CORPORATION
                                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                            (UNAUDITED)

                                                                                      NINE MONTHS ENDED
                                                                                        SEPTEMBER 30,
                                                                           -------------------------------------
                                                                                  1998                 1997
                                                                           ---------------      ----------------
                                                                                   (DOLLARS IN THOUSANDS)
<S>                                                                          <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                       $  15,320             $  12,830
Adjustments to reconcile net income to net cash (used in)
  provided by operating activities:
   Amortization of intangible assets                                                 8,475                 2,675
   Proceeds from sale of loans held-for-sale                                             -               265,203
   Provision for losses on loans and real estate owned                               5,025                 1,904
   Depreciation and amortization of premises and equipment                           4,979                 1,706
   Amortization of premiums, net of discounts                                        9,936                 3,072
   Gain on sale of securities, net                                                  (1,067)                 (875)
   Increase in other assets                                                        (20,498)               (8,536)
   Decrease in other liabilities                                                   (33,238)              (52,712)
   Other, net                                                                         (557)                2,066
                                                                                 ---------             ---------
     Net cash (used in) provided by operating activities                           (11,625)              227,333
                                                                                 ---------             ---------
                                                                                                       
CASH FLOWS FROM INVESTING ACTIVITIES                                                                   
Net cash and cash equivalents received (paid) in conjunction with                                      
 acquisitions                                                                       82,129                (9,930)
Decrease in loans resulting from principal payments,                                                   
  net of originations                                                              434,764                81,019
Purchases of loans                                                                (985,454)             (272,076)
Principal payments on mortgage-backed securities                                   223,411                62,451
Proceeds from sale of mortgage-backed securities available-for-sale                234,080                     -
Purchases of mortgage-backed securities held-to-maturity                           (67,703)                    -
Proceeds from maturities of investment securities held-to-maturity                   5,000                     -
Proceeds from sales and maturities of investment securities                          2,357                12,792
 available-for-sale                                                                                    
Purchases of investment securities                                                  (1,956)               (5,358)
Proceeds from sale of real estate owned                                              3,310                 7,714
Net additions to premises and equipment                                            (10,356)               (8,504)
Increase in stock of FHLB of San Francisco                                          (4,227)               (9,036)
                                                                                 ---------             ---------
    Net cash used in investing activities                                          (84,645)             (140,928)
                                                                                 ---------             ---------


</TABLE> 
                The accompanying notes are an integral part of 
                   these consolidated financial statements.

                                       8
<PAGE>
 
<TABLE>
<CAPTION>

                                                   BAY VIEW CAPITAL CORPORATION
                                         CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
                                                            (UNAUDITED)

                                                                                        NINE MONTHS ENDED
                                                                                          SEPTEMBER 30,
                                                                           ----------------------------------------
                                                                                   1998                   1997
                                                                           -----------------      -----------------
                                                                                     (DOLLARS IN THOUSANDS)
<S>                                                                          <C>                    <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in deposits                                                            (459,834)              (139,915)
Proceeds from advances from FHLB of San Francisco                                  4,312,700              4,460,532
Repayment of advances from FHLB of San Francisco                                  (3,814,490)            (4,413,502)
Issuance of subordinated notes, net of discount                                            -                 99,350
Proceeds from securities sold under agreements to repurchase                         352,511                444,629
Repayment of securities sold under agreements to repurchase                         (382,264)              (516,657)
Decrease in other borrowings                                                         (10,941)                (9,551)
Proceeds from issuance of common stock                                                 3,127                  1,164
Repurchase of common stock                                                           (15,462)               (27,564)
Dividends paid                                                                        (6,043)                (3,073)
                                                                                 -----------            -----------
    Net cash used in financing activities                                            (20,696)              (104,587)
                                                                                 -----------            -----------
                                                                                                        
Net decrease in cash and cash equivalents                                           (116,966)               (18,182)
Cash and cash equivalents at beginning of period                                     231,822                106,828
                                                                                 -----------            -----------
Cash and cash equivalents at end of period                                       $   114,856            $    88,646
                                                                                 ===========            ===========
                                                                                                        
Supplemental disclosures:                                                                               
      Interest paid                                                              $   195,377            $   113,976
      Income taxes paid                                                          $         -            $     7,463
                                                                                                        
Supplemental non-cash investing and financing activities:                                               
    Loans transferred to real estate owned                                       $     4,203            $     8,252
    Loans transferred from held-for-sale to held-for-investment                  $         -            $   152,357
                                                                                                        
The acquisition of subsidiaries involved the following:                                                 
    Common stock issued                                                          $   210,000            $         -
    Fair value of liabilities assumed                                              2,103,341                 13,358
    Fair value of assets acquired, excluding cash and cash equivalents            (2,128,109)                (1,986)
    Goodwill                                                                        (103,103)               (21,302)
                                                                                 -----------            -----------
    Net cash and cash equivalents received (paid)                                $    82,129            $    (9,930)
                                                                                 ===========            ===========


</TABLE> 
                The accompanying notes are an integral part of 
                   these consolidated financial statements.

                                       9
<PAGE>
 
                         BAY VIEW CAPITAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                        

NOTE 1 - BASIS OF PRESENTATION

       The accompanying unaudited interim consolidated financial statements
include the accounts of Bay View Capital Corporation (the "Company"), a Delaware
corporation operating as a diversified financial services company.  Its business
activities are concentrated in three principal areas.  Bay View Bank ("BVB"), a
California corporation and a federally chartered capital stock savings bank,
comprises the Company's Banking Platform.  Bay View Acceptance Corporation
("BVAC"), a Nevada corporation and a subsidiary of BVB, comprises the Company's
Consumer Finance Platform.  BVAC operates through its wholly owned subsidiaries,
Bay View Credit ("BVC"), Ultra Funding, Inc. ("Ultra") and LFS-BV, Inc. ("LFS").
Bay View Commercial Finance Group ("BVCFG") (formerly Concord Growth
Corporation), a California corporation and a subsidiary of the Company,
comprises the Company's Commercial Finance Platform.  The Company is also the
holding company for Bay View Securitization Corporation ("BVSC"), a Delaware
corporation formed for the purpose of issuing asset-backed securities through a
trust, and Regent Financial Corporation ("Regent"), a California corporation
providing item processing services.  All significant intercompany balances and
transactions have been eliminated in consolidation.

       The Company completed its acquisition of America First Eureka Holdings,
Inc. ("AFEH") and its wholly owned subsidiary, EurekaBank, a federal savings
bank, on January 2, 1998.  The Company's results for the first nine months of
1998 reflect the acquisition of AFEH, which was accounted for under the purchase
method of accounting.

       The information provided in these interim financial statements reflects
all adjustments which are, in the opinion of management, necessary for a fair
presentation of the Company's financial condition as of September 30, 1998 and
December 31, 1997, the results of its operations for the three and nine month
periods ended September 30, 1998 and 1997, and its cash flows for the nine month
periods ended September 30, 1998 and 1997.  Such 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 the
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 under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" is written with the
presumption that the users of these interim consolidated financial statements
have read or have access to the Company's 1997 Annual Report on Form 10-K, which
contains the latest audited financial statements and notes thereto, together
with Management's Discussion and Analysis of Financial Condition as of December
31, 1997 and 1996 and Results of Operations for the years ended December 31,
1997, 1996 and 1995.  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 nine month periods ended September
30, 1998 are not necessarily indicative of the results that may be expected for
the entire fiscal year or any other interim period.

                                       10
<PAGE>
 
                          BAY VIEW CAPITAL CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                                  (UNAUDITED)
                                        

NOTE 2 - EARNINGS PER SHARE

       In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share" ("SFAS 128"). SFAS 128 establishes standards for computing and
reporting earnings per share ("EPS") and applies to entities with publicly held
common stock or financial instruments that are potentially convertible into
publicly held common stock. SFAS 128 replaces primary EPS and fully diluted EPS
with basic EPS and diluted EPS and was effective for the Company's December 31,
1997 consolidated financial statements. Basic EPS is calculated by dividing net
earnings available to common stockholders by the weighted-average number of
common shares outstanding for that period. There is no adjustment to the number
of common shares outstanding for dilutive instruments, such as stock options.
Diluted EPS takes into account the 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 common shares outstanding. All
prior period EPS amounts have been restated to reflect the adoption of SFAS 128.

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

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED                           NINE MONTHS ENDED
                                              -----------------------------------------   -----------------------------------------
                                                  SEPTEMBER 30,         SEPTEMBER 30,         SEPTEMBER 30,         SEPTEMBER 30,
                                                      1998                  1997                  1998                  1997
                                              -------------------   -------------------   -------------------   -------------------
                                                                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                             <C>                   <C>                   <C>                   <C> 
Net earnings available to common stockholders      $ 5,025               $ 3,064               $15,320               $12,830
                                                   
Weighted-average common shares outstanding          20,095                12,868                20,224                13,039
Add:  Dilutive potential common shares                 240                   321                   346                   316
                                                   -------               -------               -------               ------- 
     Diluted weighted average shares                
      outstanding                                   20,335                13,189                20,570                13,355 
                                                   -------               -------               -------               ------- 
Basic earnings per share                           $  0.25               $  0.24               $  0.76               $  0.98
                                                   =======               =======               =======               ======= 
Diluted earnings per share                         $  0.25               $  0.23               $  0.74               $  0.96
                                                   =======               =======               =======               ======= 
</TABLE>

       The Company declared a 2 for 1 stock split in the form of a 100% stock
dividend on April 14, 1997 to stockholders of record as of the close of business
on May 9, 1997, which was paid on June 2, 1997.  All common share and per share
data, including stock option plan information, has been restated to reflect the
stock split.


NOTE 3 - COMPREHENSIVE INCOME

       In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" ("SFAS 130"), which requires that all entities report comprehensive
income and its components in their financial statements.  SFAS 130 requires that
all items which are required to be recognized under generally accepted
accounting principles as components of comprehensive income be reported in a
financial statement which is displayed with the same prominence as other
financial statements.  Comprehensive income is defined as net income plus the
change in "other comprehensive income," as defined by SFAS 130.  The only
component of other comprehensive income currently applicable to the Company is
the net unrealized gain or loss on securities available-for-sale.  This
statement was implemented during the first quarter of 1998.

                                       11
<PAGE>
 
                          BAY VIEW CAPITAL CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                                  (UNAUDITED)
                                        

NOTE 4 - STOCK OPTIONS

       The Company has five stock option plans: the "Amended and Restated 1986
Stock Option and Incentive Plan," the "1995 Stock Option and Incentive Plan,"
the "1989 Non-Employee Director Stock Option and Incentive Plan," the "1998-2000
Performance Stock Plan," and the "1998 Non-Employee Director Stock Option and
Incentive Plan" which authorize the issuance of up to 1,759,430 shares,
2,000,000 shares, 550,000 shares, 400,000 shares, and 200,000 shares of the
Company's common stock, respectively.  At September 30, 1998, there were
1,148,399 shares available for grant under these plans as illustrated in the
following table:

<TABLE>
<CAPTION>
                                  AMENDED AND                                1989 NON-                                  1998
                                    RESTATED            1995 STOCK            EMPLOYEE                              NON-EMPLOYEE
                                   1986 STOCK           OPTION AND         DIRECTOR STOCK         1998-2000        DIRECTOR STOCK
                                   OPTION AND           INCENTIVE            OPTION AND          PERFORMANCE         OPTION AND
                                 INCENTIVE PLAN            PLAN            INCENTIVE PLAN        STOCK PLAN        INCENTIVE PLAN
                              -----------------    -----------------    -----------------    -----------------   -----------------
<S>                             <C>                  <C>                  <C>                  <C>                 <C>
Shares reserved for issuance          1,759,430            2,000,000              550,000              400,000             200,000
Granted                              (2,048,816)          (1,604,500)            (570,000)                   -                   -
Forfeited                               290,074              152,899               20,000                    -                   -
Expired                                    (688)                   -                    -                    -                   -
                                    -----------          -----------            ---------             --------            --------
     Total available for grant                -              548,399                    -              400,000             200,000
                                    ===========          ===========            =========             ========            ========
</TABLE>

       At September 30, 1998, the Company had outstanding stock options for all
plans, with expiration dates from the years 1998 through 2008, as follows:

<TABLE>
<CAPTION>
                                                      NUMBER OF                 EXERCISE PRICE                 AVERAGE
                                                    OPTION SHARES                   RANGE                   EXERCISE PRICE
                                               ---------------------       ----------------------      ----------------------
<S>                                              <C>                         <C>                         <C>
Outstanding at December 31, 1997                       1,758,400              $ 7.88 - $34.41                  $19.70
Granted                                                  335,500              $27.69 - $35.20                  $31.40
Exercised                                               (156,101)             $ 7.88 - $28.44                  $12.25
Forfeited                                                (74,399)             $25.50 - $35.20                  $28.45
                                                      ----------              ---------------                  ------
     Outstanding at September 30, 1998                 1,863,400              $ 7.88 - $35.20                  $22.07
                                                      ==========              ===============                  ======
</TABLE>


NOTE 5 - DIVIDEND DECLARATION

       The Company declared a quarterly cash dividend of $0.10 per share on
September 24, 1998, payable on October 23, 1998 to stockholders of record as of
October 9, 1998. The dividend payable, totaling approximately $2.0 million, was
accrued as of September 30, 1998 and is reflected in the accompanying interim
consolidated financial statements.


NOTE 6 - ACQUISITION OF AMERICA FIRST EUREKA HOLDINGS, INC.

       The Company completed its acquisition of America First Eureka Holdings,
Inc. and its wholly owned subsidiary, EurekaBank, a federal savings bank, on
January 2, 1998. Pursuant to the Merger Agreement, the Company paid $90 million
in cash and $210 million in stock (8,076,923 shares of the Company's common
stock, a portion of which were issued from the Company's shares in treasury) to
America First Financial Fund 1987-A Limited Partnership, the sole shareholder of
AFEH, for a total purchase price of $300 million. The number of common shares
issued was based on the average value of the Company's

                                       12
<PAGE>
 
                         BAY VIEW CAPITAL CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                                  (UNAUDITED)

common stock for the 20 full trading days ending on the fifth business day prior
to the merger closing date.  Based on the average value of the Company's common
stock during this period and pursuant to the Merger Agreement, the number of
common shares issued was determined by dividing the $210 million stock portion
of the purchase price by $26.00 per share.

       The acquisition of AFEH was accounted for under the purchase method of
accounting effective January 2, 1998.  The amount of goodwill recorded as of the
merger date was approximately $103 million, excluding core deposit intangibles
("CDI") of approximately $12 million.  This goodwill, representing the excess of
the purchase price over the fair value of net assets acquired, is being
amortized on a straight-line basis over a 20-year period.  This goodwill amount
is subject to the finalization of purchase accounting adjustments, and included
approximately $800,000 in net adjustments during the third quarter of 1998.

       The following table illustrates the estimated allocation of the purchase
price:

<TABLE>
<CAPTION>
                                                             (DOLLARS IN THOUSANDS)
                                                           ------------------------
<S>                                                          <C>
Cash paid                                                         $   90,000
Value of common stock issued                                         210,000
Acquisition costs                                                      4,456
                                                                  ----------
      Total purchase price                                           304,456
                                                                  
Fair value of assets acquired, including CDI                       2,304,694
Fair value of liabilities assumed                                  2,103,341
                                                                  ----------
     Net assets acquired                                             201,353
                                                                  ----------
                                                                  
     Purchase price in excess of net assets acquired              $  103,103
                                                                  ==========
</TABLE>

       The unaudited pro forma financial information in the table below presents
the combined results of operations of the Company and AFEH for the three and
nine month periods ended September 30, 1997 as if the acquisition of AFEH had
occurred as of January 1, 1997. The pro forma financial information is presented
for informational purposes and is not necessarily indicative of the results of
operations which would have occurred had the Company and AFEH constituted a
single entity during the first nine months of 1997. The pro forma financial
information is also not necessarily indicative of the future results of
operations of the combined company. In particular, the Company expects to
achieve certain cost savings as a result of the acquisition which have not been
included in the pro forma financial information.

