##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2005
 OR
 o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission
file number 001-14879
 BAY VIEW CAPITAL CORPORATION
  Delaware
(State or other jurisdiction of
incorporation or organization)
    
    94-3078031
(I.R.S. Employer
Identification No.)
 
  þ o
 þ o
  Common Stock, Par Value $.01
(Title of Class)
    
    Outstanding at July 31, 2005
6,595,886 shares




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FORM 10-Q
INDEX
 BAY VIEW CAPITAL CORPORATION
 Page(s)PART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited):Condensed Consolidated Statements of Financial Condition
    
    4Condensed Consolidated Statements of Operations and Comprehensive Loss
    
    5-6Condensed Consolidated Statement of Stockholders Equity
    
    7Condensed Consolidated Statements of Cash Flows
    
    8-9Notes to Condensed Consolidated Financial Statements
    
    10-15Item 2. Managements Discussion and Analysis ofFinancial Condition and Results of Operations
    
    16-32Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    33-34Item 4. Controls and Procedures
    
    35-36PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    37Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    37Item 3. Defaults Upon Senior Securities
    
    37Item 4. Submission of Matters to a Vote of Security Holders
    
    37Item 5. Other Information
    
    38Item 6. Exhibits
    
    38Signatures
    
    39EXHIBIT 10.1EXHIBIT 10.2EXHIBIT 10.3EXHIBIT 10.4EXHIBIT 10.5EXHIBIT 10.6EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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##### Table of Contents



Forward-Looking Statements
   
    
    Our efforts to expand BVACs operations could be unsuccessful;
    
    Our ability to obtain and maintain financing to fund the ongoing operations of BVAC,
including securitizing and selling automobile installment contracts in order to repay
borrowings;
    
    Changes in general economic and business conditions;
    
    Interest rate fluctuations, including the results from our hedging activities;
    
    Our financial condition and liquidity, including our ability to generate future cash flows and earnings;
    
    Our degree of success in utilizing our net operating loss carryforwards;
    
    Competition;
    
    Our ability to control our operating expenses;
    
    The effect of new laws, regulations and court decisions affecting consumer finance
transactions and net operating loss carryforwards;
    
    The condition of the market for the sale of new and used automobiles, including pricing
options by automobile manufacturers;
    
    The level of charge-offs on the contracts that BVAC purchases; and
    
    The outcome of pending litigation against us.
 Cash Distributions
   3




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Bay View Capital Corporation and Subsidiaries
 
 Condensed Consolidated Statements of Financial Condition
 June 30,
    
    December 31,2005
    
    2004(Unaudited)(Dollars in thousands)ASSETSCash
    
    $
    9,361
    
    
    $
    4,447Restricted cash
    
    
    39,359
    
    
    
    26,845Retained interests in securitizations available-for-sale
    
    
    21,244
    
    
    
    22,636Auto installment contracts and loans held-for-sale:Auto installment contracts
    
    
    101,545
    
    
    
    75,021Other loans
    
    
    
    
    
    
    902Auto installment contracts held-for-investment, net
    
    
    197,185
    
    
    
    252,863Securitized auto installment contracts held-for-investment, net
    
    
    202,743
    
    
    
    Investment in operating lease assets, net
    
    
    1,426
    
    
    
    10,041Real estate owned, net
    
    
    2,654
    
    
    
    3,379Premises and equipment, net
    
    
    683
    
    
    
    733Repossessed vehicles
    
    
    296
    
    
    
    439Current and deferred income taxes, net
    
    
    18,424
    
    
    
    16,977Goodwill
    
    
    1,846
    
    
    
    1,846Other assets
    
    
    8,441
    
    
    
    7,199Total assets
    
    $
    605,207
    
    
    $
    423,328LIABILITIES AND STOCKHOLDERS EQUITYBorrowings:Warehouse credit facility and other short-term borrowings
    
    $
    284,006
    
    
    $
    298,755Securitization notes payable
    
    
    200,503
    
    
    
    Other borrowings
    
    
    94
    
    
    
    1,895Other liabilities
    
    
    9,762
    
    
    
    9,629Liquidation reserve
    
    
    8,291
    
    
    
    8,856Total liabilities
    
    
    502,656
    
    
    
    319,135Stockholders equity:Common stock ($.01 par value); authorized, 80,000,000 shares;
issued, 2005 - 6,597,303 shares; 2004 - 6,597,303 shares;
outstanding, 2005 - 6,595,886 shares; 2004 - 6,593,860 shares
    
    
    66
    
    
    
    66Additional paid-in capital
    
    
    109,243
    
    
    
    109,578Accumulated deficit
    
    
    (6,465
    )
    
    
    (4,585
    )Treasury stock, at cost; 2005 - 1,417 shares; 2004 - 3,443 shares
    
    
    (252
    )
    
    
    (587
    )Accumulated other comprehensive loss
    
    
    (41
    )
    
    
    (279
    )Total stockholders equity
    
    
    102,551
    
    
    
