##### Table of Contents



UNITED STATESSECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q



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

For the quarterly period ended September 30, 2002

OR



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

For the transition period from______to_____

Commission file number 001-14879

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X
   No

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

|                                               |  |                                                  
|---------------------------------------------- |  | -------------------------------------------------
|Common Stock, Par Value $.01

(Title of Class) |  | Outstanding at October 31, 2002
62,769,676 shares

1



---

TABLE OF CONTENTS



|                              |                                                                                               |                                                                                                 |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | Item 1. Financial Statements                                                                 
|                              |                                                                                               | Consolidated Statement of Net Assets and Consolidated Statement of Financial Condition         
|                              |                                                                                               | Consolidated Statements of Operations and Comprehensive Income (Loss) and Changes in Net Assets
|                              |                                                                                               | Consolidated Statements of Stockholders Equity                                                
|                              |                                                                                               | Consolidated Statements of Cash Flows                                                          
|                              |                                                                                               | Notes to Consolidated Financial Statements                                                     
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                              | Item 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION   
|                              | Item 1. Legal Proceedings                                                                    
|                              | Item 2. Changes in Securities                                                                
|                              | Item 3. Defaults Upon Senior Securities                                                      
|                              | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                              | Item 5. Other Information                                                                    
|                              | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                   
|Exhibit 12                   



---



##### Table of Contents



FORM 10-Q
INDEX

BAY VIEW CAPITAL CORPORATION

|                                                                                              |                                                                                                                                                                                   |  |         |       | 
|--------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------- | ----- | 
|                                                                                              |                                                                                                                                                                                   |  | Page(s)
|                                                                                              |                                                                                                                                                                                   |  |        
|PART I. FINANCIAL INFORMATION                                                                 |                                                                                                                                                                                   |  |         |      
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Item 1. Financial Statements (Unaudited):                                                     |                                                                                                                                                                                   |  |         |      
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Consolidated Statement of Net Assets (Liquidation Basis) as of September 30, 2002
and Consolidated Statement of Financial Condition (Going Concern Basis) as of
December 31, 2001 |  |         | 4     | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Consolidated Statements of Operations and Comprehensive Income (Loss)                                                                                                             |  |         | 5-7   | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Consolidated Statements of Stockholders Equity                                                                                                                                   |  |         | 8     | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Consolidated Statements of Cash Flows                                                                                                                                             |  |         | 9-10  | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Notes to Consolidated Financial Statements                                                                                                                                        |  |         | 11-27 | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations |                                                                                                                                                                                   |  | 28-59   |      
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Item 3. Quantitative and Qualitative Disclosures About
Market Risk                            |                                                                                                                                                                                   |  | 60-63   |      
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Item 4. Controls and Procedures                                                               |                                                                                                                                                                                   |  | 63      |      
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|PART II. OTHER INFORMATION                                                                    |                                                                                                                                                                                   |  |         |      
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Other Information                                                                                                                                                                 |  |         | 64    | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Signatures                                                                                                                                                                        |  |         | 65    | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002                                                            |  |         | 65    | 

2



---



##### Table of Contents



Forward-Looking Statements

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



| |  | our ability to remain in compliance with written regulatory agreements with government agencies;                                                            
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the demand for our products;                                                                                                                                
| 
| |  | actions taken by our competitors;                                                                                                                           
| 
| |  | tax rate changes, new tax laws and revised tax law interpretations;                                                                                         
| 
| |  | adverse changes occurring in the securities markets;                                                                                                        
| 
| |  | inflation and changes in prevailing interest rates that reduce our margins or the fair value of the financial instruments
we hold;                          
| 
| |  | economic or business conditions, either nationally or in our market areas, that are worse than we expect;                                                   
| 
| |  | legislative or regulatory changes that adversely affect our business;                                                                                       
| 
| |  | the timing, impact and other uncertainties of our asset sales or securitizations;                                                                           
| 
| |  | technological changes that are more difficult or expensive than we expect;                                                                                  
| 
| |  | increases in delinquencies and defaults by our borrowers and other loan delinquencies;                                                                      
| 
| |  | our inability to sustain or improve the performance of our subsidiaries;                                                                                    
| 
| |  | our inability to achieve the financial goals in our strategic plans, including any financial goals related to both
contemplated and consummated asset sales;
| 
| |  | the outcome of lawsuits or regulatory disputes;                                                                                                             
| 
| |  | credit and other risks of lending activities; and                                                                                                           
| 
| |  | our inability to use the net operating loss carryforwards and other net deferred tax assets that we currently have.                                         

Also, a number of events or factors could affect our plan of dissolution
and stockholder liquidity distributions per share and the timing of
distributions, including:



| |  | delays in obtaining regulatory approval by the Federal Reserve Bank and the Office of the Comptroller of the Currency;                                                                                         
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | unforeseen delays in our asset sales;                                                                                                                                                                          
| 
| |  | realization of deferred tax assets could be less than currently anticipated;                                                                                                                                   
| 
| |  | possible stockholder liability if we make stockholder distributions but do not establish adequate reserves for all of our
expenses and liabilities as part of our liquidation;                                 
| 
| |  | the Company or the Bank may not be able to sell some of the assets we currently anticipate will be sold or at prices we
project, including the expected (deferred) gain from the sale of the auto business; and
| 
| |  | our liabilities and expenses could be more than currently anticipated resulting in an increase in the reserve for estimated
costs during the period of liquidation.                                            

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

3



---



##### Table of Contents






PART I. FINANCIAL INFORMATION




Item 1. Financial Statements




Bay View Capital Corporation and Subsidiaries
Consolidated Statement of Net Assets (Liquidation Basis) as of September 30, 2002 and
Consolidated Statement of Financial Condition (Going Concern Basis) as of December 31, 2001
(Unaudited)