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED               NINE MONTHS ENDED
                                            SEPTEMBER 30, 1997              SEPTEMBER 30, 1997
                                        --------------------------      --------------------------
                                             (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                      <C>                             <C>
Net interest income                            $ 36,132                          $104,339
Provision for loan losses                          (901)                           (2,580)
Noninterest income                                4,986                            17,535
Noninterest expense                             (32,972)                          (89,400)
Income tax expense                               (3,485)                          (14,397)
                                               --------                          --------
     Net income                                $  3,760                          $ 15,497
                                               ========                          ========
                                                                                 
Basic earnings per share                       $   0.18                          $   0.73
                                               ========                          ========
Diluted earnings per share                     $   0.18                          $   0.72
                                               ========                          ========
</TABLE>

                                       13
<PAGE>
 
                         BAY VIEW CAPITAL CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                                  (UNAUDITED)
                                        

       The unaudited pro forma combined net income for the third quarter of 1997
of $3.8 million consists of net income for the Company of $3.1 million and net
income for AFEH of $5.3 million, less pro forma adjustments of $4.6 million. The
unaudited pro forma combined net income for the first nine months of 1997 of
$15.5 million consists of net income for the Company of $12.8 million and net
income for AFEH of $18.0 million, less pro forma adjustments of $15.3 million.
Significant pro forma adjustments include interest expense relating to $100
million in subordinated debt issued in August 1997 in anticipation of the
Company's acquisition of AFEH, amortization expense relating to goodwill and
core deposit intangibles created as a result of the acquisition and additional
income tax expense relating to income taxes that would have been recognized
utilizing the Company's effective income tax rates for the first nine months of
1997, net of the tax impact of the pro forma adjustments. The unaudited pro
forma financial information excludes the utilization of net operating loss
("NOL") carryforwards as the tax benefit associated with the NOL carryforwards
was established as a deferred tax asset as of the acquisition date. As of
January 1, 1997, AFEH had approximately $205 million in NOL carryforwards for
federal tax purposes which expire in various years through 2007.

                                       14
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
         OF OPERATIONS
         -------------

                              STRATEGIC OVERVIEW
                                        
       The Company is a diversified financial services company which operates
from three distinct business platforms:

       .   A Banking and Depository Platform ("Banking Platform") which is
           comprised primarily of first and second mortgage loans and mortgage-
           backed securities.

       .   A Consumer Finance Platform which is comprised of motor vehicle loans
           and leases and high loan-to-value ("HLTV") home equity loans.

       .   A Commercial Finance Platform which is comprised primarily of asset-
           based lending, factoring and commercial leasing activities.

THE COMPANY'S MISSION STATEMENT

       To build a diversified financial services company by investing in niche
businesses with risk-adjusted returns that enhance shareholder value.

THE COMPANY'S STRATEGIES

       The Company's strategies center around the continued transition to
traditional commercial banking activities and the resulting expansion of its net
interest margin. In order to realize this objective, management is pursuing
strategies that include the following:

       .   Replacing lower-yielding mortgage loans and mortgage-backed
           securities with consumer and commercial loans and leases with higher
           risk-adjusted returns, shorter maturities and less sensitivity to
           interest rate fluctuations.

       .   Enhancing BVB's deposit base by reducing higher-cost deposits and
           expanding lower-cost transaction accounts by emphasizing relationship
           banking and capitalizing on cross-sell opportunities with customers.

       .   De-emphasizing the less profitable elements of the Company's business
           activities including ceasing residential mortgage loan originations
           and reducing BVB's wholesale activities.

       .   Maintaining the capital level of BVB at or above the minimum "well
           capitalized" (as defined for bank regulatory purposes) level and
           returning any excess capital to the Company.

       .   Redeploying the Company's excess capital in businesses intended to
           generate assets with higher risk-adjusted returns than those
           typically provided by mortgage loans and mortgage-backed securities.

Banking Platform Strategies

       The Banking Platform is largely represented by the operations of BVB
which has 56 branches serving primarily the San Francisco Bay Area and one
branch serving Southern California. The Banking Platform's strategic focus is to
expand the retail deposit franchise through the growth of "transaction accounts"
(e.g., checking, savings and money market accounts), instead of higher-cost
certificates of deposit, as a source of financing for the Company. As a result,
transaction accounts at BVB as a percentage of total retail deposits increased
to 44.5% at September 30, 1998 as compared with 34.6% and 30.3% at December 31,
1997 and 1996, respectively.

                                       15
<PAGE>
 
       The Company recently announced that it had filed applications with the
Office of the Comptroller of the Currency and the Federal Reserve Board to
convert BVB from a federally chartered savings bank regulated by the Office
of Thrift Supervision ("OTS") to a national bank regulated by the Office of the
Comptroller of the Currency. The Company anticipates that the review process
will be completed during the fourth quarter of 1998.

Consumer Finance Platform Strategies

       The Consumer Finance Platform is comprised of motor vehicle loans and
leases underwritten and purchased by BVAC through its subsidiaries BVC, Ultra
and LFS. The platform also includes HLTV home equity loans purchased by the
Company.

       BVAC underwrites and purchases high quality, fixed-rate loans and leases
secured by new and used motor vehicles.  BVAC has successfully carved out niche
strategies in the increasingly competitive motor vehicle finance industry.

       One such niche strategy includes motor vehicle loans where the borrower
desires a higher relative loan amount and/or longer term than is offered by many
other motor vehicle financing sources.  In return for the flexibility of the
product it offers, BVAC charges interest rates higher than those typically
offered by traditional sources of motor vehicle financing, such as banks and
captive finance companies, while applying its traditional underwriting criteria
on a case-by-case basis to mitigate any potential loan losses.  BVAC also
employs niche strategies in its in-line (i.e., conventional) loan and lease
businesses including geographic and product niches.

       Securitization and Sale of Motor Vehicle Loan Portfolio

       In January 1997, BVAC sold $253 million of its motor vehicle loan
portfolio to BVSC. The motor vehicle loan portfolio was recorded at its fair
value upon acquisition of BVC in June 1996 assuming that such loans would be
securitized and sold. As a result, the only gain recorded on the securitization
and sale of the loans was related to changes in market interest rates between
the acquisition date of BVC and the subsequent securitization and sale of the
loans. The Company ceased its securitization activities during 1997 in
conjunction with the announcement of the EurekaBank acquisition.

       Strategic Alliance

       The Company has previously announced a strategic alliance with Lendco for
the purchase of motor vehicle leases. The Company began purchasing motor vehicle
leases from Lendco during April 1998. The agreements with Lendco also provide
the Company with an option to acquire Lendco. The Company continues to evaluate
the viability of such an acquisition.

Commercial Finance Platform Strategies

       BVCFG comprises the Company's Commercial Finance Platform.  Based in San
Mateo, California and Encino, California, BVCFG is engaged primarily in asset-
based lending, factoring and the purchasing of leases from Signature Financial
Group ("Signature").

       In December 1997, the Company announced an expansion of the Commercial
Finance Platform including the formation of a new asset-based lending group
known as Bay View Financial Corporation. Specifically, the Company expanded the
asset-based lending segment of the platform by adding personnel with significant
industry experience, relocating the asset-based lending business to Southern
California, one of the top asset-based lending markets in the country, and
adding new and enhanced products to the Commercial Finance Platform's product
array. This expansion represents a significant step in achieving the Company's
goal of establishing a $200-300 million asset-based lending platform.

                                       16
<PAGE>
 
       Strategic Alliance

       The Company has previously announced a strategic alliance with Signature,
a Danville, California-based company specializing in small-ticket equipment
leases nationwide. The Company began purchasing leases from Signature during the
second quarter of 1998. The agreement with Signature also provides the Company
with an option to acquire Signature. The Company continues to evaluate the
viability of such an acquisition.


                             RESULTS OF OPERATIONS

       The Company's results for the first nine months of 1998 reflect the
Company's acquisitions of EurekaBank effective January 2, 1998 and Ultra
effective October 1, 1997. The Company's results for the first nine months of
1997 reflect the Company's acquisition of BVCFG effective April 1, 1997.

       Net income for the third quarter of 1998 was $5.0 million, or $0.25 per
diluted share, as compared with $3.1 million, or $0.23 per diluted share, for
the third quarter of 1997.  Net income for the first nine months of 1998 was
$15.3 million, or $0.74 per diluted share, as compared with $12.8 million, or
$0.96 per diluted share, for the first nine months of 1997.

NET INTEREST INCOME

       Net interest income for the third quarter of 1998 was $39.3 million as
compared with $22.4 million for the third quarter of 1997.  Net interest income
for the first nine months of 1998 was $114.5 million as compared with $65.2
million for the first nine months of 1997.  The Company's net interest margin
for the third quarter of 1998 was 3.05% as compared with 2.94% for the third
quarter of 1997.  The Company's net interest margin for the first nine months of
1998 was 3.00% as compared with 2.84% for the first nine months of 1997.  The
increases in net interest income, as compared with the respective prior periods,
were principally a result of the Company's acquisition of EurekaBank, effective
January 2, 1998, as well as continued growth in the Consumer Finance Platform
and the Commercial Finance Platform.  The increases in net interest margin, as
compared with the respective prior periods, were principally a result of the
continuing shift from traditional mortgage-based assets to consumer and
commercial assets with higher risk-adjusted yields combined with a decrease in
the Company's funding costs, partially offset by the impact of EurekaBank's
lower-yielding portfolio of mortgage loans.

       Consistent with the first half of 1998, the Company continued to
experience a significant level of prepayments on loans (primarily mortgage
loans) and mortgage-backed securities during the third quarter of 1998,
reflecting the recent low interest rate environment. Prepayments (including
normal amortization) during the third quarter of 1998 were approximately $430
million, representing an annualized rate of 32.9%. Prepayments during September
1998 were approximately $130 million, representing an annualized rate of 31.2%.
Prepayments on loans and mortgage-backed securities for the first nine months of
1998 were approximately $1.2 billion, representing an annualized rate of 32.9%.
The impact of prepayments during the first nine months of 1998 was offset by
loan and lease originations and purchases during the period of approximately
$1.5 billion. During the third quarter of 1998, however, loan and mortgage-
backed securities prepayments and sales of securities exceeded loan and lease
originations and purchases and purchases of securities by approximately $190
million. While the Company's loan production remained strong, the level of loan
purchases declined during the third quarter of 1998, reflecting the current
economic environment and a difficulty in identifying assets with sufficient 
risk-adjusted yields.

                                       17
<PAGE>
 
       The following tables illustrate net interest income and net interest
margin, by platform, for the periods indicated:

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED (UNAUDITED)
                                        ----------------------------------------------------------------------
                                                SEPTEMBER 30, 1998                    SEPTEMBER 30, 1997
                                        --------------------------------     ---------------------------------
                                              NET                NET                NET                NET
                                            INTEREST          INTEREST           INTEREST           INTEREST
                                             INCOME            MARGIN             INCOME             MARGIN
                                        --------------    --------------     ---------------    --------------
                                                                 (DOLLARS IN THOUSANDS)
<S>                                       <C>               <C>                <C>                <C>
Banking Platform                            $25,411              2.43%            $16,165              2.35%
Consumer Finance Platform (1)                11,406              5.15               3,749              6.60
Commercial Finance Platform (1)               2,447             12.19               2,454             18.74
                                            -------             -----             -------             -----
     Total                                  $39,264              3.05%            $22,368              2.94%
                                            =======             =====             =======             =====
</TABLE>


<TABLE>
<CAPTION>
                                                              NINE MONTHS ENDED (UNAUDITED)
                                        ----------------------------------------------------------------------
                                                SEPTEMBER 30, 1998                    SEPTEMBER 30, 1997
                                        --------------------------------     ---------------------------------
                                              NET                NET                NET                NET
                                            INTEREST          INTEREST           INTEREST           INTEREST
                                             INCOME            MARGIN             INCOME             MARGIN
                                        --------------    --------------     ---------------    --------------
                                                                 (DOLLARS IN THOUSANDS)
<S>                                     <C>               <C>                <C>                <C>
Banking Platform                          $ 81,198              2.49%            $52,332              2.45%
Consumer Finance Platform (1)               26,385              5.22               7,853              5.88
Commercial Finance Platform (1)              6,959             14.05               5,006             19.56
                                          --------             -----             -------             -----
     Total                                $114,542              3.00%            $65,191              2.84%
                                          ========             =====             =======             =====
</TABLE>

(1)    The Consumer Finance Platform was created with the acquisitions of BVC in
       June 1996 and Ultra in October 1997. The Consumer Finance Platform began
       purchasing HLTV home equity loans in August 1997. The Commercial Finance
       Platform was created with the acquisition of BVCFG in April 1997.

       As each of the above platforms is funded by the deposits and borrowings
of BVB and the debt of the Company, the cost of funds for each platform is
deemed equal to the consolidated Company's cost of funds in the computation of
net interest income and net interest margin by platform.

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

<TABLE>
<CAPTION>
                                                                                 (UNAUDITED)
                                          ---------------------------------------------------------------------------------------
                                                       THREE MONTHS ENDED                            NINE MONTHS ENDED
                                          ------------------------------------------    -----------------------------------------
                                              SEPTEMBER 30,          SEPTEMBER 30,          SEPTEMBER 30,         SEPTEMBER 30,
                                                  1998                   1997                   1998                   1997
                                          -------------------    -------------------    -------------------    ------------------
                                                                             (DOLLARS IN THOUSANDS)
<S>                                         <C>                    <C>                    <C>                    <C>
Banking Platform                               $4,228,391             $2,783,617             $4,345,480            $2,835,114
Consumer Finance Platform(1)                      886,574                226,115                667,316               176,502
Commercial Finance Platform(1),(2)                 79,638                 51,957                 66,219                34,034
                                               ----------             ----------             ----------            ----------
     Total average interest-earning assets     $5,194,603             $3,061,689             $5,079,015            $3,045,650
                                               ==========             ==========             ==========            ==========
</TABLE>

(1)    The Consumer Finance Platform was created with the acquisitions of BVC in
       June 1996 and Ultra in October 1997. The Consumer Finance Platform began
       purchasing HLTV home equity loans in August 1997. The Commercial Finance
       Platform was created with the acquisition of BVCFG in April 1997.
(2)    The Commercial Finance Platform's average interest-earning asset balance
       for the third quarter of 1998 included average asset-based lending
       balances of $52.1 million as compared with $36.0 million for the third
       quarter of 1997.

                                       18
<PAGE>
 
Banking Platform
----------------

       The Banking Platform's net interest margin for the third quarter of 1998
was 2.43% as compared with 2.35% for the third quarter of 1997. The platform's
net interest margin for the first nine months of 1998 was 2.49% as compared with
2.45% for the first nine months of 1997. The increases in net interest margin,
as compared with the respective prior periods, were primarily due to a decrease
in the Company's funding costs, as discussed elsewhere herein. This improvement
associated with lower funding costs was partially offset, however, by the impact
of EurekaBank's lower-yielding portfolio of mortgage loans which were acquired
by the Company effective January 2, 1998, combined with a $200 million purchase
of lower-yielding mortgage loans in June 1998, primarily to assist BVB in
meeting its Community Reinvestment Act ("CRA") requirements, and the continued
prepayments of higher-yielding mortgage loans and mortgage-backed securities.

Consumer Finance Platform
-------------------------

       The Consumer Finance Platform's net interest margin for the third quarter
of 1998 was 5.15% as compared with 6.60% for the third quarter of 1997. The
platform's net interest margin for the first nine months of 1998 was 5.22% as
compared with 5.88% for the first nine months of 1997. The decreases in net
interest margin, as compared with the respective prior periods, were due to
lower yields on new auto assets generated, including purchases of lower-yielding
recreational vehicle loans, partially offset by purchases of higher-yielding
HLTV home equity loans and a decrease in the Company's funding costs. While the
Consumer Finance Platform's auto loan yields on new assets originated decreased
during the first six months of 1998, largely due to the impact of the
competitive environment, these loan yields stabilized during the third quarter
of 1998.

       During the third quarter of 1998, the Consumer Finance Platform generated
$200 million in motor vehicle loans and leased assets as compared with $91
million during the third quarter of 1997. The totals for the third quarter of
1998 included $117 million in auto loans, with an average Fair Isaac Credit
Bureau ("FICO") score of 702, and $83 million in auto leases, with an average
FICO score of 736. The Company generally considers FICO scores of 680 and higher
as "A-quality" paper.