    104,193Total liabilities and stockholders equity
    
    $
    605,207
    
    
    $
    423,328
  4




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##### Table of Contents



Bay View Capital Corporation and Subsidiaries
 
 Condensed Consolidated Statements of Operations and Comprehensive Loss
 (Unaudited)
 For the Three Months EndedJune 30,
    
    June 30,2005
    
    2004(Dollars in thousands, except per share amounts)Interest income:Interest on auto installment contracts and other loans
    
    $
    8,276
    
    
    $
    4,508Interest on short-term investments and retained interests in securitizations
    
    
    844
    
    
    
    7049,120
    
    
    
    5,212Interest expense:Interest on warehouse credit facility and other short-term borrowings
    
    
    2,608
    
    
    
    1,040Interest on securitization notes payable
    
    
    2,440
    
    
    
    Other interest expense
    
    
    58
    
    
    
    1,1235,106
    
    
    
    2,163Net interest income
    
    
    4,014
    
    
    
    3,049Provision for credit losses
    
    
    1,793
    
    
    
    521Net interest income after provision for credit losses
    
    
    2,221
    
    
    
    2,528Noninterest income:Leasing income
    
    
    1,843
    
    
    
    3,596Loan servicing income
    
    
    472
    
    
    
    852Loan fees
    
    
    193
    
    
    
    224Unrealized gain (loss) on derivative instruments
    
    
    (1,106
    )
    
    
    2,717Loss on auto installment contracts and other loans held-for-sale, and
retained interests in securitizations, net
    
    
    (585
    )
    
    
    (1,340
    )Other, net
    
    
    279
    
    
    
    1151,096
    
    
    
    6,164Noninterest expense:General and administrative
    
    
    5,630
    
    
    
    6,146Leasing expense
    
    
    156
    
    
    
    2,848Real estate owned, net
    
    
    24
    
    
    
    (11
    )5,810
    
    
    
    8,983Loss before income tax benefit
    
    
    (2,493
    )
    
    
    (291
    )Income tax benefit
    
    
    (947
    )
    
    
    (114
    )Net loss
    
    $
    (1,546
    )
    
    $
    (177
    )Basic loss per share
    
    $
    (0.23
    )
    
    $
    (0.03
    )Diluted loss per share
    
    $
    (0.23
    )
    
    $
    (0.03
    )Weighted-average basic shares outstanding
    
    
    6,596
    
    
    
    6,591Weighted-average diluted shares outstanding
    
    
    6,596
    
    
    
    6,591Net loss
    
    $
    (1,546
    )
    
    $
    (177
    )Other comprehensive income (loss), net of tax:Change in unrealized gain (loss) on securities available-for-sale, net of
tax expense (benefit) of $77 and ($24) for the three month periods ended
June 30, 2005 and June 30, 2004, respectively
    
    
    120
    
    
    
    (38
    )Comprehensive loss
    
    $
    (1,426
    )
    
    $
    (215
    )
  5




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Bay View Capital Corporation and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
 For the Six Months EndedJune 30,
    
    June 30,2005
    
    2004(Dollars in thousands, except per share amounts)Interest income:Interest on auto installment contracts and other loans
    
    $
    14,626
    
    
    $
    8,663Interest on short-term investments and retained interests in securitizations
    
    
    1,565
    
    
    
    1,46116,191
    
    
    
    10,124Interest expense:Interest on warehouse credit facility and other short-term borrowings
    
    
    4,802
    
    
    
    1,933Interest on securitization notes payable
    
    
    3,700
    
    
    
    Other interest expense
    
    
    282
    
    
    
    2,1728,784
    
    
    
    4,105Net interest income
    
    
    7,407
    
    
    
    6,019Provision for credit losses
    
    
    2,630
    
    
    
    521Net interest income after provision for credit losses
    
    
    4,777
    
    
    
    5,498Noninterest income:Leasing income
    
    
    3,913
    
    
    
    8,824Loan servicing income
    
    
    1,024
    
    
    
    1,799Loan fees
    
    
    376
    
    
    
    724Unrealized gain on derivative instruments
    
    
    374
    
    
    
    2,409Loss on auto installment contracts and other loans held-for-sale, and
retained interests in securitizations, net
    
    
    (1,034
    )
    
    
    (1,645
    )Other, net
    
    
    521
    
    
    
    1,0995,174
    
    
    
    13,210Noninterest expense:General and administrative
    
    
    12,236
    
    
    
    12,687Leasing expense
    
    
    671
    
    
    
    7,515Real estate owned, net
    
    
    28
    
    
    
    28012,935
    
    
    
    20,482Loss before income tax benefit
    
    
    (2,984
    )
    
    
    (1,774
    )Income tax benefit
    
    
    (1,104
    )
    
    
    (696
    )Net loss
    
    $
    (1,880
    )
    
    $
    (1,078
    )Basic loss per share
    
    $
    (0.29
    )
    
    $
    (0.16
    )Diluted loss per share
    
    $
    (0.29
    )
    