|                                                                                                                       |                                                                                                                                                                                           |                                                              |           |                        |   |                     |           |          |      |  
|---------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | --------- | ---------------------- | - | ------------------- | --------- | -------- | ---- | -
|                                                                                                                       |                                                                                                                                                                                           |                                                              |           | September 30, 2002     |   | December 31, 2001  
|                                                                                                                       |                                                                                                                                                                                           |                                                              |           |                        |   |                    
|                                                                                                                       |                                                                                                                                                                                           |                                                              |           | Liquidation Basis      |   | Going Concern Basis
|                                                                                                                       |                                                                                                                                                                                           |                                                              |           |                        |   |                    
|                                                                                                                       |                                                                                                                                                                                           |                                                              |           | (Dollars in thousands)
|ASSETS                                                                                                                 |                                                                                                                                                                                           |                                                              |           |                        |   |                     |           |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Cash and cash equivalents:                                                                                             |                                                                                                                                                                                           |                                                              |           |                        |   |                     |           |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Cash and due from depository institutions                                                                                                                                                 |                                                              | $         | 93,560                 |   |                     | $         | 357,008  |     
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Short-term investments                                                                                                                                                                    |                                                              |           | 2,452,936              |   |                     |           | 164,380  |     
|                                                                                                                       |                                                                                                                                                                                           |                                                              |           |                        |   |                     |           |          |     
|                                                                                                                       |                                                                                                                                                                                           |                                                              | 2,546,496 |                        |   |                     | 521,388   |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Securities available-for-sale:                                                                                         |                                                                                                                                                                                           |                                                              |           |                        |   |                     |           |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Investment securities                                                                                                                                                                     |                                                              |           | 55,661                 |   |                     |           | 98,980   |     
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Mortgage-backed securities                                                                                                                                                                |                                                              |           | 119,958                |   |                     |           | 278,891  |     
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Loans and leases held-for-sale                                                                                         |                                                                                                                                                                                           |                                                              | 749,394   |                        |   |                     | 40,608    |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Loans and leases held-for-investment, net of allowance for loan and lease
losses of $49.8 million at December 31, 2001 |                                                                                                                                                                                           |                                                              |          |                        |   |                     | 2,326,787 |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Investment in operating lease assets, net                                                                              |                                                                                                                                                                                           |                                                              | 228,544   |                        |   |                     | 339,349   |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Investment in stock of the Federal Home Loan Bank of San Francisco                                                     |                                                                                                                                                                                           |                                                              | 15,868    |                        |   |                     | 24,157    |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Investment in stock of the Federal Reserve Bank                                                                        |                                                                                                                                                                                           |                                                              | 13,304    |                        |   |                     | 11,866    |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Real estate owned, net                                                                                                 |                                                                                                                                                                                           |                                                              | 4,576     |                        |   |                     | 9,462     |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Premises and equipment, net                                                                                            |                                                                                                                                                                                           |                                                              | 10,740    |                        |   |                     | 13,145    |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Intangible assets                                                                                                      |                                                                                                                                                                                           |                                                              |          |                        |   |                     | 123,573   |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Income taxes, net                                                                                                      |                                                                                                                                                                                           |                                                              |          |                        |   |                     | 174,360   |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Other assets                                                                                                           |                                                                                                                                                                                           |                                                              | 151,932   |                        |   |                     | 51,539    |         
|                                                                                                                       |                                                                                                                                                                                           |                                                              |           |                        |   |                     |           |          |     
|Total assets                                                                                                           |                                                                                                                                                                                           | $                                                            | 3,896,473 |                        |   | $                   | 4,014,105 |         
|                                                                                                                       |                                                                                                                                                                                           |                                                              |           |                        |   |                     |           |         
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                   |                                                                                                                                                                                           |                                                              |           |                        |   |                     |           |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Deposits:                                                                                                              |                                                                                                                                                                                           |                                                              |           |                        |   |                     |           |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Transaction accounts, net of $259,145 deposit premium at September 30, 2002                                                                                                               | $                                                            | 1,520,307 |                        |   | $                   | 1,950,699 |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Retail certificates of deposit, net of $204,389 deposit premium at
September 30, 2002                                                                                                     |                                                              | 1,263,427 |                        |   |                     | 1,284,228 |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Brokered certificates of deposit                                                                                                                                                          |                                                              | 251,367   |                        |   |                     |          |         
|                                                                                                                       |                                                                                                                                                                                           |                                                              |           |                        |   |                     |           |          |     
|                                                                                                                       |                                                                                                                                                                                           |                                                              | 3,035,101 |                        |   |                     | 3,234,927 |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Subordinated Notes, net                                                                                                |                                                                                                                                                                                           |                                                              | 154,563   |                        |   |                     | 149,632   |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Other borrowings                                                                                                       |                                                                                                                                                                                           |                                                              | 77,828    |                        |   |                     | 137,536   |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Income taxes, net                                                                                                      |                                                                                                                                                                                           |                                                              | 14,531    |                        |   |                     |          |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Deferred gain                                                                                                          |                                                                                                                                                                                           |                                                              | 12,817    |                        |   |                     |          |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Other liabilities                                                                                                      |                                                                                                                                                                                           |                                                              | 44,164    |                        |   |                     | 65,823    |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Reserve for estimated costs during the period of liquidation                                                           |                                                                                                                                                                                           |                                                              | 53,794    |                        |   |                     |          |         
|                                                                                                                       |                                                                                                                                                                                           |                                                              |           |                        |   |                     |           |         
|Total liabilities                                                                                                      |                                                                                                                                                                                           |                                                              | 3,392,798 |                        |   |                     | 3,587,918 |         
|                                                                                                                       |                                                                                                                                                                                           |                                                              |           |                        |   |                     |           |         
|Guaranteed Preferred Beneficial Interest in our Junior
Subordinated Debentures (Capital Securities)                  |                                                                                                                                                                                           |                                                              | 90,000    |                        |   |                     | 90,000    |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Stockholders equity:                                                                                                  |                                                                                                                                                                                           |                                                              |           |                        |   |                     |           |         
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Series preferred stock; authorized, 7,000,000 shares; outstanding, none                                                                                                                   |                                                              |           |                       |   |                     |           |         |     
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Common stock ($.01 par value); authorized, 80,000,000 shares;
issued, 2002 - 62,818,527 shares; 2001 - 62,627,980 shares;
outstanding, 2002 - 62,769,676 shares; 2001 - 62,579,129 shares |                                                              |           |                       |   |                     |           | 626      |     
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Additional paid-in capital                                                                                                                                                                |                                                              |           |                       |   |                     |           | 595,258  |     
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Accumulated deficit                                                                                                                                                                       |                                                              |           |                       |   |                     |           | (258,047 | )   
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Treasury stock, at cost; 2001 - 48,851 shares                                                                                                                                             |                                                              |           |                       |   |                     |           | (808     | )   
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Accumulated other comprehensive income (loss):                                                                                                                                            |                                                              |           |                        |   |                     |           |          |     
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       |                                                                                                                                                                                           | Unrealized gain on securities available-for-sale, net of tax |           |                        |  |                     |           |          | 523  |  
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       |                                                                                                                                                                                           | Minimum pension liability adjustment, net of tax             |           |                        |  |                     |           |          | (294 | )
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                       | Debt of Employee Stock Ownership Plan                                                                                                                                                     |                                                              |           |                       |   |                     |           | (1,071   | )   
|                                                                                                                       |                                                                                                                                                                                           |                                                              |           |                        |   |                     |           |         
|Total stockholders equity                                                                                             |                                                                                                                                                                                           |                                                              |          |                        |   |                     | 336,187   |         
|                                                                                                                       |                                                                                                                                                                                           |                                                              |           |                        |   |                     |           |          |     
|Total liabilities and stockholders equity                                                                             |                                                                                                                                                                                           | $                                                            | 3,482,798 |                        |   | $                   | 4,014,105 |         
|                                                                                                                       |                                                                                                                                                                                           |                                                              |           |                        |   |                     |           |         
|Net assets in liquidation                                                                                              |                                                                                                                                                                                           | $                                                            | 413,675   |                        |   |                     |           |         
|                                                                                                                       |                                                                                                                                                                                           |                                                              |           |                        |   |                     |           |         

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

4



---



##### Table of Contents






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

|                                                                   |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |        |       | 
|------------------------------------------------------------------ | ----------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------- | ------- | ------------------------------------------------ | - | ------------------- | ------ | ------ | ----- | 
|                                                                   |                                                 |                                                                                                                                        |         | For the Three Months Ended                      
|                                                                   |                                                 |                                                                                                                                        |         |                                                 
|                                                                   |                                                 |                                                                                                                                        |         | September 30, 2002                               |   | September 30, 2001 
|                                                                   |                                                 |                                                                                                                                        |         |                                                  |   |                    
|                                                                   |                                                 |                                                                                                                                        |         | Liquidation Basis                                |   | Going Concern Basis
|                                                                   |                                                 |                                                                                                                                        |         |                                                  |   |                    
|                                                                   |                                                 |                                                                                                                                        |         | (Amounts in thousands, except per share amounts)
|Interest income:                                                   |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Interest on loans and leases                    |                                                                                                                                        | $       | 30,174                                           |   |                     | $      | 55,156 |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Interest on mortgage-backed securities          |                                                                                                                                        |         | 1,749                                            |   |                     |        | 4,231  |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Interest and dividends on investment securities |                                                                                                                                        |         | 7,140                                            |   |                     |        | 5,942  |      
|                                                                   |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |       
|                                                                   |                                                 |                                                                                                                                        | 39,063  |                                                  |   |                     | 65,329 |       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Interest expense:                                                  |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Interest on deposits                            |                                                                                                                                        |         | 15,978                                           |   |                     |        | 30,691 |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Interest on borrowings                          |                                                                                                                                        |         | 789                                              |   |                     |        | 3,151  |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Interest on Subordinated Notes                  |                                                                                                                                        |         | 3,716                                            |   |                     |        | 3,716  |      
|                                                                   |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |       
|                                                                   |                                                 |                                                                                                                                        | 20,483  |                                                  |   |                     | 37,558 |       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Net interest income                                                |                                                 |                                                                                                                                        | 18,580  |                                                  |   |                     | 27,771 |       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Provision for losses on loans and leases                           |                                                 |                                                                                                                                        | 2,200   |                                                  |   |                     | 3,257  |       
|                                                                   |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |       
|Net interest income after provision for losses on loans and leases |                                                 |                                                                                                                                        | 16,380  |                                                  |   |                     | 24,514 |       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Noninterest income:                                                |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Leasing income                                  |                                                                                                                                        |         | 16,886                                           |   |                     |        | 22,675 |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Loan fees and charges                           |                                                                                                                                        |         | 1,085                                            |   |                     |        | 1,106  |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Loan servicing income                           |                                                                                                                                        |         | 250                                              |   |                     |        | 289    |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Account fees                                    |                                                                                                                                        |         | 1,939                                            |   |                     |        | 2,015  |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Sales commissions                               |                                                                                                                                        |         | 1,463                                            |   |                     |        | 1,623  |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Gain on sale of assets and liabilities, net     |                                                                                                                                        |         | 18,090                                           |   |                     |        | 2,251  |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Other, net                                      |                                                                                                                                        |         | 270                                              |   |                     |        | 283    |      
|                                                                   |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |       
|                                                                   |                                                 |                                                                                                                                        | 39,983  |                                                  |   |                     | 30,242 |       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Noninterest expense:                                               |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | General and administrative                      |                                                                                                                                        |         | 31,673                                           |   |                     |        | 37,027 |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Restructuring expenses                          |                                                                                                                                        |         |                                                 |   |                     |        | (1,812 | )    
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Revaluation of franchise-related assets         |                                                                                                                                        |         |                                                 |   |                     |        | (1,382 | )    
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Leasing expenses                                |                                                                                                                                        |         | 12,911                                           |   |                     |        | 16,567 |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Dividend expense on Capital Securities          |                                                                                                                                        |         | 2,674                                            |   |                     |        | 2,287  |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Real estate owned operations, net               |                                                                                                                                        |         | 88                                               |   |                     |        | 261    |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Provision for losses on real estate owned       |                                                                                                                                        |         | 62                                               |   |                     |        |       |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Amortization of intangible assets               |                                                                                                                                        |         | 331                                              |   |                     |        | 2,804  |      
|                                                                   |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |       
|                                                                   |                                                 |                                                                                                                                        | 47,739  |                                                  |   |                     | 55,752 |       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Income (loss) from operations                                      |                                                 |                                                                                                                                        | 8,624   |                                                  |   |                     | (996   | )     
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Adjustment for liquidation basis                                   |                                                 |                                                                                                                                        | 266,510 |                                                  |   |                     |       |       
|                                                                   |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |       
|Income (loss) before income tax expense (benefit)                  |                                                 |                                                                                                                                        | 275,134 |                                                  |   |                     | (996   | )     
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Income tax expense (benefit)                                       |                                                 |                                                                                                                                        | 187,385 |                                                  |   |                     | (364   | )     
|                                                                   |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |       
|Net income (loss)                                                  |                                                 | $                                                                                                                                      | 87,749  |                                                  |   | $                   | (632   | )     
|                                                                   |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |       
|Basic earnings (loss) per share                                    |                                                 | $                                                                                                                                      | 1.40    |                                                  |   | $                   | (0.01  | )     
|                                                                   |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |       
|Diluted earnings (loss) per share                                  |                                                 | $                                                                                                                                      | 1.39    |                                                  |   | $                   | (0.01  | )     
|                                                                   |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |       
|Weighted-average basic shares outstanding                          |                                                 |                                                                                                                                        | 62,777  |                                                  |   |                     | 62,608 |       
|                                                                   |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |       
|Weighted-average diluted shares outstanding                        |                                                 |                                                                                                                                        | 62,963  |                                                  |   |                     | 62,608 |       
|                                                                   |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |       
|Net income (loss)                                                  |                                                 | $                                                                                                                                      | 87,749  |                                                  |   | $                   | (632   | )     
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Other comprehensive income (loss), net of tax:                     |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   |                                                 | Change in unrealized gain on securities available-for-sale, net
of tax expense of $1,420 for the three months ended September
30, 2001 |         |                                                  |  |                     |        |        | 2,014 | 
|                                                                   |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |        |      
|Comprehensive income                                               |                                                 | $                                                                                                                                      | 87,749  |                                                  |   | $                   | 1,382  |       
|                                                                   |                                                 |                                                                                                                                        |         |                                                  |   |                     |        |       