       On June 10, 1998, the Company announced that it had executed a definitive
agreement to acquire PSB Lending Corp. ("PSBL"), an indirect originator of HLTV
home equity loans.  On August 27, 1998, the Company announced that it had
cancelled the proposed acquisition of PSBL, due to the Company's federal banking
regulatory agency, the Office of Thrift Supervision, implementing restrictions
on the amount of HLTV home equity loans an insured thrift institution may own.
These restrictions were such that they would prevent the Company from achieving
its original acquisition-related economic assumptions.  At September 30, 1998,
the Consumer Finance Platform had approximately $420 million in HLTV home equity
loans as compared with approximately $67 million at December 31, 1997.  The
increase in HLTV home equity loans was attributable to $386 million in purchases
during the first nine months of 1998, including approximately $92 million
purchased during the third quarter of 1998, with an average FICO score of 682.
At September 30, 1998, the Company had approximately $60 million in purchase
commitments remaining with PSBL.

Commercial Finance Platform
---------------------------

       The Commercial Finance Platform's net interest margin for the third
quarter of 1998 was 12.19% as compared with 18.74% for the third quarter of
1997. The platform's net interest margin for the first nine months of 1998 was
14.05% as compared with 19.56% for the first nine months of 1997. This platform
was created as a result of the Company's acquisition of BVCFG, which was
accounted for under the purchase method of accounting effective April 1, 1997.
The decreases in net interest margin, as compared with the respective prior
periods, were largely the result of growth in the platform's asset-based lending
segment which generates lower risk-adjusted yields relative to the platform's
factoring segment, partially offset by a decrease 

                                       19
<PAGE>
 
in the Company's funding costs. The Commercial Finance Platform's asset-based
lending segment increased from $40 million at December 31, 1997 to over $60
million at September 30, 1998.

AVERAGE BALANCE SHEET

       The following tables illustrate certain information relating to the
Company's consolidated statements of financial condition and reflect the average
yields on interest-earning assets and average rates on interest-bearing
liabilities for the periods indicated. Such yields and rates are derived by
dividing interest income or interest expense by the average balances of 
interest-earning assets or interest-bearing liabilities, respectively, 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.

                                       20
<PAGE>
 
<TABLE>
<CAPTION>
                                                                    AVERAGE BALANCES, YIELDS AND RATES (UNAUDITED)
                                                 ----------------------------------------------------------------------------------
                                                                THREE MONTHS ENDED                      THREE MONTHS ENDED
                                                                SEPTEMBER 30, 1998                      SEPTEMBER 30, 1997
                                                 ----------------------------------------------------------------------------------
                                                     AVERAGE                     AVERAGE        AVERAGE                    AVERAGE
                                                     BALANCE      INTEREST     YIELD/RATE       BALANCE      INTEREST    YIELD/RATE
                                                 ----------------------------------------------------------------------------------
                                                                                (DOLLARS IN THOUSANDS)
ASSETS
------
<S>                                                <C>            <C>          <C>            <C>            <C>         <C>
Interest-earning assets:
Loans receivable                                    $4,373,323     $ 91,531          8.36%     $2,377,046     $50,674          8.51%

Mortgage-backed securities (1)                         632,638       10,054          6.36         523,049       8,374          6.40
Investment securities (1)                              188,642        2,983          6.29         161,594       2,689          6.56
                                                    ----------     --------        ------      ----------     -------        ------
Total interest-earning assets                        5,194,603     $104,568          8.04%      3,061,689     $61,737          8.05%
                                                                   ========        ======                     =======        ======
Other assets                                           398,032                                     98,376
                                                    ----------                                 ----------
Total assets                                        $5,592,635                                 $3,160,065
                                                    ==========                                 ==========
 
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Interest-bearing liabilities:
  Customer deposits                                 $3,287,430     $ 36,507          4.40%     $1,591,239     $18,599          4.63%

  Borrowings (2)                                     1,869,790       28,797          6.12       1,320,455      20,770          6.26
                                                    ----------     --------        ------      ----------     -------        ------
Total interest-bearing liabilities                   5,157,220     $ 65,304          5.03%      2,911,694     $39,369          5.37%
                                                                   ========        ======                     =======        ======
Other liabilities                                       46,433                                     53,058
                                                    ----------                                 ----------
Total liabilities                                    5,203,653                                  2,964,752
Stockholders' equity                                   388,982                                    195,313
                                                    ----------                                 ----------
Total liabilities and stockholders' equity          $5,592,635                                 $3,160,065
                                                    ==========                                 ==========
 
     Net interest income/net interest spread                       $ 39,264          3.01%                    $22,368          2.68%
                                                                   ========        ======                     =======        ======
 
     Net interest earning assets                    $   37,383                                 $  149,995
                                                    ==========                                 ==========
 
     Net interest margin (3)                                                         3.05%                                     2.94%
                                                                                   ======                                    ======
</TABLE>


(1)    Average balances and yields for mortgage-backed securities and investment
       securities classified as available-for-sale are based on historical
       amortized cost.
(2)    Interest expense for borrowings includes interest expense on interest
       rate swaps of $407,000 and $533,000 for the three months ended September
       30, 1998 and 1997, respectively.
(3)    Annualized net interest income divided by average interest-earning
       assets.

                                       21
<PAGE>
 
<TABLE>
<CAPTION>
                                                                     AVERAGE BALANCES, YIELDS AND RATES (UNAUDITED)
                                                ------------------------------------------------------------------------------------
                                                               NINE MONTHS ENDED                        NINE MONTHS ENDED
                                                               SEPTEMBER 30, 1998                       SEPTEMBER 30, 1997
                                                ------------------------------------------------------------------------------------
                                                     AVERAGE                     AVERAGE        AVERAGE                     AVERAGE
                                                     BALANCE      INTEREST     YIELD/RATE       BALANCE      INTEREST     YIELD/RATE
                                                 -----------------------------------------------------------------------------------
                                                                                (DOLLARS IN THOUSANDS)
ASSETS
------
<S>                                                <C>            <C>          <C>            <C>            <C>          <C>
Interest-earning assets:
Loans receivable                                    $4,124,300     $257,447          8.33%     $2,351,527     $145,744        8.26%
Mortgage-backed securities (1)                         787,617       38,598          6.53         545,500       26,453        6.47
Investment securities (1)                              167,098        7,935          6.28         148,623        7,122        6.30
                                                    ----------     --------        ------      ----------     --------      ------  
Total interest-earning assets                        5,079,015     $303,980          7.98%      3,045,650     $179,319        7.84%
                                                                   ========        ======                     ========      ======
Other assets                                           380,168                                     65,771                    
                                                    ----------                                 ----------
Total assets                                        $5,459,183                                 $3,111,421                    
                                                    ==========                                 ==========                    
                                                                                                                             
LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                         
------------------------------------
Interest-bearing liabilities:                                                                                                
  Customer deposits                                 $3,424,222     $115,105          4.49%     $1,638,520     $ 56,723        4.63%
  Borrowings (2)                                     1,577,733       74,333          6.29       1,228,125       57,405        6.23
                                                    ----------     --------        ------      ----------     --------      ------  
Total interest-bearing liabilities                   5,001,955     $189,438          5.06%      2,866,645     $114,128        5.32%
                                                                   ========        ======                     ========      ======
Other liabilities                                       68,314                                     49,411                    
                                                    ----------                                 ---------- 
Total liabilities                                    5,070,269                                  2,916,056                    
Stockholders' equity                                   388,914                                    195,365                    
                                                    ----------                                 ---------- 
Total liabilities and stockholders' equity          $5,459,183                                 $3,111,421                    
                                                    ==========                                 ==========                     
                                                                                                                             
     Net interest income/net interest spread                       $114,542          2.92%                    $ 65,191        2.52%
                                                                   ========        ======                     ========      ======
                                                                                                                             
     Net interest earning assets                    $   77,060                                 $  179,005                    
                                                    ==========                                 ==========                     
                                                                                                                             
     Net interest margin (3)                                                         3.00%                                    2.84%
                                                                                   ======                                   ======
</TABLE>


(1)    Average balances and yields for mortgage-backed securities and investment
       securities classified as available-for-sale are based on historical
       amortized cost.
(2)    Interest expense for borrowings includes interest expense on interest
       rate swaps of $1.6 million and $2.1 million for the nine months ended
       September 30, 1998 and 1997, respectively.
(3)    Annualized net interest income divided by average interest-earning
       assets.

                                       22
<PAGE>
 
INTEREST INCOME

Interest on Loans

       Interest on loans was $91.5 million for the third quarter of 1998 as
compared with $50.7 million for the third quarter of 1997. Interest on loans was
$257.4 million for the first nine months of 1998 as compared with $145.7 million
for the first nine months of 1997. The increases in interest on loans, as
compared with the respective prior periods, were largely a result of the
acquisitions of EurekaBank, Ultra and BVCFG, combined with internally generated
platform loan growth.

       The following tables illustrate interest on loans, by platform, for the
periods indicated:

<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED (UNAUDITED)
                                            ------------------------------------------------------------------------------------
                                                        SEPTEMBER 30, 1998                           SEPTEMBER 30, 1997
                                            ---------------------------------------      ---------------------------------------
                                                                        AVERAGE                                      AVERAGE
                                                  AMOUNT                 YIELD                 AMOUNT                 YIELD
                                            -----------------     -----------------      -----------------     -----------------
                                                                            (DOLLARS IN THOUSANDS)
<S>                                           <C>                   <C>                    <C>                   <C> 
Banking Platform                                 $65,520                  7.69%               $41,225                  7.83%
Consumer Finance Platform(1)                      22,562                 10.14                  6,326                 11.42
Commercial Finance Platform(1)                     3,449                 17.18                  3,123                 23.85
                                                 -------                 -----                -------                 -----
     Total                                       $91,531                  8.36%               $50,674                  8.51%
                                                 =======                 =====                =======                 =====
</TABLE>


<TABLE>
<CAPTION>
                                                                         NINE MONTHS ENDED (UNAUDITED)
                                            ------------------------------------------------------------------------------------
                                                        SEPTEMBER 30, 1998                           SEPTEMBER 30, 1997
                                            ---------------------------------------      ---------------------------------------
                                                                        AVERAGE                                      AVERAGE
                                                  AMOUNT                 YIELD                 AMOUNT                 YIELD
                                            -----------------     -----------------      -----------------     -----------------
                                                                            (DOLLARS IN THOUSANDS)
<S>                                           <C>                   <C>                    <C>                   <C>
Banking Platform                                $197,035                  7.75%              $125,644                  7.80%
Consumer Finance Platform(1)                      50,982                 10.20                 13,803                 10.78
Commercial Finance Platform(1)                     9,430                 19.04                  6,297                 24.61
                                                --------                 -----               --------                 -----
     Total                                      $257,447                  8.33%              $145,744                  8.26%
                                                ========                 =====               ========                 =====
</TABLE>

(1)    The Consumer Finance Platform was created with the acquisitions of BVC in
       June 1996 and Ultra in October 1997.  The Consumer Finance Platform began
       purchasing HLTV home equity loans in August 1997.  The Commercial Finance
       Platform was created with the acquisition of BVCFG in April 1997.

Banking Platform
----------------

       The Banking Platform's average loan yield for the third quarter of 1998
was 7.69% as compared with 7.83% for the third quarter of 1997. The platform's
average loan yield for the first nine months of 1998 was 7.75% as compared with
7.80% for the first nine months of 1997. The decreases in the platform's average
loan yields, as compared to the respective prior periods, were due to the impact
of EurekaBank's lower-yielding portfolio of mortgage loans which were acquired
effective January 2, 1998, combined with the aforementioned $200 million
purchase of lower-yielding mortgage loans in June 1998 and the continued
prepayments of higher-yielding mortgage loans.

Consumer Finance Platform
-------------------------

       The Consumer Finance Platform's average loan yield for the third quarter
of 1998 was 10.14% as compared with 11.42% for the third quarter of 1997. The
platform's average loan yield for the first nine months of 1998 was 10.20% as
compared with 10.78% for the first nine months of 1997. The decreases in the
platform's average loan yields, as compared with the respective prior periods,
were due to lower yields on new 

                                       23
<PAGE>
 
auto assets generated, including purchases of lower-yielding recreational
vehicle loans, partially offset by purchases of higher-yielding HLTV home equity
loans. While the Consumer Finance Platform's auto loan yields on new assets
originated decreased during the first six months of 1998, largely due to the
impact of the competitive environment, these loan yields stabilized during the
third quarter of 1998.

Commercial Finance Platform
---------------------------

       The Commercial Finance Platform's average loan yield for the third
quarter of 1998 was 17.18% as compared with 23.85% for the third quarter of
1997. The platform's average loan yield for the first nine months of 1998 was
19.04% as compared with 24.61% for the first nine months of 1997. The decreases
in the platform's average loans yields, as compared with the respective prior
periods, were largely the result of growth in the platform's asset-based lending
segment which generates lower risk-adjusted yields relative to the platform's
factoring segment. This platform was created as a result of the Company's
acquisition of BVCFG effective April 1997.

Interest on Mortgage-backed Securities

       Interest on the Company's mortgage-backed securities ("MBS") for the
third quarter of 1998 was $10.1 million as compared with $8.4 million for the
third quarter of 1997. Interest on MBS for the first nine months of 1998 was
$38.6 million as compared with $26.5 million for the first nine months of 1997.
The average yield on MBS was 6.36% for the third quarter of 1998 as compared
with 6.40% for the third quarter of 1997. The average yield on MBS was 6.53% for
the first nine months of 1998 as compared with 6.47% for the first nine months
of 1997. The increases in interest on MBS, as compared with the respective prior
periods, were primarily attributable to the acquisition of EurekaBank's MBS
portfolio effective January 2, 1998, partially offset by a high level of MBS
prepayments during the first nine months of 1998. The decrease in the average
yield for the third quarter of 1998, as compared with the third quarter of 1997,
was due to continued prepayments during 1998 of higher-yielding MBS, partially
offset by the benefit associated with the acquisition of EurekaBank's MBS
portfolio, which reflected yields higher than BVB's pre-acquisition MBS
portfolio. The increase in the average yield for the first nine months of 1998,
as compared with the first nine months of 1997, was attributable to EurekaBank's
higher-yielding MBS portfolio.

Interest and Dividends on Investment Securities

       Interest and dividends from the Company's investment securities for the
third quarter of 1998 were $3.0 million as compared with $2.7 million for the
third quarter of 1997. Interest and dividends on investment securities for the
first nine months of 1998 were $7.9 million as compared with $7.1 million for
the first nine months of 1997. The average yield on investment securities for
the third quarter of 1998 was 6.29% as compared with 6.56% for the third quarter
of 1997. The average yield on investment securities for the first nine months of
1998 was 6.28% as compared with 6.30% for the first nine months of 1997. The
increases in interest and dividends on investment securities, as compared with
the respective prior periods, were primarily due to the Company's acquisition of
EurekaBank's investment securities portfolio effective January 2, 1998. The
decreases in the average yields, as compared with the respective prior periods,
were primarily due to the impact of the recent interest rate environment.

INTEREST EXPENSE

Interest on Customer Deposits

       Interest on the Company's customer deposits was $36.5 million for the
third quarter of 1998 as compared with $18.6 million for the third quarter of
1997. Interest on customer deposits was $115.1 million for the first nine months
of 1998 as compared with $56.7 million for the first nine months of 1997. The
cost of deposits was 4.40% for the third quarter of 1998 as compared with 4.63%
for the third quarter of 1997. The cost of deposits was 4.49% for the first nine
months of 1998 as compared with 4.63% for the first nine months of 1997. 

                                       24
<PAGE>
 
The increases in interest on customer deposits, as compared with the respective
prior periods, were due to the acquisition of EurekaBank's customer deposit
balances effective January 2, 1998, partially offset by a decrease in the
Company's cost of deposits. This decrease in the cost of deposits resulted from
a combination of factors, including an increase in lower-cost transaction
accounts, deposit pricing strategies, the recent interest rate environment, and
the run-off of jumbo and brokered certificates of deposit.

       The Company's cost of deposits for September 1998 was 4.38%. This cost
was 52 basis points below the Eleventh District Cost of Funds Index ("COFI") of
4.90% for August 1998, the most recent data available. Transaction account
balances as a percentage of total retail deposits were 44.5% at September 30,
1998 as compared with 34.6% and 30.3% at December 31, 1997 and 1996,
respectively.