    $
    (0.16
    )Weighted-average basic shares outstanding
    
    
    6,595
    
    
    
    6,581Weighted-average diluted shares outstanding
    
    
    6,595
    
    
    
    6,581Net loss
    
    $
    (1,880
    )
    
    $
    (1,078
    )Other comprehensive income, net of tax:Change in unrealized gain on securities available-for-sale, net of tax
expense of $154 and $364 for the six month periods ended
June 30, 2005 and June 30, 2004, respectively
    
    
    238
    
    
    
    570Comprehensive loss
    
    $
    (1,642
    )
    
    $
    (508
    )
  6




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Bay View Capital Corporation and Subsidiaries
 
 Condensed Consolidated Statement of Stockholders Equity
 (Unaudited)
 AccumulatedNumber
    
    
    
    
    
    Additional
    
    
    
    
    
    
    
    
    
    Other
    
    Totalof Shares
    
    Common
    
    Paid-in
    
    Accumulated
    
    Treasury
    
    Comprehensive
    
    StockholdersIssued
    
    Stock
    
    Capital
    
    Deficit
    
    Stock
    
    Loss
    
    Equity(In thousands)Balance at December 31, 2004
    
    
    6,597
    
    
    $
    66
    
    
    $
    109,578
    
    
    $
    (4,585
    )
    
    $
    (587
    )
    
    $
    (279
    )
    
    $
    104,193Distribution of restricted shares
    
    
    
    
    
    
    
    
    
    
    (335
    )
    
    
    
    
    
    
    335
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,880
    )
    
    
    
    
    
    
    
    
    
    
    (1,880
    )Unrealized gain on retained interests on securitizations
available-for-sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    238
    
    
    
    238Balance at June 30, 2005
    
    
    6,597
    
    
    $
    66
    
    
    $
    109,243
    
    
    $
    (6,465
    )
    
    $
    (252
    )
    
    $
    (41
    )
    
    $
    102,551
  7




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##### Table of Contents



Bay View Capital Corporation and Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows
 (Unaudited)
 For the Six Months EndedJune 30,
    
    June 30,2005
    
    2004(Dollars in thousands)CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (1,880
    )
    
    $
    (1,078
    )Adjustments to reconcile net loss to net cash used in operating activities:Net increase in auto installment contracts held-for-sale resulting from purchases,
net of repayments
    
    
    (129,392
    )
    
    
    (96,977
    )Proceeds from sales and/or securitizations of auto installment contracts and
other loans held-for-sale
    
    
    6,493
    
    
    
    14,988Provision for credit losses
    
    
    2,630
    
    
    
    521Depreciation and amortization of investment in operating lease assets
    
    
    749
    
    
    
    6,924Depreciation and amortization of premises and equipment
    
    
    177
    
    
    
    166Amortization of premium and accretion of discount
    
    
    1,688
    
    
    
    81Accretion of retained interests in securitizations
    
    
    (986
    )
    
    
    (1,242
    )Provision for deferred taxes
    
    
    (1,104
    )
    
    
    (696
    )Loss on auto installment contracts and other loans held-for-sale, and
retained interests in securitizations, net
    
    
    1,034
    
    
    
    1,645Change in fair value of derivative instruments
    
    
    1,172
    
    
    
    (1,437
    )Increase in restricted cash
    
    
    (12,514
    )
    
    
    (4,874
    )(Increase) decrease in other assets
    
    
    (2,582
    )
    
    
    3,604Increase (decrease) in other liabilities
    
    
    539
    
    
    
    (3,553
    )Decrease in reserve for estimated costs during the period of liquidation
    
    
    (565
    )
    
    
    (1,336
    )Other, net
    
    
    (1,112
    )
    
    
    456Net cash used in operating activities
    
    
    (135,653
    )
    
    
    (82,808
    )CASH FLOWS FROM INVESTING ACTIVITIESNet increase in auto installment contracts held-for-investment resulting from
purchases, net of repayments
    
    
    (54,877
    )
    
    
    Decrease in investment in operating lease assets
    
    
    7,945
    
    
    
    32,101Principal payments on retained interests in securitizations
    
    
    2,634
    
    
    
    4,011Principal payments on mortgage-backed securities
    
    
    
    
    
    
    383Proceeds from sale of mortgage-backed securities
    
    
    
    
    
    
    5,626Proceeds from sale of real estate owned
    
    
    725
    
    
    
    690Additions to premises and equipment, net
    
    
    (127
    )
    
    
    (252
    )Net cash (used in) provided by investing activities
    
    
    (43,700
    )
    
    
    42,559
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##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (continued)
(Unaudited)
 For the Six Months EndedJune 30,
    
    June 30,2005
    
    2004(Dollars in thousands)CASH FLOWS FROM FINANCING ACTIVITIESIssuance of securitization notes payable
    
    $
    233,168
    
    
    $
    Repayment of securitization notes payable
    
    
    (32,351
    )
    
    
    Proceeds from warehouse credit facility
    
    
    516,639
    
    
    