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

5



---



##### Table of Contents



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

|                                                                                             |  |                                                  |         |                     |  |   |          |  
|-------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ------- | ------------------- |  | - | -------- | -
|                                                                                             |  | For the Nine Months Ended                       
|                                                                                             |  |                                                 
|                                                                                             |  | September 30,                                    |         | September 30,      
|                                                                                             |  | 2002                                             |         | 2001               
|                                                                                             |  |                                                  |         |                    
|                                                                                             |  | Liquidation Basis                                |         | Going Concern Basis
|                                                                                             |  |                                                  |         |                    
|                                                                                             |  | (Amounts in thousands, except per share amounts)
|Interest income:                                                                             |  |                                                  |         |                     |  |   |          |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Interest on loans and leases                                                                 |  | $                                                | 122,208 |                     |  | $ | 192,698  |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Interest on mortgage-backed securities                                                       |  |                                                  | 8,314   |                     |  |   | 27,852   |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Interest and dividends on investment securities                                              |  |                                                  | 14,717  |                     |  |   | 23,333   |  
|                                                                                             |  |                                                  |         |                     |  |   |          |  
|                                                                                             |  |                                                  | 145,239 |                     |  |   | 243,883  |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Interest expense:                                                                            |  |                                                  |         |                     |  |   |          |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Interest on deposits                                                                         |  |                                                  | 44,509  |                     |  |   | 114,065  |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Interest on borrowings                                                                       |  |                                                  | 4,413   |                     |  |   | 28,673   |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Interest on Subordinated Notes                                                               |  |                                                  | 11,146  |                     |  |   | 11,146   |  
|                                                                                             |  |                                                  |         |                     |  |   |          |  
|                                                                                             |  |                                                  | 60,068  |                     |  |   | 153,884  |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Net interest income                                                                          |  |                                                  | 85,171  |                     |  |   | 89,999   |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Provision for losses on loans and leases                                                     |  |                                                  | 10,700  |                     |  |   | 62,990   |  
|                                                                                             |  |                                                  |         |                     |  |   |          |  
|Net interest income after provision for losses on loans and leases                           |  |                                                  | 74,471  |                     |  |   | 27,009   |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Noninterest income:                                                                          |  |                                                  |         |                     |  |   |          |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Leasing income                                                                               |  |                                                  | 56,188  |                     |  |   | 70,682   |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Loan fees and charges                                                                        |  |                                                  | 3,571   |                     |  |   | 4,195    |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Loan servicing income                                                                        |  |                                                  | 663     |                     |  |   | 3,654    |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Account fees                                                                                 |  |                                                  | 5,858   |                     |  |   | 5,937    |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Sales commissions                                                                            |  |                                                  | 5,247   |                     |  |   | 4,421    |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Gain (loss) on sale of assets and liabilities, net                                           |  |                                                  | 18,625  |                     |  |   | (9,845   | )
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Other, net                                                                                   |  |                                                  | 1,413   |                     |  |   | 1,356    |  
|                                                                                             |  |                                                  |         |                     |  |   |          |  
|                                                                                             |  |                                                  | 91,565  |                     |  |   | 80,400   |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Noninterest expense:                                                                         |  |                                                  |         |                     |  |   |          |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|General and administrative                                                                   |  |                                                  | 93,001  |                     |  |   | 117,150  |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Litigation settlement expense                                                                |  |                                                  | 13,100  |                     |  |   |         |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Restructuring expenses                                                                       |  |                                                  |        |                     |  |   | 8,214    |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Revaluation of franchise-related assets                                                      |  |                                                  |        |                     |  |   | 68,646   |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Leasing expenses                                                                             |  |                                                  | 43,984  |                     |  |   | 61,610   |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Dividend expense on Capital Securities                                                       |  |                                                  | 7,873   |                     |  |   | 6,862    |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Real estate owned operations, net                                                            |  |                                                  | 956     |                     |  |   | 252      |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Provision for losses on real estate owned                                                    |  |                                                  | 266     |                     |  |   |         |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Amortization of intangible assets                                                            |  |                                                  | 993     |                     |  |   | 8,476    |  
|                                                                                             |  |                                                  |         |                     |  |   |          |  
|                                                                                             |  |                                                  | 160,173 |                     |  |   | 271,210  |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Income (loss) from operations                                                                |  |                                                  | 5,863   |                     |  |   | (163,801 | )
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Adjustment for liquidation basis                                                             |  |                                                  | 266,510 |                     |  |   |         |  
|                                                                                             |  |                                                  |         |                     |  |   |          |  
|Income (loss) before income tax expense (benefit)                                            |  |                                                  | 272,373 |                     |  |   | (163,801 | )
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Income tax expense (benefit)                                                                 |  |                                                  | 181,792 |                     |  |   | (59,853  | )
|                                                                                             |  |                                                  |         |                     |  |   |          |  
|Income (loss) before cumulative effect of change in accounting principle                     |  |                                                  | 90,581  |                     |  |   | (103,948 | )
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Cumulative effect of change in accounting principle, net of
applicable taxes of $2.3 million |  |                                                  | (18,920 | )                   |  |   |         |  
|                                                                                             |  |                                                  |         |                     |  |   |          |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Net income (loss)                                                                            |  | $                                                | 71,661  |                     |  | $ | (103,948 | )
|                                                                                             |  |                                                  |         |                     |  |   |          |  