       The following table summarizes the Company's cost of deposits versus COFI
and the Company's transaction accounts as a percentage of total retail deposits
for the periods indicated:

<TABLE>
<CAPTION>
                                                                         MONTHS ENDED (UNAUDITED)
                                      ------------------------------------------------------------------------------------------
                                            SEPTEMBER 30, 1998              DECEMBER 31, 1997               DECEMBER 31, 1996
                                      --------------------------      --------------------------      --------------------------
<S>                                     <C>                             <C>                             <C>
Cost of deposits                                4.38%                           4.71%                           4.60%
COFI (1)                                        4.90                            4.95                            4.84
                                               -----                           -----                           -----
     Spread below COFI                         (0.52%)                         (0.24%)                         (0.24%)
                                               =====                           =====                           ===== 
Transaction accounts as a
  percentage of total retail deposits           44.5%                           34.6%                           30.3%
                                               =====                           =====                           ===== 
</TABLE>

(1)    The COFI numbers represent the cost for the preceding month, the most
       recent data available for each reporting period.

       While the spread below COFI for the Company's deposits was 52 basis
points for September 1998, the spread for the original Bay View Bank branches,
on a standalone basis, was 78 basis points for September 1998. The cost of
deposits for the original EurekaBank branches, on a standalone basis, was 44
basis points below COFI for September 1998, reflecting EurekaBank's higher
deposit pricing structure. Since the acquisition of EurekaBank effective January
2, 1998, the Company has been successful in reducing the cost of the EurekaBank
deposits, along with the cost of the BVB deposits, consistent with the
Company's overall pricing strategies. The Company expects that the cost of
deposits for the EurekaBank branches should continue to decrease to levels
consistent with the Bay View Bank branches. The following table summarizes the
cost of deposits versus COFI for the Bay View Bank branches and the EurekaBank
branches for the periods indicated:

<TABLE>
<CAPTION>
                                                                       MONTHS ENDED (UNAUDITED)
                                    ------------------------------------------------------------------------------------------
                                          SEPTEMBER 30, 1998                JUNE 30, 1998                   MARCH 31, 1998
                                    --------------------------      --------------------------      --------------------------
<S>                                   <C>                             <C>                             <C>
Cost of deposits - BVB                         4.12%                           4.22%                           4.41%
Cost of deposits - EurekaBank                  4.46%                           4.56%                           4.66%
COFI (1)                                       4.90%                           4.88%                           4.97%
                                             ------                          ------                          ------
  Spread below COFI - BVB                     (0.78%)                         (0.66%)                         (0.56%)
                                             ======                          ======                          ======
  Spread below COFI - EurekaBank              (0.44%)                         (0.32%)                         (0.31%)
                                             ======                          ======                          ======
</TABLE>

(1)    The COFI numbers represent the cost for the preceding month, the most
       recent data available for each reporting period.

Interest on Borrowings

       Interest on the Company's borrowings, including senior debentures,
subordinated notes and other borrowings, was $28.8 million for the third quarter
of 1998 as compared with $20.8 million for the third quarter of 1997.  Interest
on borrowings was $74.3 million for the first nine months of 1998 as compared
with $57.4 million for the first nine months of 1997.  The average cost of
borrowings was 6.12% for the third quarter of 

                                       25
<PAGE>
 
1998 as compared with 6.26% for the third quarter of 1997. The average cost of
borrowings was 6.29% for the first nine months of 1998 as compared with 6.23%
for the first nine months of 1997. The increases in interest on borrowings, as
compared with the respective prior periods, were due to a combination of factors
including a higher level of Federal Home Loan Bank ("FHLB") advances outstanding
during 1998 and the Company's issuance of $100 million in subordinated debt in
August 1997 with an all-in cost of approximately 9.6%. The decrease in the
average cost of borrowings for the third quarter of 1998, as compared with the
third quarter of 1997, was a result of the recent interest rate environment and
the resulting lower rates on FHLB advances, partially offset by the
aforementioned debt issued in August 1997. The average cost of FHLB advances was
5.72% for the third quarter of 1998 as compared with 5.88% for the third quarter
of 1997. The slight increase in the average cost of borrowings for the first
nine months of 1998, as compared with the first nine months of 1997, was largely
the result of the debt issued in August 1997.

Changes in Rate and Volume

       The following tables illustrate the changes in net interest income due to
changes in the rate and volume of the Company's interest-earning assets and
interest-bearing liabilities for the three and nine month periods ended
September 30, 1998 as compared with the three and nine month periods ended
September 30, 1997.  The variances include the effects of the Company's
acquisitions.  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.

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED SEPTEMBER 30, 1998 vs 1997 
                                                                               (UNAUDITED)
                                                -----------------------------------------------------------------------
                                                         RATE                    VOLUME                    TOTAL
                                                       VARIANCE                 VARIANCE                  VARIANCE
                                                -------------------      ---------------------     --------------------
                                                                         (DOLLARS IN THOUSANDS)
<S>                                               <C>                      <C>                       <C>
Interest income:
   Loans                                             $  (876)                   $41,733                  $40,857
   Mortgage-backed securities                            (52)                     1,732                    1,680
   Investment securities                                 (96)                       390                      294
                                                     -------                    -------                  -------
                                                      (1,024)                    43,855                   42,831
                                                     -------                    -------                  -------
Interest expense:                                                                                        
   Customer deposits                                    (875)                    18,783                   17,908
   Borrowings                                           (456)                     8,483                    8,027
                                                     -------                    -------                  -------
                                                      (1,331)                    27,266                   25,935
                                                     -------                    -------                  -------
     Net interest income                             $   307                    $16,589                  $16,896
                                                     =======                    =======                  =======
</TABLE>

<TABLE>
<CAPTION>
                                                                NINE MONTHS ENDED SEPTEMBER 30, 1998 vs 1997 
                                                                               (UNAUDITED)
                                                -----------------------------------------------------------------------
                                                         RATE                    VOLUME                    TOTAL
                                                       VARIANCE                 VARIANCE                  VARIANCE
                                                -------------------      ---------------------     --------------------
                                                                         (DOLLARS IN THOUSANDS)
<S>                                               <C>                      <C>                       <C>
Interest income:
   Loans                                             $ 1,242                   $110,461                 $111,703
   Mortgage-backed securities                            249                     11,896                   12,145
   Investment securities                                 (21)                       834                      813
                                                     -------                   --------                 --------
                                                       1,470                    123,191                  124,661
                                                     -------                   --------                 --------
Interest expense:                                                                                       
   Customer deposits                                  (1,666)                    60,048                   58,382
   Borrowings                                            554                     16,374                   16,928
                                                     -------                   --------                 --------
                                                      (1,112)                    76,422                   75,310
                                                     -------                   --------                 --------
     Net interest income                             $ 2,582                   $ 46,769                 $ 49,351
                                                     =======                   ========                 ========
</TABLE>

                                       26
<PAGE>
 
PROVISION FOR LOAN LOSSES

       The provision for loan losses was $2.8 million for the third quarter
of 1998 as compared with $651,000 for the third quarter of 1997.  The provision
for loan losses was $5.1 million for the first nine months of 1998 as compared
with $1.8 million for the first nine months of 1997.  The higher provision
levels were a result of the Company's acquisition of EurekaBank effective
January 2, 1998 combined with the continued growth in consumer and commercial
assets, including HLTV home equity loans.  See "Balance Sheet Analysis -
Allowance for Loan Losses" for further discussion of the provision for loan
losses.

NONINTEREST INCOME

       Noninterest income for the third quarter of 1998 was $9.0 million as
compared with $2.6 million for the third quarter of 1997. Noninterest income for
the first nine months of 1998 was $19.3 million as compared with $9.9 million
for the first nine months of 1997. The increases in noninterest income, as
compared with the respective prior periods, were due to a combination of factors
including the acquisitions of EurekaBank effective January 1998 and BVCFG
effective April 1997, higher prepayment penalty fees associated with the high
level of loan prepayments during the first nine months of 1998, and leasing
income associated with the Company's auto leasing activities which began in
April 1998.

       Noninterest income included approximately $1.6 million and $2.0 million
in gain on sales of securities for the three and nine month periods ended
September 30, 1998, respectively. Included in net gain on sales of securities
was a $940,000 loss recorded during the third quarter of 1998 on the settlement
of forward sale contracts of MBS. The forward sale contracts of MBS were
selected to hedge a portfolio of mortgage loans because of their historical
effectiveness as a hedge. With the recent market and interest rate volatility,
the correlation between the hedge and underlying portfolio of loans was
disrupted, triggering the loss. The forward sale contracts were settled during
the third quarter of 1998. The Company's only remaining derivative contracts in
effect at September 30, 1998 were interest rate exchange agreements. Noninterest
income for the first nine months of 1997 included approximately $925,000 in
gains on the aforementioned securitization and sale of a $253 million motor
vehicle loan portfolio in January 1997.

NONINTEREST EXPENSE

General and Administrative Expenses

       General and administrative expenses were $30.2 million for the third
quarter of 1998 as compared with $18.6 million for the third quarter of 1997.
General and administrative expenses were $87.2 million for the first nine months
of 1998 as compared with $49.4 million for the first nine months of 1997. The
increases in general and administrative expenses, as compared with the
respective prior periods, were attributable to various factors including the
acquisitions of EurekaBank effective January 1998, Ultra effective October 1997
and BVCFG effective April 1997, a higher level of special mention items during
1998, as discussed elsewhere herein, the continued growth of the Company, and
inflationary pressures, including the Company's annual salary increases which
were effective for the second quarter of 1998. See "Non-GAAP Performance
Measures - Core General and Administrative Expenses" for a discussion of general
and administrative expenses excluding special mention items.

       General and administrative expenses by platform include an allocation of
certain indirect corporate expenses.  The Company refined its cost allocation
methodology during 1998 which resulted in additional indirect general and
administrative expenses being allocated to the Consumer Finance Platform and the
Commercial Finance Platform.  The Company continues to refine its cost
allocation methodology and anticipates further refinements during future
periods.

                                       27
<PAGE>
 
       The following table illustrates general and administrative expenses, by
platform, for the periods indicated:

<TABLE>
<CAPTION>
                                                                                (UNAUDITED)
                                       -------------------------------------------------------------------------------------------
                                                     THREE MONTHS ENDED                              NINE MONTHS ENDED
                                       --------------------------------------------     ------------------------------------------
                                           SEPTEMBER 30,            SEPTEMBER 30,           SEPTEMBER 30,          SEPTEMBER 30,
                                               1998                     1997                    1998                    1997
                                       -------------------      -------------------     -------------------     ------------------
                                                                          (DOLLARS IN THOUSANDS)
<S>                                      <C>                      <C>                     <C>                     <C> 
Banking Platform
   (includes BVB and the Company)            $23,339                  $14,360                 $66,992                $39,208
Consumer Finance Platform(1)                   4,486                    2,217                  13,710                  6,195
Commercial Finance Platform(1)                 2,421                    2,028                   6,516                  4,035
                                             -------                  -------                 -------                -------
     Total                                   $30,246                  $18,605                 $87,218                $49,438
                                             =======                  =======                 =======                =======
</TABLE>

(1)    The Consumer Finance Platform was created with the acquisitions of BVC in
       June 1996 and Ultra in October 1997. The Consumer Finance Platform began
       purchasing HLTV home equity loans in August 1997 and auto leases in April
       1998. The Commercial Finance Platform was created with the acquisition of
       BVCFG in April 1997.

Leasing Expenses

       Leasing expenses represent expenses related to the Company's auto leasing
activities which began in April 1998.  As the leases are accounted for as
operating leases, the corresponding assets are capitalized and depreciated down
to their estimated residual values over their lease terms.  This depreciation
expense is included in leasing expenses, along with the amortization of
capitalized initial direct lease costs and the provision for estimated losses
incurred upon the sale of the leased vehicles.  Leasing expenses were $2.5
million and $3.2 million for the three and nine month periods ended September
30, 1998, respectively.  The increase in leasing expenses during the third
quarter of 1998 was a result of the operating leased asset portfolio increasing
from $46.6 million at June 30, 1998 to $126.3 million at September 30, 1998.

Real Estate Owned Operations and Net Losses (Recovery of Losses) on Real Estate

       Income from real estate owned operations, net of losses on real estate,
for the third quarter of 1998 was $8,000 as compared with $21,000 for the third
quarter of 1997. Income from real estate owned operations and net recovery of
losses on real estate for the first nine months of 1998 was $194,000 as compared
with $638,000 for the first nine months of 1997. The decrease in income for the
first nine months of 1998, as compared with the first nine months of 1997, was
primarily due to a $415,000 recovery received during the first quarter of 1997.
See "Non-GAAP Performance Measures - Special Mention Items" for further
discussion on the recovery received during 1997.

Amortization of Intangible Assets

        Amortization expense related to intangible assets was $2.9 million for
the third quarter of 1998 as compared with $1.0 million for the third quarter of
1997. Amortization expense related to intangible assets was $8.5 million for the
first nine months of 1998 as compared with $2.7 million for the first nine
months of 1997. The increases in amortization expense, as compared with the
respective prior periods, were due to the additional goodwill and CDI generated
from the Company's acquisitions accounted for under the purchase method of
accounting, including EurekaBank effective January 1998, Ultra effective October
1997 and BVCFG effective April 1997.

INCOME TAX EXPENSE

       Income tax expense was $4.9 million for the third quarter of 1998 as
compared with $1.6 million for the third quarter of 1997. Income tax expense was
$14.8 million for the first nine months of 1998 as compared with $9.0 million
for the first nine months of 1997. The Company's effective tax rate was 49.5%
for the third 

                                       28
<PAGE>
 
quarter of 1998 as compared with 34.3% for the third quarter of 1997. The
Company's effective tax rate was 49.1% for the first nine months of 1998 as
compared with 41.1% for the first nine months of 1997. The increases in the
effective tax rates, as compared with the respective prior periods, were
primarily due to increases in nondeductible goodwill amortization.

                         NON-GAAP PERFORMANCE MEASURES

       The following disclosures of core earnings, tangible cash earnings, net
interest margin, and core general and administrative expenses, along with their
corresponding ratios, are not measures of performance under generally accepted
accounting principles ("GAAP").  These measures should not be considered
alternatives to net income, net interest margin and general and administrative
expenses as an indicator of the Company's operating performance.  Such measures
are included herein as management believes they are useful tools for investors
and analysts in assessing the Company's performance and trends.  These measures
may not be comparable to similarly titled measures reported by other companies.

CORE EARNINGS

       Core earnings exclude special mention items, as discussed elsewhere
herein. Special mention items for the third quarter of 1998 were approximately
$2.8 million and included $1.35 million in expenses related to the cancellation
of the Company's proposed acquisition of PSBL and a $600,000 legal settlement
related to the Company's termination during the second quarter of 1997 of a data
processing contract. Special mention items for the first nine months of 1998
were approximately $10.4 million and included approximately $7.5 million in
EurekaBank acquisition-related expenses.

       The following table illustrates the reconciliation of net income to core
earnings for the periods indicated:

<TABLE>
<CAPTION>
                                                                                (UNAUDITED)
                                    ------------------------------------------------------------------------------------------------
                                                   THREE MONTHS ENDED                                  NINE MONTHS ENDED
                                    ---------------------------------------------       --------------------------------------------
                                        SEPTEMBER 30,            SEPTEMBER 30,              SEPTEMBER 30,           SEPTEMBER 30, 
                                            1998                     1997                       1998                    1997
                                    ------------------       --------------------       ------------------       -------------------
                                                             (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                   <C>                      <C>                        <C>                      <C> 
Net income                                $5,025                     $3,064                  $15,320                   $12,830
Special mention items, net of tax          1,663                      1,691                    6,079                     1,539
                                          ------                     ------                  -------                   -------
Core earnings                             $6,688                     $4,755                  $21,399                   $14,369
                                          ------                     ------                  -------                   -------
Core earnings per diluted share           $ 0.33                     $ 0.36                  $  1.04                   $  1.08
                                          ======                     ======                  =======                   =======

Core return on average assets               0.48%                      0.60%                    0.52%                     0.62%
                                          ======                     ======                  =======                   ======= 
Core return on average equity               6.88%                      9.74%                    7.34%                     9.81%
                                          ======                     ======                  =======                   ======= 
</TABLE>

                                       29
<PAGE>
 
TANGIBLE CASH EARNINGS

        Tangible cash earnings equal core earnings excluding charges related to
the amortization of intangible assets and charges tied to the Company's common
stock.