    128,399Repayment of warehouse credit facility
    
    
    (531,388
    )
    
    
    (45,679
    )Redemption of Junior Subordinated Deferrable Interest Debentures
    
    
    
    
    
    
    (22,000
    )Net decrease in other borrowings
    
    
    (1,801
    )
    
    
    (9,919
    )Proceeds from issuance of common stock
    
    
    
    
    
    
    202Dividends paid to common stockholders
    
    
    
    
    
    
    (16,478
    )Net cash provided by financing activities
    
    
    184,267
    
    
    
    34,525Net increase (decrease) in cash and cash equivalents
    
    
    4,914
    
    
    
    (5,724
    )Cash and cash equivalents at beginning of period
    
    
    4,447
    
    
    
    11,563Cash and cash equivalents at end of period
    
    $
    9,361
    
    
    $
    5,839Cash paid during the period for:Interest
    
    $
    8,858
    
    
    $
    3,377Income taxes
    
    $
    498
    
    
    $
    264Supplemental non-cash investing and financing activities:Loans transferred from held-for-sale to held-for-investment
    
    $
    96,263
    
    
    $
    103,023Redemption of Junior Subordinated Deferrable Interest Debentures
    
    $
    
    
    
    $
    2,784
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Bay View Capital Corporation and Subsidiaries
 
 Notes to Condensed Consolidated Financial Statements
 June 30, 2005
 (Unaudited)
 Note 1. Summary of Significant Accounting Policies
 Basis of Presentation
      Stock-based Compensation
  10




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Bay View Capital Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2005
(Unaudited)
 For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,
    
    June 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004(Dollars in thousands, except per share amounts)Net loss as reported in Consolidated
Statements of Operations and Comprehensive
Loss
    
    $
    (1,546
    )
    
    $
    (177
    )
    
    $
    (1,880
    )
    
    $
    (1,078
    )Stock-based compensation included in net loss
as reported
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense determined
under fair value method, net of taxes
    
    
    (18
    )
    
    
    
    
    
    
    (37
    )
    
    
    Pro forma net loss, after stock-based
compensation expense
    
    $
    (1,564
    )
    
    $
    (177
    )
    
    $
    (1,917
    )
    
    $
    (1,078
    )Net loss per share  basic:As reported
    
    $
    (0.23
    )
    
    $
    (0.03
    )
    
    $
    (0.29
    )
    
    $
    (0.16
    )Pro forma
    
    $
    (0.24
    )
    
    $
    (0.03
    )
    
    $
    (0.29
    )
    
    $
    (0.16
    )Net loss per share  diluted:As reported
    
    $
    (0.23
    )
    
    $
    (0.03
    )
    
    $
    (0.29
    )
    
    $
    (0.16
    )Pro forma
    
    $
    (0.24
    )
    
    $
    (0.03
    )
    
    $
    (0.29
    )
    
    $
    (0.16
    )
  For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,
    
    June 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Risk-free interest rate
    
    
    3.67
    %
    
    
    3.16
    %
    
    
    3.67
    %
    
    
    3.16
    %Expected life
    
    3.6 years
    
    3.6 years
    
    3.6 years
    
    3.6 yearsExpected volatility
    
    
    84.1
    %
    
    
    41.2
    %
    
    
    84.1
    %
    
    
    41.2
    %Expected dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Recent Accounting Pronouncements
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Bay View Capital Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2005
(Unaudited)
   Reclassifications
  12




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Bay View Capital Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2005
(Unaudited)
 Note 2. Loss per Share
   For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,
    
    June 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004(In thousands, except per share amounts)Net loss
    
    $
    (1,546
    )
    
    $
    (177
    )
    
    $
    (1,880
    )
    
    $
    (1,078
    )Weighted-average basic shares outstanding
    
    
    6,596
    
    
    
    6,591
    
    
    
    6,595
    
    
    
    6,581Add: Dilutive potential common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted-average diluted shares outstanding
    
    
    6,596
    
    
    
    6,591
    
    
    
    6,595
    
    
    
    6,581Basic loss per share
    
    $
    (0.23
    )
    
    $
    (0.03
    )
    
    $
    (0.29
    )
    
    $
    (0.16
    )Diluted loss per share
    
    $
    (0.23
    )
    
    $
    (0.03
    )
    
    $
    (0.29
    )
    
    $
    (0.16
    )
 Note 3. Auto Installment Contracts
  As of
    
    As ofJune 30, 2005
    
    December 31, 2004(Dollars in thousands)Auto installment contracts pledged under warehouse credit facility
    
    $
    278,971
    
    
    $
    314,749Auto installment contracts transferred to a special purpose trust in
connection with the securitization and issuance of auto
receivable-backed notes accounted for as a secured financing
    
    
    199,535
    
    
    
    Other unpledged auto installment contracts
    
    
    13,426
    
    
    
    5,932Premiums, discounts and deferred fees and costs, net
    
    
    12,892
    
    
    