6



---



##### Table of Contents



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

|                                                                                             |                                                                                                                                             |   |                                                  |   |                     |   |          |       | 
|-------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------------------------------------------ | - | ------------------- | - | -------- | ----- | 
|                                                                                             |                                                                                                                                             |   | For the Nine Months Ended                       
|                                                                                             |                                                                                                                                             |   |                                                 
|                                                                                             |                                                                                                                                             |   | September 30,                                    |   | September 30,      
|                                                                                             |                                                                                                                                             |   | 2002                                             |   | 2001               
|                                                                                             |                                                                                                                                             |   |                                                  |   |                    
|                                                                                             |                                                                                                                                             |   | Liquidation Basis                                |   | Going Concern Basis
|                                                                                             |                                                                                                                                             |   |                                                  |   |                    
|                                                                                             |                                                                                                                                             |   | (Amounts in thousands, except per share amounts)
|Basic earnings (loss) per share before cumulative effect of change in
accounting principle   |                                                                                                                                             | $ | 1.44                                             |   |                     | $ | (2.22    | )    
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Cumulative effect of change in accounting principle, net                                     |                                                                                                                                             |   | (0.30                                            | ) |                     |   |         |      
|                                                                                             |                                                                                                                                             |   |                                                  |   |                     |   |          |      
|Net basic earnings (loss) per share                                                          |                                                                                                                                             | $ | 1.14                                             |   |                     | $ | (2.22    | )    
|                                                                                             |                                                                                                                                             |   |                                                  |   |                     |   |          |      
|Diluted earnings (loss) per share before cumulative effect of change in
accounting principle |                                                                                                                                             | $ | 1.43                                             |   |                     | $ | (2.22    | )    
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Cumulative effect of change in accounting principle, net                                     |                                                                                                                                             |   | (0.30                                            | ) |                     |   |         |      
|                                                                                             |                                                                                                                                             |   |                                                  |   |                     |   |          |      
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Net diluted earnings (loss) per share                                                        |                                                                                                                                             | $ | 1.13                                             |   |                     | $ | (2.22    | )    
|                                                                                             |                                                                                                                                             |   |                                                  |   |                     |   |          |      
|Weighted-average basic shares outstanding                                                    |                                                                                                                                             |   | 62,724                                           |   |                     |   | 46,914   |      
|                                                                                             |                                                                                                                                             |   |                                                  |   |                     |   |          |      
|Weighted-average diluted shares outstanding                                                  |                                                                                                                                             |   | 63,135                                           |   |                     |   | 46,914   |      
|                                                                                             |                                                                                                                                             |   |                                                  |   |                     |   |          |      
|Net income (loss)                                                                            |                                                                                                                                             | $ | 71,661                                           |   |                     | $ | (103,948 | )    
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Other comprehensive income (loss), net of tax:                                               |                                                                                                                                             |   |                                                  |   |                     |   |          |      
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                             | Change in unrealized gain or loss on securities available-for-sale,
net of tax expense of $808 for the nine months ended September 30,
2001 |   |                                                  |  |                     |   |          | 1,146 | 
|                                                                                             |                                                                                                                                             |   |                                                  |   |                     |   |          |      
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Comprehensive income (loss)                                                                  |                                                                                                                                             | $ | 71,661                                           |   |                     | $ | (102,802 | )    
|                                                                                             |                                                                                                                                             |   |                                                  |   |                     |   |          |      

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

7



---



##### Table of Contents






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

|                                                                                               |  |                                                  |        |        |  |           |      |         |  |             |     |            |  |            |          |             |  |           |          |               |  |                |        |           |  |            |      |         |  |          |      |   |  |   |        |   |  |   |          |  
|---------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ------ | ------ |  | --------- | ---- | ------- |  | ----------- | --- | ---------- |  | ---------- | -------- | ----------- |  | --------- | -------- | ------------- |  | -------------- | ------ | --------- |  | ---------- | ---- | ------- |  | -------- | ---- | - |  | - | ------ | - |  | - | -------- | -
|                                                                                               |  |                                                  |        |        |  |           |      |         |  |             |     |            |  |            |          |             |  |           |          |               |  |                |        |           |  | Unrealized |      |         |  |          |      |   |  |   |        |   |  |  
|                                                                                               |  |                                                  |        |        |  |           |      |         |  |             |     |            |  |            |          |             |  |           |          |               |  |                |        |           |  | Gain on    |      | Minimum |  | Debt of  |      |   |  |  
|                                                                                               |  |                                                  |        |        |  |           |      |         |  |             |     |            |  |            |          |             |  |           |          |               |  |                |        |           |  | Securities |      | Pension |  | Employee |      |   |  |  
|                                                                                               |  | Number                                           |        |        |  |           |      |         |  |             |     | Additional |  |            |          |             |  |           |          |               |  | Available-for- |        | Liability |  | Stock      |      | Total  
|                                                                                               |  | of Shares                                        |        | Common |  | Preferred |      | Paid-in |  | Accumulated |     | Treasury   |  | Sale,      |          | Adjustment, |  | Ownership |          | Stockholders'
|                                                                                               |  | Issued                                           |        | Stock  |  | Stock     |      | Capital |  | Deficit     |     | Stock      |  | Net of Tax |          | Net of Tax  |  | Plan      |          | Equity       
|                                                                                               |  |                                                  |        |        |  |           |      |         |  |             |     |            |  |            |          |             |  |           |          |              
|                                                                                               |  | (Amounts in thousands, except per share amounts)
|Balance at December 31, 2000                                                                   |  |                                                  | 32,640 |        |  | $         | 326  |         |  | $           |    |            |  | $          | 456,045  |             |  | $         | (156,877 | )             |  | $              | (1,081 | )         |  | $          | 10   |         |  | $        |     |   |  | $ | (574   | ) |  | $ | 297,849  |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Exercise of stock options, including tax benefits                                              |  |                                                  | 20     |        |  |           |     |         |  |             |    |            |  |            | 94       |             |  |           |         |               |  |                |       |           |  |            |     |         |  |          |     |   |  |   |       |   |  |   | 94       |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Distribution of directors retirement plan shares                                              |  |                                                  | 10     |        |  |           |     |         |  |             |    |            |  |            | 73       |             |  |           |         |               |  |                |       |           |  |            |     |         |  |          |     |   |  |   |       |   |  |   | 73       |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Distribution of restricted shares                                                              |  |                                                  |       |        |  |           |     |         |  |             |    |            |  |            | (273     | )           |  |           |         |               |  |                | 273    |           |  |            |     |         |  |          |     |   |  |   |       |   |  |   |         |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Proceeds from issuance of common stock, net of
expenses of $2.0 million                        |  |                                                  | 23,967 |        |  |           | 240  |         |  |             |    |            |  |            | 107,760  |             |  |           |         |               |  |                |       |           |  |            |     |         |  |          |     |   |  |   |       |   |  |   | 108,000  |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Proceeds from issuance of 5,991,369 shares of
preferred stock, net of expenses of $1.1 million |  |                                                  |       |        |  |           |     |         |  |             | 60  |            |  |            | 26,340   |             |  |           |         |               |  |                |       |           |  |            |     |         |  |          |     |   |  |   |       |   |  |   | 26,400   |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Conversion of preferred stock to common stock                                                  |  |                                                  | 5,991  |        |  |           | 60   |         |  |             | (60 | )          |  |            |         |             |  |           |         |               |  |                |       |           |  |            |     |         |  |          |     |   |  |   |       |   |  |   |         |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Expense recognized on stock options with below
market strike price                             |  |                                                  |       |        |  |           |     |         |  |             |    |            |  |            | 5,219    |             |  |           |         |               |  |                |       |           |  |            |     |         |  |          |     |   |  |   |       |   |  |   | 5,219    |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Unrealized gain on securities available-for-sale,
net of tax                                   |  |                                                  |       |        |  |           |     |         |  |             |    |            |  |            |         |             |  |           |         |               |  |                |       |           |  |            | 513  |         |  |          |     |   |  |   |       |   |  |   | 513      |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Minimum pension liability adjustment, net of tax                                               |  |                                                  |       |        |  |           |     |         |  |             |    |            |  |            |         |             |  |           |         |               |  |                |       |           |  |            |     |         |  |          | (294 | ) |  |   |       |   |  |   | (294     | )
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Change in debt of ESOP                                                                         |  |                                                  |       |        |  |           |     |         |  |             |    |            |  |            |         |             |  |           |         |               |  |                |       |           |  |            |     |         |  |          |     |   |  |   | (497   | ) |  |   | (497     | )
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Net loss                                                                                       |  |                                                  |       |        |  |           |     |         |  |             |    |            |  |            |         |             |  |           | (101,170 | )             |  |                |       |           |  |            |     |         |  |          |     |   |  |   |       |   |  |   | (101,170 | )
|                                                                                               |  |                                                  |        |        |  |           |      |         |  |             |     |            |  |            |          |             |  |           |          |               |  |                |        |           |  |            |      |         |  |          |      |   |  |   |        |   |  |   |          |  
|Balance at December 31, 2001                                                                   |  |                                                  | 62,628 |        |  |           | 626  |         |  |             |    |            |  |            | 595,258  |             |  |           | (258,047 | )             |  |                | (808   | )         |  |            | 523  |         |  |          | (294 | ) |  |   | (1,071 | ) |  |   | 336,187  |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Exercise of stock options, including tax benefits                                              |  |                                                  | 121    |        |  |           | 2    |         |  |             |    |            |  |            | 568      |             |  |           |         |               |  |                |       |           |  |            |     |         |  |          |     |   |  |   |       |   |  |   | 570      |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Distribution of directors retirement plan shares                                              |  |                                                  | 24     |        |  |           |     |         |  |             |    |            |  |            | 165      |             |  |           |         |               |  |                |       |           |  |            |     |         |  |          |     |   |  |   |       |   |  |   | 165      |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Exercise of stock warrants                                                                     |  |                                                  | 45     |        |  |           |     |         |  |             |    |            |  |            | 212      |             |  |           |         |               |  |                |       |           |  |            |     |         |  |          |     |   |  |   |       |   |  |   | 212      |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Expense recognized on stock options with below
market strike price                             |  |                                                  |       |        |  |           |     |         |  |             |    |            |  |            | 4,033    |             |  |           |         |               |  |                |       |           |  |            |     |         |  |          |     |   |  |   |       |   |  |   | 4,033    |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Change in debt of ESOP                                                                         |  |                                                  |       |        |  |           |     |         |  |             |    |            |  |            |         |             |  |           |         |               |  |                |       |           |  |            |     |         |  |          |     |   |  |   | 1,071  |   |  |   | 1,071    |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Net income                                                                                     |  |                                                  |       |        |  |           |     |         |  |             |    |            |  |            |         |             |  |           | 71,661   |               |  |                |       |           |  |            |     |         |  |          |     |   |  |   |       |   |  |   | 71,661   |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Other                                                                                          |  |                                                  |       |        |  |           |     |         |  |             |    |            |  |            |         |             |  |           | 5        |               |  |                |       |           |  |            |     |         |  |          |     |   |  |   |       |   |  |   | 5        |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Liquidation adjustment on securities
available-for-sale, net of tax                            |  |                                                  |       |        |  |           |     |         |  |             |    |            |  |            |         |             |  |           |         |               |  |                |       |           |  |            | (523 | )       |  |          |     |   |  |   |       |   |  |   | (523     | )
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Liquidation adjustment on pension liability                                                    |  |                                                  |       |        |  |           |     |         |  |             |    |            |  |            |         |             |  |           |         |               |  |                |       |           |  |            |     |         |  |          | 294  |   |  |   |       |   |  |   | 294      |  
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Transfer of stockholders equity to net assets in
liquidation                                  |  |                                                  |       |        |  |           | (628 | )       |  |             |    |            |  |            | (600,236 | )           |  |           | 186,381  |               |  |                | 808    |           |  |            |     |         |  |          |     |   |  |   |       |   |  |   | (413,675 | )
|                                                                                               |  |                                                  |        |        |  |           |      |         |  |             |     |            |  |            |          |             |  |           |          |               |  |                |        |           |  |            |      |         |  |          |      |   |  |   |        |   |  |   |          |  
|Balance at September 30, 2002                                                                  |  |                                                  | 62,818 |        |  | $         |     |         |  | $           |    |            |  | $          |         |             |  | $         |         |               |  | $              |       |           |  | $          |     |         |  | $        |     |   |  | $ |       |   |  | $ |         |  
|                                                                                               |  |                                                  |        |        |  |           |      |         |  |             |     |            |  |            |          |             |  |           |          |               |  |                |        |           |  |            |      |         |  |          |      |   |  |   |        |   |  |   |          |  