        The following tables illustrate the reconciliation of core earnings to
tangible cash earnings for the periods indicated:

<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED (UNAUDITED)
                                                          ---------------------------------------------------------
                                                               SEPTEMBER 30, 1998             SEPTEMBER 30, 1997
                                                          --------------------------     --------------------------
                                                                             (DOLLARS IN THOUSANDS,
                                                                            EXCEPT PER SHARE AMOUNTS)
<S>                                                         <C>                            <C> 
Core earnings                                                        $6,688                         $4,755
Adjustments, net of tax:
   Amortization of intangible assets                                  2,474                            865
   Charges tied to common stock                                          67                             60
                                                                     ------                         ------
Tangible cash earnings                                               $9,229                         $5,680
                                                                     ------                         ------
Tangible cash earnings per diluted share                             $ 0.45                         $ 0.43
                                                                     ======                         ======
                                                                                                    
Tangible cash return on average assets (1)                             0.66%                          0.72%
                                                                     ======                         ====== 
Tangible cash return on average equity (1)                             9.49%                         11.63%
                                                                     ======                         ======
                                                                                                    
Tangible cash return on average tangible assets (2)                    0.68%                          0.73%
                                                                     ======                         ====== 
Tangible cash return on average tangible equity (2)                   14.65%                         13.82%
                                                                     ======                         ====== 
</TABLE>


<TABLE>
<CAPTION>
                                                                       NINE MONTHS ENDED (UNAUDITED)
                                                        ---------------------------------------------------------
                                                             SEPTEMBER 30, 1998             SEPTEMBER 30, 1997
                                                        --------------------------     --------------------------
                                                                          (DOLLARS IN THOUSANDS,
                                                                         EXCEPT PER SHARE AMOUNTS)
<S>                                                       <C>                            <C> 
Core earnings                                                       $21,399                        $14,369
Adjustments, net of tax:
   Amortization of intangible assets                                  7,351                          2,130
   Charges tied to common stock                                         199                            181
                                                                    -------                        -------
Tangible cash earnings                                              $28,949                        $16,680
                                                                    -------                        -------
Tangible cash earnings per diluted share                            $  1.41                        $  1.25
                                                                    =======                        =======
                                                                                                   
Tangible cash return on average assets (1)                             0.71%                          0.71%
                                                                    =======                        ======= 
Tangible cash return on average equity (1)                             9.92%                         11.38%
                                                                    =======                        =======
                                                                                                   
Tangible cash return on average tangible assets (2)                    0.73%                          0.72%
                                                                    =======                        =======
Tangible cash return on average tangible equity (2)                   15.43%                         12.69%
                                                                    =======                        ======= 
</TABLE>

(1)    Tangible cash return on average assets (average equity) is defined as
       tangible cash earnings divided by average assets (average equity).
(2)    Tangible cash return on average tangible assets (average tangible equity)
       is defined as tangible cash earnings divided by average tangible assets
       (average tangible equity). Average tangible assets (average tangible
       equity) is defined as average assets (average equity) less average
       intangible assets.

                                       30
<PAGE>
 
       The following tables illustrate tangible cash earnings, plus the
utilization of NOL carryforwards acquired from AFEH, for the periods indicated:

<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED (UNAUDITED)
                                                        ---------------------------------------------------------
                                                             SEPTEMBER 30, 1998             SEPTEMBER 30, 1997
                                                        --------------------------     --------------------------
                                                                       (DOLLARS IN THOUSANDS, EXCEPT
                                                                            PER SHARE AMOUNTS)
<S>                                                       <C>                            <C> 
Tangible cash earnings                                              $ 9,229                         $5,680
Utilization of NOL carryforwards (1)                                  2,739                              -
                                                                    -------                         ------
Tangible cash earnings, plus the utilization of                                                     
 NOL carryforwards                                                  $11,968                         $5,680
                                                                    =======                         ======
Tangible cash earnings, plus the utilization of                                                     
 NOL carryforwards, per diluted share                               $  0.59                         $ 0.43
                                                                    =======                         ======
Tangible cash return on average assets, plus the                                                    
 utilization of NOL carryforwards (2)                                  0.86%                          0.72%
                                                                    =======                         ======
Tangible cash return on average equity, plus the                                                    
 utilization of NOL carryforwards (2)                                 12.30%                         11.63%
                                                                    =======                         ======
Tangible cash return on average tangible assets,                                                    
 plus the utilization of NOL carryforwards (3)                         0.88%                          0.73%
                                                                    =======                         ======
Tangible cash return on average tangible equity,                                                    
 plus the utilization of NOL carryforwards (3)                        19.00%                         13.82%
                                                                    =======                         ======
</TABLE>


<TABLE>
<CAPTION>
                                                                        NINE MONTHS ENDED (UNAUDITED)
                                                         ---------------------------------------------------------
                                                              SEPTEMBER 30, 1998             SEPTEMBER 30, 1997
                                                         --------------------------     --------------------------
                                                                        (DOLLARS IN THOUSANDS, EXCEPT
                                                                             PER SHARE AMOUNTS)
<S>                                                        <C>                            <C> 
Tangible cash earnings                                              $28,949                        $16,680
Utilization of NOL carryforwards (1)                                  8,217                              -
                                                                    -------                        -------
Tangible cash earnings, plus the utilization of                                                    
 NOL carryforwards                                                  $37,166                        $16,680
                                                                    =======                        =======
Tangible cash earnings, plus the utilization of                                                    
 NOL carryforwards, per diluted share                               $  1.81                        $  1.25
                                                                    =======                        =======
Tangible cash return on average assets, plus the                                                   
 utilization of NOL carryforwards (2)                                  0.91%                          0.71%
                                                                    =======                        =======
Tangible cash return on average equity, plus the                                                   
 utilization of NOL carryforwards (2)                                 12.74%                         11.38%
                                                                    =======                        =======
Tangible cash return on average tangible assets,                                                   
 plus the utilization of NOL carryforwards (3)                         0.93%                          0.72%
                                                                    =======                        =======
Tangible cash return on average tangible equity,                                                   
 plus the utilization of NOL carryforwards (3)                        19.81%                         12.69%
                                                                    =======                        =======
</TABLE>

(1)    In conjunction with the acquisition of AFEH, the Company acquired $181
       million in NOL carryforwards. The Company may utilize these
       carryforwards, subject to annual limitations, to reduce its current
       liability for federal income taxes. The associated tax benefit of the NOL
       carryforwards is approximately $63 million. The Company estimates that,
       during 1998, its maximum available tax benefit resulting from the NOL
       carryforwards will be approximately $11 million. The amount of the
       benefit reflected in the above tables represents the pro rata portion of
       the estimated 1998 maximum available tax benefit.
(2)    Tangible cash return on average assets (average equity) is defined as
       tangible cash earnings divided by average assets (average equity).

                                       31
<PAGE>
 
(3)    Tangible cash return on average tangible assets (average tangible equity)
       is defined as tangible cash earnings divided by average tangible assets
       (average tangible equity). Average tangible assets (average tangible
       equity) is defined as average assets (average equity) less average
       intangible assets.

       The following tables illustrate tangible cash earnings contributed, by
platform, for the periods indicated:

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED (UNAUDITED)
                               ------------------------------------------------------------------
                                      SEPTEMBER 30, 1998                 SEPTEMBER 30, 1997
                               ------------------------------    --------------------------------
                                  TANGIBLE            PER           TANGIBLE             PER
                                    CASH            DILUTED           CASH             DILUTED
                                  EARNINGS           SHARE          EARNINGS            SHARE
                               -------------    -------------    -------------     --------------
                                         (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                              <C>              <C>              <C>               <C> 
Banking Platform                      $5,549            $0.27           $4,057              $0.31
 
Consumer Finance Platform(1)           3,516             0.17            1,188               0.09
 
Commercial Finance Platform(1)           164             0.01              435               0.03
                                      ------            -----           ------              ----- 
 
 
   Total                              $9,229            $0.45           $5,680              $0.43
                                      ======            =====           ======              =====
</TABLE>


<TABLE>
<CAPTION>
                                                     NINE MONTHS ENDED (UNAUDITED)
                                   ----------------------------------------------------------------
                                          SEPTEMBER 30, 1998                SEPTEMBER 30, 1997
                                   ------------------------------    ------------------------------
                                      TANGIBLE            PER           TANGIBLE            PER
                                        CASH            DILUTED           CASH            DILUTED
                                      EARNINGS           SHARE          EARNINGS           SHARE
                                   -------------    -------------    -------------    -------------
                                          (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                  <C>              <C>              <C>              <C> 
Banking Platform                     $21,531            $1.05          $13,077            $0.98
 
Consumer Finance Platform(1)           6,824             0.33            2,551             0.19
 
Commercial Finance Platform(1)           594             0.03            1,052             0.08
                                     -------            -----          -------            ----- 
   Total                             $28,949            $1.41          $16,680            $1.25
                                     =======            =====          =======            =====
</TABLE>

(1)    The Consumer Finance Platform was created with the acquisitions of BVC in
       June 1996 and Ultra in October 1997. The Consumer Finance Platform began
       purchasing HLTV home equity loans in August 1997 and auto leases in April
       1998. The Commercial Finance Platform was created with the acquisition of
       BVCFG in April 1997.

       The increases in tangible cash earnings for the Banking Platform, as
compared with the respective prior periods, were primarily attributable to the
Company's acquisition of EurekaBank effective January 2, 1998. The increases in
tangible cash earnings for the Consumer Finance Platform, as compared with the
respective prior periods, were attributable to the continued growth of the
platform, including the Company's auto leasing activities which began in April
1998, as well as a higher level of HLTV home equity loans resulting from
purchases by the Company during the first nine months of 1998. The decreases in
tangible cash earnings for the Commercial Finance Platform, as compared with the
respective prior periods, were a result of a combination of factors including
additional general and administrative expenses incurred in conjunction with the
rapid growth of the platform, including the previously discussed expansion of
the asset-based lending segment, and additional allocations of certain indirect
general and administrative expenses. Recent and anticipated future loan growth
should enable the Commercial Finance Platform to achieve greater economies of
scale in the future and, in return, generate additional tangible cash earnings.

                                       32
<PAGE>
 
NET INTEREST MARGIN

       The Company's net interest margin, calculated in accordance with GAAP,
excludes the impact of the Company's auto leasing activities which began in
April 1998 and which are principally funded by the Company's deposits and other
borrowings.  As the leases are accounted for as operating leases, the rental
income and related expenses, including depreciation expense, are reflected as
noninterest income and noninterest expenses, respectively, in accordance with
GAAP.  Accordingly, these amounts are not reflected in the Company's net
interest income or net interest margin.  Had the excess of rental income over
depreciation expense, along with the corresponding average balance of leased
assets, been included in the computation of net interest margin, the Company's
net interest margin would have been 3.11% for the third quarter of 1998 and
3.03% for the first nine months of 1998.  This compares with the Company's net
interest margin calculated in accordance with GAAP of 3.05% for the third
quarter of 1998 and 3.00% for the first nine months of 1998.

CORE GENERAL AND ADMINISTRATIVE EXPENSES

       Core general and administrative expenses exclude special mention items,
as discussed elsewhere herein. Core general and administrative expenses for the
third quarter of 1998 were $27.4 million as compared with $16.6 million for the
third quarter of 1997. Core general and administrative expenses for the first
nine months of 1998 were $76.8 million as compared with $47.3 million for the
first nine months of 1997.

       The following table illustrates the reconciliation of general and
administrative expenses to core general and administrative expenses (excluding
special mention items) for the periods indicated:

<TABLE>
<CAPTION>
                                                                             (UNAUDITED)
                                     ----------------------------------------------------------------------------------------------
                                                  THREE MONTHS ENDED                               NINE MONTHS ENDED
                                     ------------------------------------------      ----------------------------------------------
                                        SEPTEMBER 30,           SEPTEMBER 30,            SEPTEMBER 30,             SEPTEMBER 30, 
                                            1998                    1997                     1997                      1997 
                                     -------------------    -------------------      -------------------      ---------------------
                                                                           (DOLLARS IN THOUSANDS)
<S>                                    <C>                      <C>                      <C>                      <C> 
General and administrative expenses        $30,246                  $18,605                 $ 87,218                  $49,438
                                                                                                                      
Special mention items                       (2,835)                  (2,013)                 (10,435)                  (2,163)
                                           -------                  -------                 --------                  ------- 
Core general and administrative                                                                                       
 expenses                                  $27,411                  $16,592                 $ 76,783                  $47,275
                                           =======                  =======                 ========                  =======
</TABLE>

        The following table illustrates core general and administrative expenses
(excluding special mention items), by platform, for the periods indicated:

<TABLE>
<CAPTION>
                                                                               (UNAUDITED)
                                     ---------------------------------------------------------------------------------------------
                                                  THREE MONTHS ENDED                                NINE MONTHS ENDED
                                     -------------------------------------------     ---------------------------------------------
                                         SEPTEMBER 30,           SEPTEMBER 30,           SEPTEMBER 30,           SEPTEMBER 30, 
                                             1998                    1997                    1998                    1997 
                                     -------------------     -------------------     -------------------     ---------------------
                                                                         (DOLLARS IN THOUSANDS)
<S>                                    <C>                      <C>                      <C>                      <C> 
Banking Platform (includes BVB
 and the Company)                           $20,662                 $12,347                 $57,441                   $37,045
                                            
Consumer Finance Platform(1)                  4,328                   2,217                  12,826                     6,195
                                            
Commercial Finance Platform(1)                2,421                   2,028                   6,516                     4,035
                                            -------                 -------                 -------                   -------
     Total                                  $27,411                 $16,592                 $76,783                   $47,275
                                            =======                 =======                 =======                   =======
</TABLE>

                                       33
<PAGE>
 
(1)    The Consumer Finance Platform was created with the acquisitions of BVC in
       June 1996 and Ultra in October 1997. The Consumer Finance Platform began
       purchasing HLTV home equity loans in August 1997 and auto leases in April
       1998. The Commercial Finance Platform was created with the acquisition of
       BVCFG in April 1997.

       The increases in the Banking Platform's core general and administrative
expenses, as compared with the respective prior periods, were attributable to
the acquisition of EurekaBank effective January 2, 1998, continued growth in the
platform and inflationary pressures, including the Company's annual salary
increases which were effective for the second quarter of 1998.  The increases in
the Consumer Finance Platform's core general and administrative expenses, as
compared with the respective prior periods, were attributable to the acquisition
of Ultra effective October 1, 1997, continued growth in the platform, and in
particular, the Company's auto leasing activities which began April 1, 1998,
combined with inflationary pressures.  The increases in the Commercial Finance
Platform's core general and administrative expenses, as compared with the
respective prior periods, were largely the result of the platform being created
with the Company's acquisition of BVCFG effective April 1997 combined with
continued growth in the platform, including the previously discussed expansion
of the asset-based lending segment, additional allocations of certain indirect
general and administrative expenses and inflationary pressures.

       Although the Company originally anticipated that the EurekaBank
integration-related expenses would have been eliminated by the end of the second
quarter, certain of these costs continued during the third quarter of 1998.
These costs were necessary to complete projects not finalized at June 30th and
to ensure the complete and successful integration of EurekaBank into the
Company. The Company has taken all necessary measures to ensure that these costs
have been substantially eliminated by the end of the third quarter of 1998 and
anticipates that the core general and administrative expense run-rate for the
fourth quarter of 1998 will be within a range that will enable the Company to
achieve the EurekaBank acquisition-related cost savings as originally projected.

       The following table illustrates the ratio of core general and
administrative expenses (excluding special mention items) to average assets
(including securitized assets), by platform, on an annualized basis for the
periods indicated:

<TABLE>
<CAPTION>
                                                                              (UNAUDITED)
                                  ------------------------------------------------------------------------------------------------
                                                THREE MONTHS ENDED                                  NINE MONTHS ENDED
                                  --------------------------------------------      ----------------------------------------------
                                     SEPTEMBER 30,             SEPTEMBER 30,           SEPTEMBER 30,            SEPTEMBER 30, 
                                         1998                      1997                    1998                     1997
                                  -------------------      -------------------      -------------------      ---------------------
<S>                                 <C>                      <C>                      <C>                      <C>
Banking Platform (includes BVB
   and the Company)                       1.69%                    1.74%                    1.50%                      1.71%
Consumer Finance Platform(1)              1.70%                    2.08%                    2.04%                      2.28%
Commercial Finance Platform(1)            9.65%                   11.20%                    9.81%                     11.74%
                                         -----                   ------                    -----                      -----
     Expenses to Average Assets           2.03%                    1.99%                    1.88%                      1.91%
                                         =====                   ======                    =====                      =====
</TABLE>

(1)    The Consumer Finance Platform was created with the acquisitions of BVC in
       June 1996 and Ultra in October 1997. The Consumer Finance Platform began
       purchasing HLTV home equity loans in August 1997 and auto leases in April
       1998. The Commercial Finance Platform was created with the acquisition of
       BVCFG in April 1997.