    8,711Less: Allowance for credit losses
    
    
    (3,272
    )
    
    
    (1,508
    )Lower-of-cost-or-market allowance on auto contracts
held-for-sale
    
    
    (79
    )
    
    
    Total auto installment contracts, net
    
    $
    501,473
    
    
    $
    327,884
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Bay View Capital Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2005
(Unaudited)
 Note 4. Income Taxes
    Note 5. Commitments and Contingencies
    14




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##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2005
(Unaudited)
 Note 6. Liquidation Reserve
   Litigation /Severance
    
    Facilities(1)
    
    Other
    
    Total(Dollars in thousands)Balance at December 31, 2004
    
    $
    1,314
    
    
    $
    6,003
    
    
    $
    1,539
    
    
    $
    8,856Accruals (reversals)
    
    
    40
    
    
    
    (222
    )
    
    
    43
    
    
    
    (230
    )Payments
    
    
    (66
    )
    
    
    (313
    )
    
    
    (47
    )
    
    
    (335
    )Balance at June 30, 2005
    
    $
    1,288
    
    
    $
    5,468
    
    
    $
    1,535
    
    
    $
    8,291
 
 (1)
    
    The reversal of the facilities accrual during the six month period ended June
30, 2005 was attributable to postponement of a planned move of the Companys headquarters
during 2005. Note 7. Subsequent Event
  15




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
   Strategic Overview
  Auto Finance
    16




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##### Table of Contents



Bay View Bank Liquidation
     17




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##### Table of Contents



Critical Accounting Policies
  Loan Sales and Retained Interests in Securitizations
      Weighted-average discount rate
    
    10.0%  12.0%Range of projected annual credit losses, net
    
    1.40%  1.53%Range of projected cumulative credit losses
    
    2.04%  2.37%Prepayment speed
    
    1.6 ABS
  18




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##### Table of Contents



Allowance for Credit Losses
    Income Taxes
   19




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##### Table of Contents



Derivative Instruments
    Results of Operations
   20




---



##### Table of Contents



Net Interest Income and Net Interest Margin
   21




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##### Table of Contents



Average Balances, Yields and RatesFor the Three Months Ended
    
    For the Three Months EndedJune 30, 2005
    
    June 30, 2004Average
    
    
    
    
    
    Average
    
    Average
    
    
    
    
    
    AverageBalance
    
    Interest
    
    Yield/Rate
    
    Balance
    
    Interest
    
    Yield/Rate(Dollars in thousands)AssetsInterest-earning assets:Restricted cash
    
    $
    32,251
    
    
    $
    371
    
    
    
    4.54
    %
    
    $
    25,449
    
    
    $
    50
    
    
    
    0.81
    %Retained interests in securitizations
    
    
    21,540
    
    
    
    473
    
    
    
    8.79
    
    
    
    27,988
    
    
    
    652
    
    
    
    9.31Mortgage-backed and other securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    366
    
    
    
    2
    
    
    
    1.64Auto installment contracts and other loans receivable
    
    
    238,429
    
    
    
    4,704
    
    
    
    7.92
    
    
    
    239,258
    
    
    
    4,508
    
    
    
    7.57Securitized auto installment contracts
    
    
    213,299
    
    
    
    3,572
    
    
    
    6.72
    
    
    
    
    
    
    
    
    
    
    
    Total interest-earning assets
    
    
    505,519
    
    
    
    9,120
    
    
    
    7.24
    %
    
    
    293,061
    
    
    
    5,212
    
    
    
    7.14
    %Other assets
    
    
    48,536
    
    
    
    
    
    
    
    
    
    
    
    85,270Total assets
    
    $
    554,055
    
    
    
    
    
    
    
    
    
    
    $
    378,331Liabilities and Stockholders EquityInterest-bearing liabilities:Warehouse credit facility and other borrowings
    
    $
    220,038
    
    
    
    2,614
    
    
    
    4.70
    %
    
    $
    180,826
    
    
    
    1,040
    
    
    
    2.28
    %Interest rate swap expense
    
    
    
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    519
    
    
    
    Warehouse credit facility, other borrowings and swaps
    
    
    220,038
    
    
    
    2,666
    
    
    
    4.79
    
    
    
    180,826
    
    
    
    1,559
    
    
    
    3.42Securitization notes payable
    
    
    213,657
    
    
    
    2,440
    
    
    
    4.52
    
    
    
    
    
    
    
    
    
    
    
    Junior Subordinated Deferrable Interest Debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,511
    
    
    
    604
    
    
    
    9.87Total interest-bearing liabilities
    
    
    433,695
    
    
    
    5,016
    
    
    
    4.66
    %
    
    
    205,337
    
    
    
    2,163
    
    
    
    4.19
    %Other liabilities
    
    
    17,096
    
    
    
    
    
    
    
    
    
    
    
    25,501Total liabilities
    
    
    450,791
    
    
    
    
    
    
    
    
    
    
    
    230,838Stockholders equity
    
    
    103,264
    
    
    
    
    
    
    