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

8



---



##### Table of Contents






Bay View Capital Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)

|                                                                                     |                                                                       |   |                           |          |               |   |          |         |  
|------------------------------------------------------------------------------------ | --------------------------------------------------------------------- | - | ------------------------- | -------- | ------------- | - | -------- | ------- | -
|                                                                                     |                                                                       |   | For the Nine Months Ended
|                                                                                     |                                                                       |   |                          
|                                                                                     |                                                                       |   | September 30,             |          | September 30,
|                                                                                     |                                                                       |   | 2002                      |          | 2001         
|                                                                                     |                                                                       |   |                           |          |              
|                                                                                     |                                                                       |   | (Dollars in thousands)   
|CASH FLOWS FROM OPERATING ACTIVITIES                                                 |                                                                       |   |                           |          |               |   |          |        
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Net income (loss)                                                                    |                                                                       | $ | 71,661                    |          |               | $ | (103,948 | )      
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Adjustments to reconcile net income (loss) to net cash
used in operating activities: |                                                                       |   |                           |          |               |   |          |        
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Amortization of intangible assets                                     |   |                           | 993      |               |   |          | 8,476   |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Provision for losses on loans and leases and real estate owned        |   |                           | 10,966   |               |   |          | 62,990  |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Depreciation and amortization of premises and equipment               |   |                           | 2,703    |               |   |          | 3,761   |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Depreciation and amortization of investment in operating lease assets |   |                           | 35,206   |               |   |          | 43,623  |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Amortization of premiums, net of discount accretion                   |   |                           | 6,356    |               |   |          | 7,441   |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Non-cash
compensation expense                                         |   |                           | 4,033    |               |   |          | 4,260   |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Revaluation of franchise-related assets                               |   |                           |         |               |   |          | 68,646  |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | (Gain) loss on sale of assets and liabilities, net                    |   |                           | (18,625  | )             |   |          | 9,845   |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Decrease (increase) in other assets                                   |   |                           | 65,718   |               |   |          | (65,857 | )
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Increase (decrease) in other liabilities                              |   |                           | 10,184   |               |   |          | (27,781 | )
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Adjustment for liquidation basis                                      |   |                           | (266,510 | )             |   |          |        |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Cumulative effect of change in accounting principle, net of taxes     |   |                           | 18,920   |               |   |          |        |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Other, net                                                            |   |                           | 3,812    |               |   |          | (36     | )
|                                                                                     |                                                                       |   |                           |          |               |   |          |        
|Net cash (used in) provided by operating activities                                  |                                                                       |   | (54,583                   | )        |               |   | 11,420   |        
|                                                                                     |                                                                       |   |                           |          |               |   |          |        
|CASH FLOWS FROM INVESTING ACTIVITIES                                                 |                                                                       |   |                           |          |               |   |          |        
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Net decrease in loans and leases resulting from
originations, net of repayments      |                                                                       |   | 80,090                    |          |               |   | 89,321   |        
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Purchases of loans and leases, net                                                   |                                                                       |   |                          |          |               |   | (12,933  | )      
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Purchases of mortgage-backed securities                                              |                                                                       |   | (59,984                   | )        |               |   | (154,021 | )      
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Purchases of investment securities                                                   |                                                                       |   | (77,568                   | )        |               |   | (77,608  | )      
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Principal payments on mortgage-backed securities                                     |                                                                       |   | 127,068                   |          |               |   | 148,180  |        
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Principal payments on investment securities                                          |                                                                       |   | 43,568                    |          |               |   | 4,124    |        
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Proceeds from securitizations and/or sales of loans and leases held-for-sale         |                                                                       |   | 1,586,628                 |          |               |   | 486,541  |        
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Proceeds from sale of mortgage-backed securities available-for-sale                  |                                                                       |   | 104,700                   |          |               |   | 392,166  |        
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Proceeds from sale of investment securities available-for-sale                       |                                                                       |   | 59,027                    |          |               |   | 26,321   |        
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Proceeds from sale of real estate owned                                              |                                                                       |   | 4,662                     |          |               |   | 1,037    |        
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Additions to premises and equipment                                                  |                                                                       |   | (298                      | )        |               |   | (471     | )      
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Decrease in investment in stock of the Federal Home Loan Bank
of San Francisco       |                                                                       |   | 8,289                     |          |               |   | 16,431   |        
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|(Increase) decrease in investment in stock of the Federal Reserve Bank               |                                                                       |   | (1,438                    | )        |               |   | 7,724    |        
|                                                                                     |                                                                       |   |                           |          |               |   |          |        
|Net cash provided by investing activities                                            |                                                                       |   | 1,874,744                 |          |               |   | 926,812  |        
|                                                                                     |                                                                       |   |                           |          |               |   |          |        