       The lower expense ratios for each platform, as compared with the
respective prior periods, were primarily the result of the Company's acquisition
of EurekaBank effective January 2, 1998 and the corresponding increase in the
Company's assets, combined with loan growth within the Consumer Finance Platform
and the Commercial Finance Platform, partially offset by higher levels of core
general and administrative expenses as previously discussed. The higher
consolidated expense ratio for third quarter of 1998 as compared with the third
quarter of 1997 was due to the relative growth of the Consumer Finance Platform
and the Commercial Finance Platform with their higher corresponding expense
ratios.

       Another measure that management uses to monitor the Company's level of
core general and administrative expenses is the core efficiency ratio. The core
efficiency ratio is calculated by dividing the amount of core general and
administrative expenses by operating revenues, defined as net interest income,
loan fees and 

                                       34
<PAGE>
 
charges, the excess of the Company's leasing-related rental income over leasing-
related depreciation expense, and other noninterest income, excluding securities
gains and losses. This ratio reflects the level of core general and
administrative expenses required to generate $1 of operating revenue. The
Company's core efficiency ratio for the third quarter of 1998 was 60.3% as
compared with 64.2% for the third quarter of 1997. The Company's core efficiency
ratio for the first nine months of 1998 was 59.0% as compared with 63.0% for the
first nine months of 1997. The improvements in the efficiency ratios, as
compared with the respective prior periods, were largely due to cost
efficiencies resulting from the Company's acquisition of EurekaBank combined
with the net leasing-related rental income beginning in April 1998.

SPECIAL MENTION ITEMS

       The Company's net income for the periods indicated below included certain
items which deserve special mention and which are excluded from net income to
arrive at core earnings.

Third Quarter 1998:
------------------ 

       The impact of the following items was a net expense of $2.8 million 
($1.7 million after-tax, or $.08 per diluted share).

*      $1.35 million ($800,000 after-tax) related to the cancellation of the
       Company's proposed acquisition of PSBL. This amount includes investment
       banking, legal and accounting fees previously capitalized by the Company,
       as well as certain expense reimbursements to PSBL, as provided in the
       acquisition agreement.
*      $600,000 ($350,000 after-tax) representing a legal settlement related to
       the Company's decision in the second quarter of 1997 to terminate a data
       processing contract. In 1996, the Company entered into a contract to
       convert to a new third-party data processing service provider. During the
       second quarter of 1997, however, the Company announced its acquisition of
       AFEH and subsequently decided to remain with its existing service
       provider, the then current data processing service provider for both BVB
       and EurekaBank. Accordingly, the Company terminated this new data
       processing contract.
*      $840,000 ($500,000 after-tax) in other expenses, primarily Year 2000
       compliance-related expenses and certain EurekaBank transitional and
       integration-related expenses. See further discussion of Year 2000
       elsewhere herein.

Second Quarter 1998:
--------------------

       The impact of the following items was a net expense of $4.2 million 
($2.4 million after-tax, or $0.12 per diluted share).

*      $3.9 million ($2.3 million after-tax) primarily related to the
       acquisition and integration of EurekaBank and related systems, operations
       and reengineering projects.
*      $235,000 ($135,000 after-tax) in other expenses including $195,000
       relating to the Company's efforts to ensure Year 2000 compliance.

First Quarter 1998:
-------------------
  
       The impact of the following item was a net expense of $3.4 million 
($2.0 million after-tax, or $0.10 per diluted share).

*      $3.4 million related to the acquisition and integration of EurekaBank.

Third Quarter 1997:
------------------ 

       The impact of the following item was a net expense of $2.9 million 
($1.7 million after-tax, or $0.13 per diluted share).

*      $2.9 million in pre-merger expenses related to the acquisition of
       EurekaBank.

                                       35
<PAGE>
 
Second Quarter 1997:
--------------------

       The impact of the following items was a net benefit of $300,000 ($173,000
after-tax, or $0.01 per diluted share).

*      $400,000 benefit associated with the decision to cease the conversion to
       a new third-party data processing service provider as previously
       discussed (see "Special Mention Items - Third Quarter 1998" for further
       discussion).
*      $100,000 expense accrual for long-term incentive plan awards due to an
       increase in the Company's stock price.

First Quarter 1997:
-------------------

       The after-tax impact of the following items essentially offset each
other.

*      $700,000 expense accrual for long-term incentive plan awards due to an
       increase in the Company's stock price.
*      $415,000 recovery related to a real estate joint venture previously
       written-off.
*      $250,000 benefit relating to the reversal of an accrual for the
       termination of BVB's data processing contract (see "Special Mention 
       Items -Third Quarter 1998" for further discussion).

                                       36
<PAGE>
 
                            BALANCE SHEET ANALYSIS

       The Company's total assets were $5.5 billion at September 30, 1998 as
compared with $3.2 billion at December 31, 1997. The increase in total assets
was largely due to the Company's acquisition of EurekaBank effective January 2,
1998. The increase was also due to loan and lease originations and purchases of
approximately $1.5 billion during the first nine months of 1998 exceeding
prepayments on loans and mortgage-backed securities of approximately $1.2
billion during this same period.

SECURITIES

       The Company maintains a portfolio of MBS, primarily issued by the Federal
Home Loan Mortgage Corporation ("FHLMC"), Federal National Mortgage Association
("FNMA") and Government National Mortgage Association ("GNMA").

       The following table illustrates the Company's securities portfolio as of
the dates indicated:

<TABLE>
<CAPTION>
                                                                         (UNAUDITED)
                                   --------------------------------------------------------------------------------------
                                              SEPTEMBER 30, 1998                             DECEMBER 31, 1997
                                   ---------------------------------------      -----------------------------------------
                                        AMORTIZED               FAIR                  AMORTIZED                FAIR
                                          COST                 VALUE                    COST                  VALUE
                                   -----------------    ------------------      -------------------    ------------------
                                                                    (DOLLARS IN THOUSANDS)
<S>                                  <C>                  <C>                     <C>                    <C>
AVAILABLE-FOR-SALE
------------------
Investment securities                       $  6,488              $  6,488                 $  5,639              $  5,639
Mortgage-backed securities:
   FHLMC, FNMA and GNMA
     and other                                14,840                14,715                   54,526                54,402
                                            --------              --------                 --------              --------
                                              21,328                21,203                   60,165                60,041
                                            --------              --------                 --------              --------
HELD-TO-MATURITY
----------------
Investment securities                              -                     -                    5,000                 5,015
Mortgage-backed securities:
   FHLMC, FNMA, GNMA
    and other                                558,043               561,390                  415,859               413,980
                                            --------              --------                 --------              -------- 
                                             558,043               561,390                  420,859               418,995
                                            --------              --------                 --------              -------- 
 
                                            $579,371              $582,593                 $481,024              $479,036
                                            ========              ========                 ========              ========
</TABLE>
 
        The Company sold $9 million, $23 million and $202 million in MBS
securities from the available-for-sale portfolio during the first, second and
third quarters of 1998, respectively, in connection with the Company's interest
rate risk and balance sheet management activities. A portion of these MBS were
replaced with approximately $68 million in pledgable collateralized mortgage
obligations ("CMOs") purchased during the third quarter of 1998. There were no
sales or purchases of MBS or CMOs during the first nine months of 1997.

                                       37
<PAGE>
 
LOANS AND LEASES

        The following table illustrates the Company's loan and lease portfolio
as of the dates indicated:

<TABLE>
<CAPTION>
                                                                       (UNAUDITED)
                                              ----------------------------------------------------------
                                                   SEPTEMBER 30, 1998               DECEMBER 31, 1997
                                              --------------------------      --------------------------
                                                                 (DOLLARS IN THOUSANDS)
<S>                                             <C>                             <C>
Banking Platform:
   Single-family real estate                                  $1,812,875                      $  550,506
   Multi-family real estate                                    1,047,658                       1,026,148
   Commercial real estate                                        349,349                         348,754
   Consumer                                                       83,277                          61,478
                                                              ----------                      ----------
                                                               3,293,159                       1,986,886
Consumer Finance Platform:
    Motor vehicle                                                514,378                         298,627
    HLTV home equity                                             421,968                          67,092
                                                              ----------                      ----------
                                                                 936,346                         365,719
Commercial Finance Platform:
    Commercial loans and leases                                   91,851                          54,120
                                                              ----------                      ---------- 
     Gross loans receivable                                    4,321,356                       2,406,725
 
Premiums and discounts and deferred fees
  and costs                                                       38,118                           4,846
Allowance for loan losses                                        (46,132)                        (38,458)
                                                              ----------                      ----------
     Net loans receivable                                     $4,313,342                      $2,373,113
                                                              ==========                      ==========
</TABLE>

       Management's strategy is to supplement its loan production with purchases
of loans and leases with higher risk-adjusted yields. The following tables
illustrate loans and leases originated and purchased for the periods indicated:

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED  (UNAUDITED)
                                             ------------------------------------------------------
                                                  SEPTEMBER 30, 1998           SEPTEMBER 30, 1997
                                             --------------------------     -----------------------
                                                              (DOLLARS IN THOUSANDS)
<S>                                            <C>                            <C>
LOAN AND LEASE ORIGINATIONS:
Real estate (1)                                      $ 42,581                    $ 40,593
Motor vehicle                                          99,698                      50,649
Commercial                                             18,872                       9,260
Other                                                  17,925                       4,767
                                                     --------                    --------
   Total originations                                $179,076                    $105,269
                                                     --------                    -------- 
                                                    
LOAN AND LEASED ASSET PURCHASES:                    
Real estate (1)                                      $  3,477                    $  1,062
HLTV home equity                                       92,451                      69,996
Motor vehicle                                         100,272                      39,870
                                                     --------                    -------- 
   Total purchases                                   $196,200                    $110,928
                                                     --------                    --------
   Total originations and purchases                  $375,276                    $216,197
                                                     ========                    ========
</TABLE>

                                       38
<PAGE>
 
<TABLE>
<CAPTION>
                                                      NINE MONTHS ENDED (UNAUDITED)
                                         -----------------------------------------------------
                                             SEPTEMBER 30, 1998           SEPTEMBER 30, 1997
                                         -------------------------     -----------------------
                                                         (DOLLARS IN THOUSANDS)
<S>                                        <C>                           <C>
Loan and Lease Originations:
Real estate (1)                                 $  114,907                    $111,177
Motor vehicle                                      298,729                     133,496
Commercial                                          47,437                      13,953
Other                                               43,666                      15,582
                                                ----------                    -------- 
   Total originations                           $  504,739                    $274,208
                                                ----------                    -------- 
                                                                              
Loan and Leased Asset Purchases:                                              
Real estate (1)                                 $  413,891                    $ 50,544
HLTV home equity                                   385,884                      69,996
Motor vehicle                                      185,679                      85,682
                                                ----------                    --------
   Total purchases                              $  985,454                    $206,222
                                                ----------                    -------- 
   Total originations and purchases             $1,490,193                    $480,430
                                                ==========                    ========
</TABLE>

(1)    Includes first and second mortgages.


       The Company's loan and lease origination and purchase activity during the
first nine months of 1998, as compared with the first nine months of 1997, is
consistent with the Company's strategy of focusing on generating assets within
the Consumer Finance Platform and the Commercial Finance Platform which provide
higher risk-adjusted yields compared to traditional mortgage-based assets.  The
high level of real estate loans purchased during the first nine months of 1998
includes approximately $200 million in real estate loans purchased during the
second quarter of 1998, primarily to assist BVB in meeting its CRA regulatory
requirements.  The Company's level of loan purchases declined during the third
quarter of 1998, as compared with the first and second quarters of 1998, due to
a combination of factors including a lower level of HLTV home equity loans
purchased during the third quarter of 1998 due to the cancellation of the
proposed acquisition of PSBL, the aforementioned $200 million portfolio of
mortgage loans purchased during the second quarter of 1998 primarily to assist
BVB in meeting its CRA requirements and the difficulty during the third quarter
of 1998 in identifying assets with sufficient risk-adjusted yields.

CREDIT QUALITY

       The Company defines nonperforming assets ("NPAs") as nonaccrual loans,
real estate owned and other repossessed assets. The Company defines nonaccrual
loans as loans 90 days or more delinquent as to principal and interest payments
(unless the principal and interest are well secured and in the process of
collection) and loans less than 90 days delinquent designated as nonperforming
when the Company determines that the full collection of principal and/or
interest is doubtful. NPAs are placed on a nonaccrual status. Troubled debt
restructurings ("TDRs") are real estate loans that have been modified (due to
borrower financial difficulties) to allow a stated interest rate and/or a
monthly payment lower than those prevailing in the market.

       Overall credit quality has continued to remain strong as evidenced by the
improving trends in NPAs and delinquencies.  The following table illustrates the
Company's NPAs and TDRs as of the dates indicated and reflects the acquisition
of EurekaBank effective January 2, 1998:

<TABLE>
<CAPTION>
                                                                               (UNAUDITED)
                                             -----------------------------------------------------------------------------
                                                SEPTEMBER 30, 1998          DECEMBER 31, 1997          DECEMBER 31, 1996
                                             -----------------------    -----------------------    -----------------------
                                                                         (DOLLARS IN THOUSANDS)
<S>                                            <C>                        <C>                        <C> 
Nonaccrual loans                                             $13,299                    $10,991                    $16,125
Real estate owned                                              3,740                      4,146                      7,387
Other repossessed assets                                         834                        629                        798
                                                             -------                    -------                    -------
   Nonperforming assets                                       17,873                     15,766                     24,310
Troubled debt restructurings                                     779                        731                        509
                                                             -------                    -------                    -------
     Total                                                   $18,652                    $16,497                    $24,819
                                                             =======                    =======                    =======
</TABLE>

                                       39
<PAGE>
 
       The following table illustrates, by platform, NPAs and NPAs as a
percentage of total assets as of the dates indicated:

<TABLE>
<CAPTION>
                                                                     NONPERFORMING ASSETS AS A PERCENTAGE
                                                                         OF TOTAL ASSETS (UNAUDITED)
                                 ---------------------------------------------------------------------------------------------------
                                         SEPTEMBER 30, 1998                   DECEMBER 31, 1997                DECEMBER 31, 1996
                                 -------------------------------     --------------------------------     --------------------------
                                                                           (DOLLARS IN THOUSANDS)
<S>                                <C>              <C>                <C>               <C>                <C>               <C> 
Banking Platform                       $15,130          0.27%           $14,345            0.45%             $23,323         0.71%
Consumer Finance Platform (1)            2,544          0.05%               748            0.02%                 987         0.03%
Commercial Finance Platform (1)            199             -                673            0.02%                   -            -
                                       -------          ----            -------            ----              -------         ----
     Total                             $17,873          0.32%           $15,766            0.49%             $24,310         0.74%
                                       =======          ====            =======            ====              -------         ----
</TABLE>

(1)    The Consumer Finance Platform was created with the acquisitions of BVC in
       June 1996 and Ultra in October 1997. The Consumer Finance Platform began
       purchasing HLTV home equity loans in August 1997 and auto leases in April
       1998. The Commercial Finance Platform was created with the acquisition of
       BVCFG in April 1997.