    
    
    
    
    147,493Total liabilities and stockholders equity
    
    $
    554,055
    
    
    
    
    
    
    
    
    
    
    $
    378,331Net interest income/net interest rate spread
    
    
    
    
    
    $
    4,014
    
    
    
    2.58
    %
    
    
    
    
    
    $
    3,049
    
    
    
    2.95
    %Net interest-earning assets
    
    $
    71,824
    
    
    
    
    
    
    
    
    
    
    $
    87,724Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.24
    %
    
    
    
    
    
    
    
    
    
    
    4.20
    %
 22




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##### Table of Contents



Average Balances, Yields and RatesFor the Six Months Ended
    
    For the Six Months EndedJune 30, 2005
    
    June 30, 2004Average
    
    
    
    
    
    Average
    
    Average
    
    
    
    
    
    AverageBalance
    
    Interest
    
    Yield/Rate/
    
    Balance
    
    Interest
    
    Yield/Rate(Dollars in Thousands)AssetsInterest-earning assets:Restricted cash
    
    $
    30,451
    
    
    $
    590
    
    
    
    3.86
    %
    
    $
    27,588
    
    
    $
    114
    
    
    
    0.84
    %Retained interests in securitizations
    
    
    21,920
    
    
    
    975
    
    
    
    8.89
    
    
    
    28,178
    
    
    
    1,316
    
    
    
    9.34Mortgage-backed and other securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,433
    
    
    
    31
    
    
    
    4.40Auto installment contracts and other loans
receivable
    
    
    225,567
    
    
    
    8,578
    
    
    
    7.68
    
    
    
    222,599
    
    
    
    8,663
    
    
    
    7.83Securitized auto installment contracts
    
    
    182,444
    
    
    
    6,048
    
    
    
    6.69
    
    
    
    
    
    
    
    
    
    
    
    Total interest-earning assets
    
    
    460,382
    
    
    
    16,191
    
    
    
    7.09
    %
    
    
    279,798
    
    
    
    10,124
    
    
    
    7.27
    %Other assets
    
    
    53,886
    
    
    
    
    
    
    
    
    
    
    
    96,199Total assets
    
    $
    514,268
    
    
    
    
    
    
    
    
    
    
    $
    375,997Liabilities and Stockholders EquityInterest-bearing liabilities:Warehouse credit facility and other borrowings
    
    $
    226,480
    
    
    
    4,815
    
    
    
    4.23
    %
    
    $
    173,078
    
    
    
    1,933
    
    
    
    2.21
    %Interest rate swap expense
    
    
    
    
    
    
    269
    
    
    
    
    
    
    
    
    
    
    
    969
    
    
    
    Warehouse credit facility, other borrowings and
swaps
    
    
    226,480
    
    
    
    5,084
    
    
    
    4.46
    
    
    
    173,078
    
    
    
    2,902
    
    
    
    3.33Securitization notes payable
    
    
    161,785
    
    
    
    3,700
    
    
    
    4.55
    
    
    
    
    
    
    
    
    
    
    
    Junior Subordinated Deferrable Interest Debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,647
    
    
    
    1,203
    
    
    
    9.77Total interest-bearing liabilities
    
    
    388,265
    
    
    
    8,784
    
    
    
    4.50
    %
    
    
    197,725
    
    
    
    4,105
    
    
    
    4.13
    %Other liabilities
    
    
    22,631
    
    
    
    
    
    
    
    
    
    
    
    30,675Total liabilities
    
    
    410,896
    
    
    
    
    
    
    
    
    
    
    
    228,400Stockholders equity
    
    
    103,372

    
    
    
    
    
    
    
    
    
    
    
    147,597Total liabilities and stockholders equity
    
    $
    514,268
    
    
    
    
    
    
    
    
    
    
    $
    375,997Net interest income/net interest rate spread
    
    
    
    
    
    $
    7,407
    
    
    
    2.59
    %
    
    
    
    
    
    $
    6,019
    
    
    
    3.14
    %Net interest-earning assets
    
    $
    72,117
    
    
    
    
    
    
    
    
    
    
    $
    82,073Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.30
    %
    
    
    
    
    
    
    
    
    
    
    4.35
    %
 23




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##### Table of Contents



Provision for Credit Losses
  Noninterest Income
     24




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##### Table of Contents



25




---



##### Table of Contents



Noninterest Expense
  For the Three Months EndedJune 30, 2005
    
    June 30, 2004(Dollars in thousands)General and administrative expense:Employee compensation and benefits
    
    $
    3,193
    
    
    $
    3,169Professional and legal services
    
    
    1,889
    
    
    
    1,554Occupancy and equipment
    
    
    252
    
    
    
    459Postage, telephone and travel
    
    
    384
    
    
    
    456Information technology
    
    
    288
    
    
    
    257Capitalized fees and costs
    
    
    (732
    )
    
    
    (314
    )Other
    
    
    356
    
    
    