9



---



##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(Unaudited)

|                                                                        |                                                                    |                                                     |            |                           |         |               |          |         |            |  
|----------------------------------------------------------------------- | ------------------------------------------------------------------ | --------------------------------------------------- | ---------- | ------------------------- | ------- | ------------- | -------- | ------- | ---------- | -
|                                                                        |                                                                    |                                                     |            | For the Nine Months Ended
|                                                                        |                                                                    |                                                     |            |                          
|                                                                        |                                                                    |                                                     |            | September 30,             |         | September 30,
|                                                                        |                                                                    |                                                     |            | 2002                      |         | 2001         
|                                                                        |                                                                    |                                                     |            |                           |         |              
|                                                                        |                                                                    |                                                     |            | (Dollars in thousands)   
|CASH FLOWS FROM FINANCING ACTIVITIES                                    |                                                                    |                                                     |            |                           |         |               |          |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net increase (decrease) in deposits                                     |                                                                    | $                                                   | 263,708    |                           |         | $             | (362,440 | )      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Proceeds from advances from the Federal Home Loan Bank of San Francisco |                                                                    |                                                     | 2,490,000  |                           |         |               | 205,000  |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Repayment of advances from the Federal Home Loan Bank of San Francisco  |                                                                    |                                                     | (2,490,000 | )                         |         |               | (908,800 | )      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Repayment of reverse repurchase agreements                              |                                                                    |                                                     |           |                           |         |               | (103,241 | )      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net decrease in warehouse lines outstanding                             |                                                                    |                                                     |           |                           |         |               | (94,134  | )      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net decrease in other borrowings                                        |                                                                    |                                                     | (59,708    | )                         |         |               | (593     | )      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Proceeds from issuance of common stock                                  |                                                                    |                                                     | 947        |                           |         |               | 108,073  |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Proceeds from issuance of preferred stock                               |                                                                    |                                                     |            |                           |         |               | 26,400   |        
|                                                                        |                                                                    |                                                     |            |                           |         |               |          |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                                                    | Net cash provided by (used in) financing activities |            |                           | 204,947 |               |          |         | (1,129,735 | )
|                                                                        |                                                                    |                                                     |            |                           |         |               |          |        
|Net increase (decrease) in cash and cash equivalents                    |                                                                    |                                                     | 2,025,108  |                           |         |               | (191,503 | )      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Cash and cash equivalents at beginning of period                        |                                                                    |                                                     | 521,388    |                           |         |               | 694,934  |        
|                                                                        |                                                                    |                                                     |            |                           |         |               |          |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Cash and cash equivalents at end of period                              |                                                                    | $                                                   | 2,546,496  |                           |         | $             | 503,431  |        
|                                                                        |                                                                    |                                                     |            |                           |         |               |          |        
|Cash paid during the year for:                                          |                                                                    |                                                     |            |                           |         |               |          |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Interest                                                           |                                                     | $          | 62,226                    |         |               | $        | 173,280 |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Income taxes                                                       |                                                     | $          | 859                       |         |               | $        | 88      |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Supplemental non-cash investing and financing activities:               |                                                                    |                                                     |            |                           |         |               |          |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Loans transferred to real estate owned                             |                                                     | $          | 387                       |         |               | $        | 14,181  |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Loans transferred from held-for-investment to held-for-sale        |                                                     | $          | 2,289,672                 |         |               | $        | 242,686 |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Securities transferred from held-to-maturity to available-for-sale |                                                     | $          |                          |         |               | $        | 641,663 |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Conversion of preferred stock to common stock                      |                                                     | $          |                          |         |               | $        | 26,400  |           

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

10



---



##### Table of Contents






Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)

Note 1. Basis of Presentation

The accompanying unaudited consolidated financial statements include the
accounts of Bay View Capital Corporation (the Company), a bank holding
company incorporated under the laws of the state of Delaware, and our wholly
owned subsidiaries: Bay View Bank, N.A. (the Bank), a national bank; Bay View
Securitization Corporation, a Delaware corporation; Bay View Capital I, a
Delaware business trust; FMAC Insurance Services, a Delaware corporation; FMAC
2000-A Holding Company, a California corporation; and FMAC Franchise
Receivables Corporation, a California corporation. Bay View Bank includes its
wholly owned subsidiaries: Bay View Acceptance Corporation, a Nevada
corporation; Bay View Commercial Finance Group, a California corporation;
XBVBKRS, Inc., formerly Bankers Mutual, a California corporation; MoneyCare,
Inc., a California corporation; and Bay View Auxiliary Corporation, a
California corporation. All significant intercompany accounts and transactions
have been eliminated.

On November 1, 1999, we acquired Franchise Mortgage Acceptance Company,
sometimes referred to as FMAC, which included the operations of Bankers Mutual
and FMAC Insurance Services. On June 30, 2000, substantially all of the assets
and certain liabilities of Bankers Mutual were sold to Berkshire Mortgage
Finance Limited Partnership. In September 2000, we announced the restructuring
of FMACs franchise lending operations. The shutdown of this division was
effective as of September 30, 2000 and involved the termination of all related
production and marketing personnel. Effective February 28, 2001, substantially
all of the assets and liabilities of FMAC Insurance Services were sold. On
June 22, 2001, we completed the stock sale by Bay View Bank of the legal entity
Bay View Franchise Mortgage Acceptance Company (BVFMAC) and its related
servicing platform. On December 31, 2001, in connection with the financing
secured by our auto lease cash flows, LFS-BV, formerly a subsidiary of Bay View
Acceptance Corporation, was merged into Bay View Bank.

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

On September 13, 2002, the Company filed a definitive proxy statement with
the Securities and Exchange Commission and mailed copies to all stockholders of
record at August 20, 2002. The proxy materials included two proposals for
stockholder vote at a special meeting held on October 3, 2002. The first
proposal was to approve the Companys plan of dissolution and stockholder
liquidity and the second proposal was to approve the sale of the Banks retail
banking assets to U.S. Bank. Both of the proposals were approved by a majority
of the stockholders.

As a result of the stockholder approval of both of these proposals, the
information provided in these interim financial statements reflect the
Companys adoption of liquidation basis accounting effective September 30, 2002
in accordance with accounting principles generally accepted in the United
States of America (GAAP). Historical comparative periods are presented on a
going concern basis. Liquidation basis accounting requires the Company to
value its assets at their estimated net realizable values and its liabilities
to include accruals for estimated costs associated with carrying out the plan
of dissolution and stockholder liquidity.

The information provided in these interim financial statements reflects
all adjustments which are, in the opinion of management, necessary for a fair
presentation of our financial condition as of September 30, 2002, the results of our operations for the three- and nine-month periods
ended September 30, 2002

11



---



##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)

and 2001, and our cash flows for the nine-month periods ended September 30,
2002 and 2001. For 2002, these adjustments are primarily liquidation basis
mark-to-market adjustments and expense accruals. For 2001, these adjustments
are of a normal, recurring nature unless otherwise disclosed in this Form 10-Q.
As necessary, reclassifications have been made to prior period amounts to
conform to the current period presentation. These reclassifications had no
effect on our financial condition, results of operations or stockholders
equity. These interim financial statements have been prepared in accordance
with the instructions to Form 10-Q, and therefore do not include all of the
necessary information and footnotes for a presentation in conformity with GAAP.

The information included in Managements Discussion and Analysis of
Financial Condition and Results of Operations was written assuming that you
have read or have access to our 2001 Annual Report on Form 10-K, which contains
the latest audited consolidated financial statements and notes, along with
Managements Discussion and Analysis of Financial Condition as of December 31,
2001 and 2000 and Results of Operations for the years ended December 31, 2001,
2000 and 1999 as well as the Definitive Proxy Statement, filed on September 13,
2002 related to the Companys proposals on its plan of dissolution and
stockholder liquidity and the sale of the Bank's retail banking assets to U.S.
Bank. 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, 2002 are not
necessarily indicative of the results that may be expected for the entire
fiscal year or any other interim period.

Note 2. Plan of Dissolution and Stockholder Liquidity

On October 3, 2002, a special meeting of Bay View Capital Corporations
stockholders was held to vote on the Companys proposed Plan of Dissolution and
Stockholder Liquidity (the Plan) and the sale of the Banks retail banking
assets to U. S. Bank. Both of these proposals were approved by a majority of
the common stockholders. As a result of these approvals and the then
anticipated close of the U.S. Bank transaction on November 1, 2002, the Company
adopted liquidation basis accounting effective September 30, 2002 in accordance
with GAAP. Accordingly, assets have been valued at their estimated net
realizable values and liabilities include accruals for estimated costs
associated with carrying out the Plan. In accordance with liquidation basis
accounting, our stockholders equity was transferred to net assets in
liquidation. Our net assets in liquidation totaled $413.7 million at September
30, 2002 or $6.50 in net assets in liquidation per outstanding share based on
63,631,680 diluted shares in liquidation.

The Plan outlines the steps necessary to fully liquidate the Company,
including the sale of the Banks retail banking assets to U. S. Bank.
Following the sale, the remaining assets of the Company are to be sold in an
orderly manner and the liabilities and expenses will be paid or have
arrangements made to be paid, including the outstanding debt of both the
Company and the Bank and the Capital Securities. Once these transactions have
been substantially completed, the Company will distribute the net proceeds of
the asset sales to its stockholders.