       The following table illustrates, by platform, loans delinquent 60 days or
more as a percentage of gross loans as of the dates indicated:

<TABLE>
<CAPTION>
                                                                       LOANS DELINQUENT 60 DAYS OR MORE
                                                                  AS A PERCENTAGE OF GROSS LOANS (UNAUDITED)
                                 ---------------------------------------------------------------------------------------------------
                                         SEPTEMBER 30, 1998                    DECEMBER 31, 1997                 DECEMBER 31, 1996
                                 --------------------------------     --------------------------------     -------------------------
                                                                            (DOLLARS IN THOUSANDS)
<S>                                <C>               <C>                <C>               <C>                <C>               <C> 
Banking Platform                      $15,853           0.37%             $21,526            0.90%             $22,460         0.90%

Consumer Finance Platform (1)           4,305           0.10%               1,045            0.04%                 548         0.02%

Commercial Finance Platform (1)           199              -                  673            0.03%                   -            -
                                      -------           ----              -------            ----              -------         ----
     Total                            $20,357           0.47%             $23,244            0.97%             $23,008         0.92%
                                      =======           ====              =======            ====              =======         ====
</TABLE>

(1)    The Consumer Finance Platform was created with the acquisitions of BVC in
       June 1996 and Ultra in October 1997. The Consumer Finance Platform began
       purchasing HLTV home equity loans in August 1997 and auto leases in April
       1998. The Commercial Finance Platform was created with the acquisition of
       BVCFG in April 1997.

ALLOWANCE FOR LOAN LOSSES

       The Company conducts an ongoing review of its asset categories to assess
the adequacy of the allowance for loan losses, which is maintained at a level
that the Company believes is sufficient to cover estimated possible losses in
the portfolios. In determining the level of the allowance for loan losses, the
Company considers a number of factors, including prevailing and anticipated
economic conditions, historical loss experience, the levels of classified,
nonperforming and delinquent assets, weighting by property type, loan portfolio
trends, and other factors. The allowance for loan losses at September 30, 1998
was $46.1 million as compared with $38.5 million and $29.0 million at December
31, 1997 and 1996, respectively. The increase in the allowance for loan losses
at September 30, 1998, as compared with December 31, 1997 and 1996, was largely
due to the reserves acquired in conjunction with the Company's acquisitions.

                                       40
<PAGE>
 
       The following table illustrates the allowance for loan losses as a
percentage of NPAs, gross loans and total assets, respectively, as of the dates
indicated:

<TABLE>
<CAPTION>
                                                                 
                                                                ALLOWANCE FOR LOAN LOSSES
                                                      AS A PERCENTAGE OF SPECIFIED ASSETS (UNAUDITED)
                       ----------------------------------------------------------------------------------------------------------
                              SEPTEMBER 30, 1998                  DECEMBER 31, 1997                      DECEMBER 31, 1996
                       ----------------------------------------------------------------------------------------------------------
                                                                  (DOLLARS IN THOUSANDS)
<S>                      <C>                <C>             <C>                <C>               <C>                  <C> 
Nonperforming assets        $   17,873          258%         $   15,766           244%           $   24,310             150%
                                                                                                                      
Gross loans                 $4,321,356         1.07%         $2,406,725          1.60%           $2,505,656            1.46%
                                                                                                                      
Total assets                $5,522,374         0.84%         $3,246,476          1.18%           $3,300,262            1.10%
</TABLE>

       The decrease in the allowance for loan losses as a percentage of gross
loans and total assets as of September 30, 1998, as compared with December 31,
1997 and 1996, was largely a result of the Company's acquisition of EurekaBank
effective January 2, 1998. EurekaBank's $1.5 billion loan portfolio consisted
primarily of single-family and multi-family residential mortgage loans which
have lower credit risk as compared with consumer and commercial assets, and thus
had a corresponding lower allowance for loan losses relative to gross loans and
total assets than that of the Company.

       The following table illustrates the changes in the allowance for loan
losses for the periods indicated:

<TABLE>
<CAPTION>
                                                                                       (UNAUDITED)
                                                 -----------------------------------------------------------------------------------
                                                         THREE                    NINE                                        
                                                      MONTHS ENDED            MONTHS ENDED                  FOR THE YEAR ENDED
                                                     SEPTEMBER 30,           SEPTEMBER 30,                     DECEMBER 31,   
                                                 -------------------     -------------------     -----------------------------------
                                                          1998                    1998                  1997              1996
                                                 -------------------     -------------------     ---------------     ---------------
                                                                                 (DOLLARS IN THOUSANDS)
<S>                                                <C>                     <C>                     <C>                  <C>
Beginning balance                                       $47,192                $ 38,458              $29,013              $30,014
Reserves related to acquisitions                              -                  11,374               14,162                2,860
Charge-offs:                                                                   
  Real Estate and other                                    (219)                 (1,850)              (2,699)              (5,927)
  Consumer                                               (4,722)                (10,609)              (4,057)                (474)
  Commercial                                               (208)                   (590)              (1,685)                   -
                                                        -------                --------              -------              -------
                                                         (5,149)                (13,049)              (8,441)              (6,401)
Recoveries:                                                                                                               
  Real Estate and other                                     112                   1,753                  706                  522
  Consumer                                                1,141                   2,305                  955                  120
  Commercial                                                 82                     177                  111                    -
                                                        -------                --------              -------              -------
                                                          1,335                   4,235                1,772                  642
Net charge-offs                                          (3,814)                 (8,814)(1)           (6,669)              (5,759)
Provision for loan losses                                 2,754                   5,114                1,952                1,898
                                                        -------                --------              -------              -------
     Ending balance                                     $46,132                $ 46,132              $38,458              $29,013
                                                        =======                ========              =======              =======
     Net charge-offs to average loans (annualized)         0.35%                   0.28%                0.28%                0.24%
                                                        =======                ========              =======              =======
</TABLE>

(1)    Net charge-offs for the first nine months of 1998 included approximately
       $3.7 million in net charge-offs related to the Company's portfolio of
       HLTV home equity loans acquired from Emergent Mortgage Corp. ("Emergent")
       in August 1997, the reserves for which were provided for upon
       acquisition. Net charge-offs for the first nine months of 1998, excluding
       the Emergent HLTV home equity loan portfolio, were approximately $5.1
       million, which approximates the provision for loan losses for the first
       nine months of 1998.

                                       41
<PAGE>
 
       The Company's provision for loan losses for the third quarter of 1998 was
$2.8 million as compared with $651,000 for the third quarter of 1997. The
Company's provision for loan losses for the first nine months of 1998 was $5.1
million as compared with $1.8 million for the first nine months of 1997. The
increases in the provision for loan losses, as compared with the respective
prior periods, were a result of the Company's acquisition of EurekaBank, in
addition to the aforementioned growth in the Company's consumer and commercial
assets, including HLTV home equity loans. This provision level reflects the
composition and quality of the Company's loan portfolio including the continued
transition of its loan portfolio to consumer and commercial assets with higher
risk-adjusted yields relative to traditional mortgage loans, but also higher
corresponding credit losses.

CUSTOMER DEPOSITS

       As a primary part of the Company's business, customer deposits are
generated for the purpose of funding loans, leases and securities. The following
table illustrates customer deposits as of the dates indicated:

<TABLE>
<CAPTION>
                                                                            (UNAUDITED)        
                               ----------------------------------------------------------------------------------------------------
                                            SEPTEMBER 30, 1998                                     DECEMBER 31, 1997
                               ----------------------------------------------       -----------------------------------------------
                                                  % OF            WEIGHTED                               % OF           WEIGHTED
                                                 TOTAL            AVERAGE                               TOTAL           AVERAGE
                                 AMOUNT         DEPOSITS            RATE                AMOUNT         DEPOSITS           RATE
                               ------------    -----------      -------------       -------------    -------------    -------------
                                                                          (DOLLARS IN THOUSANDS)
<S>                           <C>              <C>             <C>                 <C>               <C>              <C> 
Transaction accounts           $1,438,387           44.5%         3.20%               $  553,820         33.0%            2.97%
Retail CDs                      1,791,557           55.5          5.33                 1,045,152         62.3             5.51
Brokered CDs                            -              -             -                    78,163          4.7             5.82
                               ----------          -----          ----                ----------        -----             ----
Total                          $3,229,944          100.0%         4.38%               $1,677,135        100.0%            4.71%
                               ==========          =====          ====                ==========        =====             ====
</TABLE>

BORROWINGS

       The Company utilizes collateralized advances from the FHLB of San
Francisco and other borrowings, such as senior and subordinated debt 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 Company in executing its
business strategies.

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

<TABLE>
<CAPTION>
                                                                       (UNAUDITED)
                                              ------------------------------------------------------------
                                                   SEPTEMBER 30, 1998                DECEMBER 31, 1997
                                              ---------------------------      ---------------------------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                             <C>                              <C> 
Advances from the FHLB of San Francisco             $1,664,480                           $1,110,270
Securities sold under agreements to repurchase          60,381                               90,134
Subordinated notes                                      99,420                               99,372
Senior debentures                                       50,000                               50,000
Other                                                    5,259                                6,200
                                                    ----------                           ----------
Total                                               $1,879,540                           $1,355,976
                                                    ==========                           ==========
</TABLE>

LIQUIDITY

       The Company's primary sources of funds include cash flows from
operations, loan and MBS repayments, customer deposits, advances from the FHLB
of San Francisco, and securities sold under agreements to repurchase. The
Company uses its liquidity resources principally to fund the origination and
purchase of loans, leases and securities, to repay maturing borrowings and to
fund maturing time deposits and other deposit withdrawals.

                                       42
<PAGE>
 
UNIVERSAL SHELF REGISTRATION

       During the third quarter of 1998, the Company filed a Universal Shelf
Registration Statement ("Shelf Registration") on Form S-3 with the Securities
and Exchange Commission.  The Shelf Registration provides for the issuance of up
to $450 million in debt and equity securities, including but not limited to,
Senior Debt, Subordinated Debt, Trust Preferred Securities, and Common Stock.
The Shelf Registration was filed by the Company to facilitate the timely
issuance of any of the aforementioned securities subject to market conditions
and the needs of the Company.

SHARE REPURCHASES

       In August 1998, the Company's Board of Directors authorized a total of
$50 million in share repurchases. During the third quarter of 1998, the Company
repurchased approximately 760,000 shares at an average cost of $21.36 per share.
At September 30, 1998, the Company had approximately $33.8 million in remaining
authorization available for future share repurchases. The Company intends to
continue to repurchase shares prospectively, and to measure any acquisition
opportunities relative to the risk-free returns associated with share
repurchases.

CAPITAL

       BVB's regulatory capital at September 30, 1998 exceeded the minimum
requirements of each Office of Thrift Supervision ("OTS") regulatory capital
standard on a fully phased-in basis as follows:

<TABLE>
<CAPTION>
 
                                                                        (UNAUDITED)
                        --------------------------------------------------------------------------------------------------------- 
                                                                         MINIMUM
                                     ACTUAL                            REQUIREMENT                              EXCESS
                        ------------------------------     --------------------------------      ---------------------------------
                             AMOUNT            RATIO            AMOUNT             RATIO               AMOUNT              RATIO
                        --------------    ------------     ---------------    -------------      ----------------     ------------
                                                                   (DOLLARS IN THOUSANDS)
<S>                       <C>               <C>              <C>                <C>                <C>                  <C> 
Tangible                      $340,919            6.39%           $ 80,006             1.50%             $260,913             4.89%
Core                           341,879            6.41%            213,311             4.00%              128,568             2.41%
Total Risk-based               386,460           10.50%            294,475             8.00%               91,985             2.50%
</TABLE>

       The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") requires each Federal banking agency, including the OTS, to implement
prompt corrective actions for "under capitalized" institutions that it
regulates. Under capital guidelines enacted by FDICIA, BVB met the criteria for
a "well capitalized" institution at September 30, 1998 as follows:

<TABLE>
<CAPTION>
 
                                                                         (UNAUDITED)
                        ---------------------------------------------------------------------------------------------------------- 
                                                                      WELL CAPITALIZED
                                     ACTUAL                            REQUIREMENT                              EXCESS
                        ------------------------------     --------------------------------      ---------------------------------
                             AMOUNT            RATIO            AMOUNT             RATIO               AMOUNT              RATIO
                        --------------    ------------     ---------------    -------------      ----------------     ------------
                                                                   (DOLLARS IN THOUSANDS)
<S>                       <C>               <C>              <C>                <C>                <C>                  <C> 
Tier 1 Leverage            $341,879            6.41%           $266,638             5.00%             $ 75,241             1.41%
Tier 1 Risk-based           341,879            9.29%            220,856             6.00%              121,023             3.29%
Total Risk-based            386,460           10.50%            368,094            10.00%               18,366             0.50%
</TABLE>

YEAR 2000

General

       The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. As a result,
any of the Company's computer programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000 which, in
turn, could result 

                                       43
<PAGE>
 
in system failures or miscalculations causing disruptions in the operations of
the Company and its suppliers and customers.

       The potential impact of the Year 2000 compliance issues on the financial
services industry could be material, as virtually every aspect of the industry
and processing of transactions will be affected.  Due to the size of the task
facing the financial services industry and the interdependent nature of its
transactions, the Company may be adversely affected by this problem, depending
on whether it and the entities with which it does business address the issue
successfully.  The impact of Year 2000 issues on the Company will then depend
not only on corrective actions that the Company takes, but also on the way in
which Year 2000 issues are addressed by governmental agencies, businesses, and
other third-parties that provide services or data to, or receive services and
data from, the Company, or whose financial condition or operational capability
is important to the Company.

       Financial institution regulators have recently increased their focus upon
Year 2000 compliance issues and have issued guidance concerning the
responsibilities of an institution's senior management and directors. The
Federal Financial Institutions Examination Council, an oversight authority for
financial institutions, has issued several interagency statements on Year 2000
project management awareness. These statements require financial institutions
to, among other things, examine the Year 2000 implications of their reliance on
vendors and the potential impact of the Year 2000 issue on their customers,
suppliers and borrowers. These statements also require each federally regulated
financial institution to survey its exposure, measure its risk and prepare a
plan to address the Year 2000 issue. In addition, federal banking regulators
have issued safety and soundness guidelines to be followed by insured depository
institutions, such as BVB, to assure resolution of any Year 2000 problems. The
federal banking agencies have asserted that Year 2000 testing and certification
is a key safety and soundness issue in conjunction with regulatory examinations
and thus, that an institution's failure to appropriately address the Year 2000
issue could result in supervisory action, including the reduction of the
institution's supervisory ratings, the denial of applications for approval of
mergers or acquisitions or the imposition of civil monetary penalties.

The Company's State of Readiness

       The Company relies upon third-party software vendors and data processing
service providers for the majority of its electronic data processing and does
not operate any proprietary programs which are critical to the Company's
operations.  Thus, the focus of the Company is to monitor the progress of its
primary software and data processing service providers toward resolving Year
2000 compliance issues and prepare to test actual data of the Company in
simulated processing of future-sensitive dates.

       The Company's Year 2000 compliance program has been divided into phases,
each of them common to all sections of the process: (1) inventorying Year 2000
items; (2) assessing the Year 2000 compliance of items determined to be material
to the Company; (3) upgrading or replacing material items that are determined
not to be Year 2000 compliant and testing material items; (4) designing and
implementing contingency and business continuation plans; and (5) assessing the
status of third-party risks.

        In the first phase, the Company conducted a thorough evaluation of
current information technology systems, software and embedded technologies,
resulting in the identification of 14 mission critical systems that could be
affected by Year 2000 issues. Non-information technology systems such as climate
control systems, elevators and vault security equipment, were also surveyed.
This phase of the Year 2000 compliance program is substantially complete.

        In the second phase, results from the systems inventory were assessed to
determine the Year 2000 impact and what actions were required to obtain Year
2000 compliance.  For the Company's internal systems, actions needed ranged from
third-party vendor application upgrades to PC, server and network equipment
replacement. Further, the Company surveyed information regarding Year 2000
readiness for its material third-party suppliers 

                                       44
<PAGE>
 
of information systems and services. This phase of the Year 2000 compliance
program is substantially complete.

       The third phase includes the upgrading, replacement, and/or refinement of
systems, and testing.  This phase of the Year 2000 process is ongoing and is
expected to be completed by the first quarter of 1999.  The Company estimates
that the software conversion phase of its mission critical systems was more than
90% complete at September 30, 1998, and the remaining conversions are expected
to be completed no later than year-end 1998. Each of the upgrades or
replacements, to the extent economically feasible, is run through a test
environment to see how well it integrates with the Company's overall data
processing environment. Final "future-date" testing of system upgrades and
replacements is expected to be completed by the end of the first quarter of
1999.

       The fourth phase relates to contingency plans.  While the Company is
reasonably certain that its internal Year 2000 compliance program will be
successfully accomplished on time, there could be other operational issues
regarding the Year 2000 process that may prevent the Company from successfully
implementing its Year 2000 compliance program.  If these other operational
issues occur and remain unresolved, the Company could be required to implement a
contingency plan for Year 2000 compliance.  While the Company has not completely
finalized its contingency plan, it will select from several alternative plans
including the installation of other third-party vendor software or some
combination of alternatives.