    565Total general and administrative expense
    
    $
    5,630
    
    
    $
    6,146
   For the Six Months EndedJune 30, 2005
    
    June 30, 2004(Dollars in thousands)General and administrative expense:Employee compensation and benefits
    
    $
    6,309
    
    
    $
    6,880Professional and legal services
    
    
    4,477
    
    
    
    3,120Occupancy and equipment
    
    
    721
    
    
    
    706Postage, telephone and travel
    
    
    833
    
    
    
    967Information technology
    
    
    491
    
    
    
    561Capitalized fees and costs
    
    
    (1,298
    )
    
    
    (602
    )Other
    
    
    703
    
    
    
    1,055Total general and administrative expense
    
    $
    12,236
    
    
    $
    12,687
 26




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##### Table of Contents



Income Taxes
   27




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##### Table of Contents



Balance Sheet Analysis
  Restricted Cash
   Retained Interests in Securitizations
  June 30,
    
    December 31,2005
    
    2004(Dollars in thousands)Transaction:Bay View 2002-LJ-1 Owner Trust
    
    $
    14,828
    
    
    $
    15,622Bay View 2003-LJ-1 Owner Trust
    
    
    6,416
    
    
    
    7,014Total retained interests in securitizations
    
    $
    21,244
    
    
    $
    22,636
  28




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##### Table of Contents



Auto Installment Contracts and Other Loans Receivable
  June 30, 2005
    
    December 31, 2004(Dollars in thousands)Auto installment contracts held-for-sale
    
    $
    98,874
    
    
    $
    73,462Premiums, discounts and deferred fees and costs
    
    
    2,750
    
    
    
    1,559Lower-of-cost-or-market allowance on auto contracts
held-for-sale
    
    
    (79
    )
    
    
    Auto installment contracts held-for-sale, net
    
    
    101,545
    
    
    
    75,021Other loans held-for-sale:
    
    
    
    
    
    
    902Auto installment contracts and other loans held-for-sale, net
    
    
    101,545
    
    
    
    75,923Auto installment contracts held-for-investment
    
    
    193,523
    
    
    
    247,219Securitized auto installment contracts held-for-investment
    
    
    199,535
    
    
    
    Premiums, discounts, and deferred fees and costs, net
    
    
    10,142
    
    
    
    7,152Allowance for credit losses
    
    
    (3,272
    )
    
    
    (1,508
    )Auto installment contracts held-for-investment, net
    
    
    399,928
    
    
    
    252,863Auto installment contracts and other loans receivable, net
    
    $
    501,473
    
    
    $
    328,786
   Credit Quality
    29




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##### Table of Contents



Allowance for Credit Losses
  As of and For
    
    As of and For thethe Three Months
    
    Six Months
    
    As of and For theEnded
    
    Ended
    
    Year EndedJune 30, 2005
    
    June 30, 2005
    
    December 31, 2004(Dollars in thousands)Balance at beginning of period
    
    $
    2,013
    
    
    $
    1,508
    
    
    $
    Provision for credit losses
    
    
    1,793
    
    
    
    2,630
    
    
    
    1,612Net charge-offs
    
    
    (534
    )
    
    
    (866
    )
    
    
    (104
    )Balance at end of period
    
    $
    3,272
    
    
    $
    3,272
    
    
    $
    1,508
  Other Loans and Real Estate Owned
  30




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##### Table of Contents



Borrowings
     31




---



##### Table of Contents



Liquidity and Capital Resources
        32




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Asset/Liability Management
  Fixed-rate Auto Contracts
  Net Interest Income
   .
 Warehouse Credit Facility
  33




---



##### Table of Contents



34




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##### Table of Contents



Item 4. Controls and Procedures
     
    
    Derivative Accounting- Our internal controls intended to ensure the proper accounting
for derivatives (interest rate cap contracts) maintained by a special purpose trust in
connection with a $350 million warehouse credit facility provided to our wholly owned
subsidiary, Bay View Acceptance Corporation (BVAC), were not operating effectively. We
determined that we should have accounted for the derivatives in accordance with Statement
of Financial Accounting Standards No. 133 (SFAS 133), Accounting for Derivative
Instruments and Hedging Activities. Under SFAS 133, we are now recognizing the value of
the derivatives as an asset and record them at fair value, with any changes in fair value
recognized in earnings. We previously accounted for the derivatives as a debt issuance
cost of BVACs warehouse credit facility, which was amortized into our results of
operations.
    
    Insufficient Qualified Accounting Personnel- The above weakness indicated that a
continuing weakness existed at December 31, 2004, as reported in a Form 8-K Current Report
dated July 26, 2004, relating to insufficient qualified accounting personnel to identify
and resolve complex accounting issues on a timely basis and lack of appropriate resources
resulting in insufficient supervision and review of our financial reporting process.
    