On November 1, 2002, the Company completed the U.S. Bank sale transaction.
At the closing of the transaction, U.S. Bank paid Bay View Bank the sum of: (i)
a 14% deposit premium (based on the average daily balances of deposits for the
30 calendar days ending on the business day prior to the closing date) plus
$5.0 million, or approximately $463.7 million; (ii) the principal amount of the
loans acquired of approximately $337.2 million less a loan loss reserve of
approximately $2.2 million; (iii) the net book value of real property and
personal property utilized by the branches and improvements thereto and other
assets assumed of approximately $15.2 million and (iv) the face amount of coins
and currency of approximately $9.8 million. Bay View Bank paid to U.S. Bank at
the closing an amount equal to the deposits being assumed by U.S. Bank of
approximately $3.307 billion, less of the amounts payable by U.S. Bank to Bay
View Bank as described above. The amounts paid at closing are subject to a
post-closing adjustment based upon a balance sheet as of the closing date.

12



---



##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)

The Company and the Bank have obtained regulatory approvals necessary for
the early redemption of their outstanding debt securities, and have the funds
needed for redemption. These include the Companys $100 million of 9-1/8 %
Subordinated Notes which will be redeemed at the applicable price of par plus a
premium of 4.563% on November 29, 2002 and the Banks $50 million of 10%
Subordinated Notes which will be redeemed at par on December 9, 2002. Notices
of redemption have been sent to holders by the trustee of each of the debt
securities.

Subject to the required regulatory approvals, the Company anticipates
paying accrued and unpaid distributions on the Capital Securities on December
31, 2002.

The Company recorded pre-tax adjustments totaling $266.5 million related
to the mark-to-market valuation of its assets and liabilities in connection
with its adoption of liquidation basis accounting for the quarter ended
September 30, 2002. The valuation adjustments primarily consisted of the
following:



| |  | $463.5 million deposit premium, which was calculated as 14% of non-brokered retail deposits based on October average
deposit levels plus $5 million pursuant to the agreement with U.S. Bank;                                                                                                   
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | $91.0 million reduction in goodwill related to the deposits being sold;                                                                                                                                                                                                                         
| 
| |  | $37.0 million mark-to-market adjustment related to loan balances reflecting the Companys estimated net realizable value of
its remaining loan portfolios under an accelerated timeline to sell such loans pursuant to the plan of dissolution and
stockholder liquidity;                       
| 
| |  | $51.1 million in charges related to the sale of the Companys retail banking assets including $26.6 million in severance
payments, $12.7 million in investment banking and other professional fees, and $11.8 million in net accruals for closed
facilities and other contracts and settlements;
| 
| |  | $8.8 million in charges related to the prepayment of the Companys and Bay View Banks Subordinated Notes including a $4.2
million write-off of issuance costs and $4.6 million in prepayment penalties;                                                                                        
| 
| |  | $4.9 million write-off of franchise loan securitization residual assets; and                                                                                                                                                                                                                    
| 
| |  | $3.7 million write-off of unamortized issuance costs on the Capital Securities in anticipation of these securities being
called in 2003.                                                                                                                                                        

Under liquidation basis accounting, the Company has estimated future
liabilities associated with carrying out the Plan. The Company has not
reflected future revenues and expenses of the auto platform by way of auto
leasing income and expense, interest expense related to the auto lease
financing and interest income on auto loans, as such income and expenses will
be recognized when realized.

As a result of the adoption of liquidation basis accounting, there are
changes to certain accounting policies, which require significant judgments and
estimates by management of the Company, as of September 30, 2002 as detailed
below. Only those policies that are different from going concern basis, as
disclosed in our Annual Report on Form 10-K, are included. Included in the
accounting policies below are the assumptions used in the valuation of assets
and liabilities of the Company reflecting the change to liquidation basis
accounting. On a quarterly basis, the valuation of the assets and liabilities
will be updated and changes in liquidation value will be recorded as
adjustments to net assets in liquidation in future periods.

13



---



##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)

Securities. All securities must be classified as available-for-sale and
reported at fair value, based on published information or quotes by registered
securities brokers. Securities for which quotes are not readily available are
valued based on the present value of discounted estimated future cash flows.

Loans and Leases. All loans and leases must be classified as
held-for-sale and reported at net realizable value. Market value for these
loans and leases is based on existing external bids from sales contracts or
letters of intent or prices for similar loans and leases in the secondary whole
loan or securitization markets. Accounting policies for interest income and
loan fee recognition have not changed. Classification and accounting treatment
of impaired loans, including nonperforming loans and troubled debt
restructurings also have not changed.

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

Intangible assets. Goodwill and other intangible assets were all written
off as of September 30, 2002. The goodwill and core deposit intangibles
associated with the deposits sold to U.S. Bank were realized in anticipation of
the close of that transaction. The goodwill related to the Companys
commercial business units, including Asset-Based Lending, Factored Receivables
and Commercial Leasing, was written off as current estimated fair values of
those businesses were below book value based on bids from interested buyers of
the businesses. See Note 12 for additional discussion.

During the quarter, the Company recorded $18.9 million in impairment
charges, net of taxes, for goodwill related to three of the Companys
commercial lending businesses which is not expected to be realized upon the
disposition of these businesses. As required by the transitional provisions of
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets, which the Company adopted as of January 1, 2002, the
impairment loss is measured and recorded as of the date of adoption and
recognized as the cumulative effect of a change in accounting principle as of
January 1, 2002.

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

In addition to the $51.1 million in charges related to the sale of the
Companys retail banking assets, $2.6 million was transferred from the existing
restructuring accruals. At September 30, 2002 the total accruals for severance
and facilities, including these transfers, were $28.0 million and $10.6
million, respectively.

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

Earnings Per Share. In addition to Basic and Diluted earnings per share,
liquidation basis accounting measures net assets in liquidation on a per share
basis, adjusted for the dilutive effects of outstanding stock options and
warrants.

All of the above assumptions are subject to change should facts and
circumstances change.

14



---



##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)

Note 3. Earnings Per Share

Basic earnings per share are calculated by dividing net earnings or loss
for the period by the weighted-average common shares outstanding for that
period. There is no adjustment to the number of outstanding shares for
potential dilutive instruments, such as stock options or warrants. Diluted
earnings or loss per share takes into
account the potential dilutive impact of such instruments and uses the average
share price for the period in determining the number of incremental shares to
add to the weighted-average number of shares outstanding. For the three- and
nine-month periods ended September 30, 2001, average dilutive potential common
shares of 157,661, and 31,276 shares related to shares issuable upon the
exercise of options were not included in the computation because they were
anti-dilutive.

During the third quarter of 2002, we recorded $18.9 million in goodwill
impairment charges, net of taxes, which was recognized as the cumulative effect
of a change in accounting principle as of January 1, 2002, as previously
discussed.

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

|                                                                                             |  |                                                  |        |                            |  |               |        |               |  |   |         |   |  |   |          |  
|-------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ------ | -------------------------- |  | ------------- | ------ | ------------- |  | - | ------- | - |  | - | -------- | -
|                                                                                             |  | For the Three Months Ended,                      |        | For the Nine Months Ended,
|                                                                                             |  |                                                  |        |                           
|                                                                                             |  | September 30,                                    |        | September 30,              |  | September 30, |        | September 30,
|                                                                                             |  | 2002                                             |        | 2001                       |  | 2002          |        | 2001         
|                                                                                             |  |                                                  |        |                            |  |               |        |              
|                                                                                             |  | (Amounts in thousands, except per share amounts)
|Income (loss) before cumulative effect of change in
accounting principle                     |  | $                                                | 87,749 |                            |  | $             | (632   | )             |  | $ | 90,581  |   |  | $ | (103,948 | )
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Cumulative effect of change in accounting principle,
net of taxes of $2.3 million            |  |                                                  |       |                            |  |               |       |               |  |   | (18,920 | ) |  |   |         |  
|                                                                                             |  |                                                  |        |                            |  |               |        |               |  |   |         |   |  |   |          |  
|Net income (loss)                                                                            |  | $                                                | 87,749 |                            |  | $             | (632   | )             |  | $ | 71,661  |   |  | $ | (103,948 | )
|                                                                                             |  |                                                  |        |                            |  |               |        |               |  |   |         |   |  |   |          |  
|Weighted-average basic shares outstanding                                                    |  |                                                  | 62,777 |                            |  |               | 62,608 |               |  |   | 62,724  |   |  |   | 46,914   |  
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Add: Dilutive potential common shares                                                        |  |                                                  | 186    |                            |  |               |       |               |  |   | 411     |   |  |   |         |  
|                                                                                             |  |                                                  |        |                            |  |               |        |               |  |   |         |   |  |   |          |  
|Weighted-average diluted shares outstanding                                                  |  |                                                  | 62,963 |                            |  |               | 62,608 |               |  |   | 63,135  |   |  |   | 46,914   |  
|                                                                                             |  |                                                  |        |                            |  |               |        |               |  |   |         |   |  |   |          |  
|Basic earnings (loss) per share before cumulative
effect of change in accounting principle   |  | $                                                | 1.40   |                            |  | $             | (0.01  | )             |  | $ | 1.44    |   |  | $ | (2.22    | )
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Cumulative effect of change in accounting
principle, net                                     |  |                                                  |       |                            |  |               |       |               |  | $ | (0.30   | ) |  |   |         |  
|                                                                                             |  |                                                  |        |                            |  |               |        |               |  |   |         |   |  |   |          |  
|Net basic earnings (loss) per share                                                          |  | $                                                | 1.40   |                            |  | $             | (0.01  | )             |  | $ | 1.14    |   |  | $ | (2.22    | )
|                                                                                             |  |                                                  |        |                            |  |               |        |               |  |   |         |   |  |   |          |  
|Diluted earnings (loss) per share before cumulative
effect of change in accounting principle |  | $                                                | 1.39   |                            |  | $             | (0.01  | )             |  | $ | 1.43    |   |  | $ | (2.22    | )
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Cumulative effect of change in accounting
principle, net                                     |  |                                                  |       |                            |  |               |       |               |  | $ | (0.30   | ) |  |   |         |  
|                                                                                             |  |                                                  |        |                            |  |               |        |               |  |   |         |   |  |   |          |  
|Net diluted earnings (loss) per share                                                        |  | $                                                | 1.39   |                            |  | $             | (0.01  | )             |  | $ | 1.13    |   |  | $ | (2.22    | )
|                                                                                             |  |                                                  |        |                            |  |               |        |               |  |   |         |   |  |   |          |  