       The final phase, assessing third-party risks, includes the process of
identifying and prioritizing critical suppliers and customers at the direct
interface level, as well as other material relationships with third-parties,
including various exchanges, clearing houses, other banks, telecommunication
companies, and public utilities.  This evaluation includes communicating with
the third-parties about their plans and progress in addressing Year 2000 issues.
Detailed evaluations of the most critical third-parties are continuing.  These
evaluations will be followed with contingency plans, which are ongoing and
expected to be finalized in the second quarter of 1999, with follow up reviews
scheduled through the remainder of 1999.

       The Company's total costs associated with required modifications to
become Year 2000 compliant are estimated at approximately $1.0 million. A
significant portion of these costs has been and will continue to be the
reallocation of internal resources and, therefore, does not necessarily
represent incremental expense to the Company. The total amount expended on the
Year 2000 compliance program through September 30, 1998 was approximately
$350,000.

Risks

       Failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations.  Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition.  Due to the general
uncertainty inherent in the Year 2000 problem, resulting primarily from the
uncertainty of the Year 2000 readiness of third-party suppliers and customers,
the Company is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact.  The Company's Year 2000 compliance
program will reduce levels of uncertainty about the Year 2000 issues including
the compliance and readiness of its material third-party providers.  The Company
believes that, with the implementation of new or upgraded business systems and
completion of the Year 2000 compliance program as scheduled, the possibility of
significant interruptions of normal operations will be reduced.

IMPACT OF NEW ACCOUNTING STANDARDS
 
       In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information" ("SFAS 131"), which establishes annual
and interim reporting standards for a publicly held entity's operating segments
and related disclosures about its products, services, geographic areas, and
major customers. Adoption of this statement will not impact the Company's
consolidated financial condition, results 

                                       45
<PAGE>
 
of operations or cash flows, and any effect will be limited to the form and
content of its disclosures. SFAS 131 will be effective for the Company's
December 31, 1998 financial statements.

       In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), which establishes accounting
and reporting standards for derivative instruments and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial condition and measure those
instruments at fair value.  The accounting for changes in the fair value of
derivatives depends on the intended use of the derivative.  The Company
currently utilizes interest rate swap agreements to hedge cash flows associated
with current and anticipated transactions.  To the extent these interest rate
swap agreements qualify as a cash flow hedge under SFAS 133, the effective
portion of the derivative's gain or loss would be initially reported as a
component of other comprehensive income (outside of earnings) and subsequently
reclassified into earnings when the forecasted transaction affected earnings.
SFAS 133 will be effective for the Company for the fiscal quarter beginning July
1, 1999.

       In October 1998, the FASB issued SFAS No. 134, "Accounting for Mortgage-
Backed Securities Retained after the Securitization of Mortgage Loans Held for
Sale by a Mortgage Banking Enterprise" ("SFAS 134"), which amends the disclosure
requirements of SFAS No. 65, "Accounting for Certain Mortgage Banking
Activities." SFAS 134 conforms the subsequent accounting for securities retained
after the securitization of mortgage loans by a mortgage banking enterprise with
the subsequent accounting for securities retained after the securitization of
other types of assets by a nonmortgage banking enterprise. SFAS 134 will be
effective for the Company for the fiscal quarter beginning January 1, 1999. The
Company does not expect that the adoption of SFAS 134 will have a material
impact on its consolidated financial condition, results of operations or cash 
flows.

                                       46
<PAGE>
 
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------

                        ASSET AND LIABILITY MANAGEMENT

       The objective of the Company's asset/liability management activities is
to improve earnings by adjusting the type and mix of assets and liabilities to
effectively address changing conditions and risks. Through overall management of
its balance sheet and by controlling various risks, the Company seeks to
optimize its financial returns within safe and sound parameters. The Company's
operating strategies for attaining this objective include:

       .   Managing net interest margin through appropriate risk/return pricing
           of assets and liabilities.
       .   Increasing deposits as a percentage of interest-bearing liabilities
           and reducing the Company's cost of funds.
       .   Utilizing the Company's strong capital position to boost the earnings
           power through acquisition of quality assets with higher risk-adjusted
           yields.
       .   Controlling noninterest expense and enhancing noninterest income,
           utilizing improved information systems to facilitate analysis of the
           profitability of individual business units and products.
       .   Utilizing interest rate swap agreements and other hedging strategies
           to reduce exposure to fluctuations in interest rates.
       .   Enhancing internal analysis capability for measuring, evaluating and
           monitoring risk.

INTEREST RATE RISK

       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. The Company's strategy has been to
reduce the sensitivity of its earnings to interest rate fluctuations by more
closely matching the effective maturities or repricing characteristics of its
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. The
Company considers the anticipated effects of these factors when implementing its
interest rate risk management objectives.

       The Company pursues balance sheet management strategies that should, in
the long run, mitigate its exposure to fluctuations in interest rates. The
Company also considers other strategies to minimize the variability of net
interest margin including off-balance sheet activities. The Company has
initiated numerous actions over the past three years which significantly reduced
the Company's exposure to fluctuations in interest rates since December 31,
1994.

Interest Rate Swaps
-------------------

       The Company uses interest rate swap agreements to hedge cash flows
associated with the Company's borrowings. Interest rate swaps involve the
exchange of fixed-rate and floating-rate interest payment obligations without
the exchange of the underlying notional amounts. At September 30, 1998 and
December 31, 1997, the Company was a party to interest rate swap agreements with
notional principal amounts of $366 million and $449 million, respectively, which
involve the receipt of floating interest rates (based on 3-month LIBOR) and
payment of fixed interest rates on the underlying notional amounts.

                                       47
<PAGE>
 
INTEREST RATE SENSITIVITY

       The Company's interest rate risk management policies are established and
monitored by its Asset/Liability Committee ("ALCO").  The ALCO reviews the
sensitivity of the Company's net interest income and market value of equity to
interest rate changes.  The objective of the Company's ALCO activities is to
improve earnings by adjusting the types of assets and liabilities to effectively
address changing conditions and risks.  Management believes that its
asset/liability activities have improved earnings within safe and sound
parameters.

       In measuring interest rate sensitivity, the Company uses simulation 
modeling to estimate the potential effects of movements in interest rates.
Interest rate sensitivity analysis measures the Company's interest rate risk by
computing the estimated change in base forecasted net interest income ("NII") in
the event of a range of assumed changes in market interest rates. The base
forecast is for the twelve month period beginning September 30, 1998 and ending
September 30, 1999, and utilizes current market rate assumptions. This analysis
assesses the effect on NII in the event of a sudden and sustained 100 or 200
basis point increase or decrease in market interest rates.

       The following table presents the Company's projected NII with and without
interest rate swaps, and the corresponding percentage change from the base
forecast, for the various basis point ("bp") rate shock levels at September 30,
1998.

<TABLE>
<CAPTION>
                                                                         PROJECTED EFFECT (UNAUDITED)
                                       --------------------------------------------------------------------------------------------
                                              -200 bp                 -100 bp                  +100 bp                  +200 bp
                                       -------------------     -------------------     -------------------      -------------------
<S>                                      <C>                     <C>                     <C>                      <C>
  NII without swaps                         $194,816                $186,630                $171,132                 $161,367
  NII with swaps                            $186,658                $180,912                $170,296                 $162,971
  Impact of swaps                           $ (8,158)               $ (5,718)               $   (836)                $  1,604
  % Increase (decrease) from base NII,      
    with swaps                                  6.22%                   2.95%                  (3.09%)                  (7.26%)
 
</TABLE>

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

       To measure the Company's interest rate sensitivity, a cumulative gap
measure can also be used to assess the impact of potential changes in interest
rates on net interest income. The repricing gap represents the net position of
assets and liabilities subject to repricing in specified time periods. Assets
and liabilities are categorized according to the expected repricing time frames
based on management's judgment. A cumulative gap measure alone cannot be used to
evaluate interest rate sensitivity because interest rate changes do not affect
all categories of assets and liabilities equally or simultaneously.

                                       48
<PAGE>
 
       The following table illustrates the combined asset and liability
repricing of the Company as of September 30, 1998:

<TABLE>
<CAPTION>
                                                                       REPRICING PERIOD (UNAUDITED)
                                         ---------------------------------------------------------------------------------------
                                               UNDER               BETWEEN         BETWEEN THREE        OVER
                                                ONE             ONE AND THREE           AND             FIVE
                                               YEAR                 YEARS           FIVE YEARS          YEARS      TOTAL
                                         ---------------------------------------------------------------------------------------
                                                                          (DOLLARS IN THOUSANDS)
ASSETS:                                  
-------                                  
<S>                                        <C>                  <C>                <C>                 <C>          <C>
Cash and investments                        $  172,816           $       -           $      -           $       -     $  172,816

Loans and mortgage-backed                   
 securities (1)                              3,111,211             989,237            568,369             389,756      5,058,573
                                            ----------           ---------           --------           ---------     ----------    

Total interest rate                      
 sensitive assets                           $3,284,027           $ 989,237           $568,369           $ 389,756     $5,231,389
                                            ==========           =========           ========           =========     ========== 
                                         
LIABILITIES                              
-----------                              
Deposits:                                
    Transaction accounts                    $1,438,387           $       -           $      -           $       -     $1,438,387
    Certificates of deposit                  1,528,558             224,252             37,559               1,188      1,791,557
Borrowings                                     990,308             514,296            270,962             103,974      1,879,540
                                            ----------           ---------           --------           ---------     ----------   
Total interest rate sensitive            
 liabilities                                $3,957,253           $ 738,548           $308,521           $ 105,162     $5,109,484
                                            ==========           =========           ========           =========     ==========  
Repricing gap-positive                   
 (negative) before impact                
 of interest rate swaps                     $ (673,226)          $ 250,689           $259,848           $ 284,594     $  121,905
                                                                                                                      ==========
Impact of interest rate swaps                  281,500            (154,000)           (25,000)           (102,500)
                                            ----------           ---------           --------           ---------     
                                            $ (391,726)             96,689            234,848             182,094
                                            ==========           =========           ========           =========     
Cumulative repricing                     
 gap-positive (negative)                    $ (391,726)          $(295,037)          $(60,189)          $ 121,905
                                            ==========           =========           ========           =========     
Cumulative repricing gap as a            
 percentage of interest rate             
 sensitive assets at                     
 September 30, 1998                              (7.49)%             (5.64)%            (1.15)%              2.33%
                                            ==========           =========           ========           =========     
</TABLE>

(1)    Based on assumed annual prepayment and amortization rates which
       approximate the Company's historical experience.

                                       49
<PAGE>
 
       The following table illustrates the combined asset and liability
repricing of the Company as of December 31, 1997:

<TABLE>
<CAPTION>
                                                                       REPRICING PERIOD (UNAUDITED)
                                         --------------------------------------------------------------------------------------
                                               UNDER             BETWEEN               BETWEEN            OVER
                                                ONE           ONE AND THREE        THREE AND FIVE         FIVE
                                               YEAR               YEARS                 YEARS             YEARS      TOTAL
                                         ---------------------------------------------------------------------------------------
                                                                          (DOLLARS IN THOUSANDS)
ASSETS                                   
------                                   
<S>                                        <C>              <C>                   <C>                  <C>          <C>
Cash and investments                        $  257,588             $   5,000             $       -      $      -     $  262,588
Loans and mortgage-backed                
 securities (1)                              1,950,582               371,275               201,178       320,339      2,843,374
                                            ----------             ---------             ---------      --------     ----------
Total interest rate                      
 sensitive assets                           $2,208,170             $ 376,275             $ 201,178      $320,339     $3,105,962
                                            ==========             =========             =========      ========     ==========
                                         
LIABILITIES                              
-----------                              
Deposits:                                
    Transaction accounts                    $  553,820             $       -             $       -      $      -     $  553,820
    Certificates of deposit                  1,007,420               110,987                 4,908             -      1,123,315
Borrowings                                   1,101,604               135,000                20,000        99,372      1,355,976
                                            ----------             ---------             ---------      --------     ----------
                                         
Total interest rate                      
 sensitive liabilities                      $2,662,844             $ 245,987             $  24,908      $ 99,372     $3,033,111
                                            ----------             ---------             ---------      --------     ----------
                                         
Repricing gap-positive                   
 (negative) before impact of             
 interest rate swaps                        $ (454,674)            $ 130,288             $ 176,270      $220,967     $   72,851
                                                                                                                     ==========
Impact of interest rate swaps                  389,250              (111,750)             (100,000)     (177,500)
                                            ----------             ---------             ---------      --------      
                                               (65,424)               18,538                76,270        43,467
                                            ----------             ---------             ---------      --------      
Cumulative repricing                     
 gap-positive (negative)                    $  (65,424)            $ (46,886)            $  29,384      $ 72,851
                                            ==========             =========             =========      ======== 
Cumulative repricing gap as a            
 percentage of interest rate             
 sensitive assets at                     
 December 31, 1997                               (2.11)%               (1.51)%                0.95%         2.35%
                                            ==========             =========             =========      ======== 
</TABLE>

(1)    Based on assumed annual prepayment and amortization rates which
       approximate the Company's historical experience.

                                       50
<PAGE>
 
                           PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings
         -----------------
         None

Item 2.  Changes in Securities
         ---------------------
         None

Item 3.  Defaults Upon Senior Securities
         -------------------------------
         None

Item 4.  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------
         None

Item 5.  Other Information
         -----------------

         The Indenture relating to the Company's 9 1/8% Subordinated Notes due
         2007 has not permitted the Company to pay cash dividends or make common
         stock repurchases unless it was "well-capitalized" for bank holding
         company regulatory purposes. The Company's October 1998 stock
         repurchases were made at a time when the Company was not well-
         capitalized. On October 30, 1998 the Company and the Indenture Trustee
         entered into a First Supplemental Indenture, revising the "well
         capitalized" standard to "adequately capitalized." The Company is
         currently in compliance with the Indenture, as amended by the First
         Supplemental Indenture.

         In addition, the First Supplemental Indenture amended the Indenture to
         exclude from the definition of "restricted payments" under the
         Indenture dividends on preferred securities issued by a special purpose
         subsidiary whose primary purpose is to invest in debt securities of the
         Company and any distribution of these debt securities to the preferred 
         security holders.

         See also the First Supplemental Indenture attached hereto as Exhibit
         10.

Item 6.  Exhibits and Reports on Form 8-K
         --------------------------------

  a(i).  First Supplemental Indenture dated October 30, 1998 (Exhibit 10)
         Employment Agreement with Richard Arnold (Exhibit 10.1)
         Employment Agreement with John N. Buckley (Exhibit 10.2)
         Employment Agreement with Robert J. Flax (Exhibit 10.3)
         Employment Agreement with David A. Heaberlin (Exhibit 10.4)
         Employment Agreement with Scott H. Ray (Exhibit 10.5)
         Employment Agreement with Ronald L. Reed (Exhibit 10.6)
         Employment Agreement with Edward H. Sondker (Exhibit 10.7)
         Employment Agreement with Carolyn Williams-Goldman (Exhibit 10.8)

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

a(iii).  Financial Data Schedule (Exhibit 27)

  b(i).  The Registrant filed the following report on Form 8-K dated August
         27, 1998 during the three months ended September 30, 1998:

                                       51
<PAGE>
 
         The Registrant cancelled the proposed acquisition of PSB Lending
         Corporation, increased its share repurchase program to up to $50
         million in shares of the Company's common stock, and announced the
         filing of an application to convert Bay View Bank from a federally
         chartered savings bank regulated by the Office of Thrift Supervision to
         a national bank regulated by the Office of the Comptroller of the
         Currency.
 
 b(ii).  The Registrant filed the following report on Form 8-K dated
         September 30, 1998 during the three months ended September 30, 1998:

         The Registrant provided consolidated financial statements of AFEH and
         pro forma financial information regarding the merger of the Company and
         AFEH prepared in accordance with Regulation S-X of the Securities and
         Exchange Commission.


                                  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: November 16, 1998     BY:  /s/   David A. Heaberlin
                                -------------------------
                                David A. Heaberlin
                                Executive Vice President and 
                                Chief Financial Officer
                                (Duly Authorized Officer and 
                                Principal Financial Officer)

                                       52