    Third-Party Service Organizations- We were unable to assess the effectiveness of the
internal controls of two of BVACs third-party service organizations. The service
organizations processes are an integral part of BVACs auto installment loan process,
which is part of our internal control over financial reporting, specifically as to the
existence and valuation of auto installment contracts, interest and fee income. The
control deficiency did not result in a misstatement in our historical consolidated
financial statements; however, it could have resulted in a misstatement of auto installment
contracts, interest and fee income that would result in a material misstatement to our
annual or interim financial statements that might not be prevented or detected in a timely
manner.
 35




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##### Table of Contents



Remediation Efforts Related to the Material Weaknesses in Internal Controls
  
    
    Derivative Accounting We believe that the material weakness with respect to our
derivative accounting has been completely resolved through our adoption of SFAS 133 and
restatement of certain financial statements hereafter described. During the first quarter
of 2005, we announced the restatement of our financial statements for the first three
quarters of 2004 and publicly released the effect of these corrections on our financial
statements for each of the first three quarters of 2004. Our Form 10-Q Quarterly Report
filed on May 10, 2005 for the quarter ended March 31, 2005 included a restatement of our
financial statements for the quarter ended March 31, 2004, and our Form 10-Q/A Amended
Quarterly reports filed on May 10, 2005 for the quarters ended June 30, 2004 and September
30, 2004 included a restatement of our financial statements for those quarters.
    
    Insufficient Qualified Accounting Personnel- We have retained a qualified independent
advisory firm to provide guidance relating to the application of complex accounting
principles. We have also retained an interim controller to assist in day-to-day accounting
management and financial reporting. Management, including our Chief Executive Officer and
our Chief Financial Officer, is in the process of assessing whether the actions taken to
date are sufficient to resolve the material weakness in accounting personnel.
    
    Third-Party Service Organizations- We received one SAS 70 Type II report from one of
BVACs third party service organizations during the second quarter of 2005 and expect to
receive the other report during the fourth quarter of 2005. The SAS 70 Type II reports
allow us to assess the effectiveness of the internal controls of these organizations. We
believe that this material weakness will be resolved when we receive the second SAS 70 Type
II report and if the report is satisfactory to us.
 Limitations on the Effectiveness of Controls
    36




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Legal Proceedings
    
 Unregistered Sales of Equity Securities and Use of Proceeds
  
 Defaults Upon Senior Securities
  
 Submission of Matters to a Vote of Security Holders
  I.
    
    The election of five directors of Bay View Capital Corporation:
 
 
 
  For
    
    WithheldFred Dreher
    
    
    5,539,443
    
    
    
    896,892Roger Easley
    
    
    6,013,767
    
    
    
    422,568John Rose
    
    
    4,982,390
    
    
    
    1,453,945P.K. Chatterjee
    
    
    6,184,736
    
    
    
    251,599Daniel Porter
    
    
    5,594,166
    
    
    
    842,169
 37




---



##### Table of Contents



Other Information
  
 Exhibits
 10.1
    
    Amended and Restated Trust Agreement between Bay View Warehouse
Corporation, as Depositor and Wilmington Trust Company, as Owner Trustee, dated
as of June 20, 200510.2
    
    Contribution Agreement by and between Bay View Acceptance
Corporation, as Contributor, and Bay View Warehouse Corporation, as Depositor
dated as of June 20, 200510.3
    
    Custodian Agreement among Bay View Acceptance Corporation, as
Custodian, and Bay View 2005 Warehouse Trust, as Issuer and JPMorgan Chase Bank,
N.A., as Indenture Trustee, dated as of June 20, 200510.4
    
    Indenture by and between Bay View 2005 Warehouse Trust, as Issuer
and JPMorgan Chase Bank, N.A., as Indenture Trustee dated as of June 20, 2005,
$450,000,000 Bay View 2005 Warehouse Trust Automobile Receivables-Backed Notes,
Series 2005-110.5
    
    Note Purchase Agreement among Bay View Acceptance Corporation, (the
Contributor), Bay View 2005 Warehouse Trust, (the Issuer), Falcon Asset
Securitization Corporation and Fairway Finance Company, LLC, (the Initial
Purchasers), JPMorgan Chase Bank, N.A. and Harris Nesbit Corp., (the  Lender
Group Agents), JPMorgan Chase Bank, N.A. and Bank of Montreal, (the Financial
Institutions) and JPMorgan Chase Bank, N.A., (the Administrative Agent), dated
as of June 20, 200510.6
    
    Sale and Servicing Agreement by and among Bay View 2005 Warehouse
Trust, as Issuer, Bay View Warehouse Corporation, as Depositor, Bay View
Acceptance Corporation, as Servicer and as Contributor and JPMorgan Chase Bank,
N.A., as Indenture Trustee and Systems & Services Technologies, Inc., as Backup
Servicer dated as of June 20, 200531.1
    
    Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Rules 13a-14 and
15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of
200232.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of
2002
 38




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##### Table of Contents



SIGNATURES
  BAY VIEW CAPITAL CORPORATIONDATE: August 5, 2005
    
    BY:
    
    /s/ John OkuboJohn OkuboExecutive Vice President and Chief Financial Officer(Principal Financial and Accounting Officer)
 39