15



---



##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)

Note 4. Stock Options

As of September 30, 2002, we had five employee stock option plans and
three non-employee director stock option plans. The employee stock option
plans were as follows: the Amended and Restated 1986 Stock Option and
Incentive Plan, the Amended and Restated 1995 Stock Option and Incentive
Plan, the 1998-2000
Performance Stock Plan, the 1999 FMAC Stock Option, Deferred Stock and
Restricted Stock Plan, and the 2001 Stock Option and Incentive Plan which
authorize the issuance of up to 1,759,430, 2,500,000, 400,000, 270,576, and
3,200,000 shares of common stock, respectively. The non-employee director
stock option plans were as follows: the Amended and Restated 1989 Non-Employee
Director Stock Option and Incentive Plan, the 1998 Non-Employee Director
Stock Option and Incentive Plan, and the 2001 Non-Employee Director Stock
Option Plan which authorize the issuance of up to 550,000, 200,000, and
500,000 shares of common stock, respectively.

The following table illustrates the stock options available for grant as
of September 30, 2002:

|                             |  |                       |            |                  |  |                       |            |   |  |  |             |  
|---------------------------- |  | --------------------- | ---------- | ---------------- |  | --------------------- | ---------- | - |  |  | ----------- | -
|                             |  |                       |            |                  |  | Non-Employee Director |            |   |  | 
|                             |  | Employee Stock Option |            | Stock Option and |  |                       |            |  
|                             |  | and Incentive Plans   |            | Incentive Plans  |  | Total                
|                             |  |                       |            |                  |  |                      
|Shares reserved for issuance |  |                       | 8,130,006  |                  |  |                       | 1,250,000  |   |  |  | 9,380,006   |  
|                            
|                            
|                            
|                            
|Granted                      |  |                       | (9,239,892 | )                |  |                       | (1,137,000 | ) |  |  | (10,376,892 | )
|                            
|                            
|                            
|                            
|Forfeited                    |  |                       | 2,543,615  |                  |  |                       | 152,000    |   |  |  | 2,695,615   |  
|                            
|                            
|                            
|                            
|Expired                      |  |                       | (408,688   | )                |  |                       | (102,000   | ) |  |  | (510,688    | )
|                             |  |                       |            |                  |  |                       |            |   |  |  |             |  
|Total available for grant    |  |                       | 1,025,041  |                  |  |                       | 163,000    |   |  |  | 1,188,041   |  
|                             |  |                       |            |                  |  |                       |            |   |  |  |             |  

At September 30, 2002, we had outstanding options under the plans with
expiration dates ranging from the year 2003 through 2014, as illustrated in the
following table:

|                                  |  |               |           |                |  |                  |            |  |  |   |       | 
|--------------------------------- |  | ------------- | --------- | -------------- |  | ---------------- | ---------- |  |  | - | ----- | 
|                                  |  | Number of     |           | Exercise Price |  | Weighted-Average
|                                  |  | Option Shares |           | Range          |  | Exercise Price  
|                                  |  |               |           |                |  |                 
|Outstanding at December 31, 2001  |  |               | 6,277,797 |                |  | $                | 4.59-34.41 |  |  | $ | 9.21  | 
|                                 
|                                 
|                                 
|                                 
|Granted                           |  |               | 38,000    |                |  |                  | 6.64-6.84  |  |  |   | 6.82  | 
|                                 
|                                 
|                                 
|                                 
|Exercised                         |  |               | (120,669  | )              |  |                  | 4.59-5.41  |  |  |   | 4.72  | 
|                                 
|                                 
|                                 
|                                 
|Forfeited                         |  |               | (602,297  | )              |  |                  | 4.59-31.56 |  |  |   | 15.19 | 
|                                  |  |               |           |                |  |                  |            |  |  |   |       | 
|Outstanding at September 30, 2002 |  |               | 5,592,831 |                |  | $                | 4.59-34.41 |  |  | $ | 8.66  | 
|                                  |  |               |           |                |  |                  |            |  |  |   |       | 
|Exercisable at September 30, 2002 |  |               | 4,093,914 |                |  | $                | 4.59-34.41 |  |  | $ | 9.79  | 
|                                  |  |               |           |                |  |                  |            |  |  |   |       | 

All of our stock option plans define a change in control as including a
sale of all or substantially all of our assets, and all of our stock option
plans provide for the automatic acceleration of the exercisability of stock
options in the event of a change in control with the exception of our 2001
Stock Option and Incentive Plan (the 2001 Plan). The 2001 Plan provides for
the acceleration of the exercisability of stock options in such circumstances
as the stock option committee of our Board of Directors determines to be
appropriate. On August 6, 2002, our stock option committee determined that the
consummation of the sale of the Banks retail banking assets will constitute a
change in control for purposes of the 2001 Plan and recommended to the Board of
Directors the acceleration of the exercisability of the stock options under the
2001 Plan in order that all of our option holders would be treated equally. On
October 3, 2002, the Board of Directors authorized such acceleration as of that
date.

16



---



##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)

Our stock options generally cancel automatically 90 days after termination
of employment and, notwithstanding any other provisions of our stock option
plans, all outstanding stock options will automatically cancel on the final
record date. A substantial number of our employees will be terminating their
employment with us to become employees of U.S. Bank and a number of other
employees will be terminated as part of our downsizing and cost control
program. To prevent our employees from losing the value in their stock options
as a result of the termination of their employment and to motivate our
remaining employees throughout the dissolution process, our Board of Directors
has amended our stock option plans, to the extent necessary, to permit the
exercise of the options on a net issuance basis. This right will entitle the
holder to elect to receive from us, in exchange for the shares subject to the
stock option, that number of shares of our common stock that has a value equal to
the total amount by which the market price of the shares on the date the option
is exercised exceeds the total exercise price of the shares subject to the
option.

During the quarter ended September 30, 2002 we amortized the remaining
balance of $2.7 million of the deferred expense related to the issuance of
stock options with below market strike prices as part of our liquidation basis
valuation adjustments.

Note 5. Agreements with Regulatory Agencies

During the third quarter of 2000, we entered into formal agreements with
the Office of the Comptroller of the Currency, sometimes referred to as the
OCC, and the Federal Reserve Bank of San Francisco.

The agreement between Bay View Bank and the OCC was dated September 6,
2000. The provisions of this agreement, among other things, require that Bay
View Banks Board of Directors adopt a new budget as well as new strategic,
earnings and capital plans. The strategic plan established objectives for Bay
View Banks overall risk profile, earnings performance, growth, and capital
adequacy. In addition, a provision of the agreement states that Bay View Bank
may not declare or distribute any dividends without the prior written approval
of the OCC.

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

At September 30, 2002, Bay View Capital Corporations regulatory capital
ratios exceeded the requirements necessary to be considered adequately
capitalized. At December 31, 2001, Bay View Capital Corporation exceeded the
requirements to be considered adequately capitalized for Tier 1 risk-based
capital while its Total risk-based capital ratio of 7.62% and Tier 1 leverage
ratio of 3.73% fell below the required amounts. Bay View Banks regulatory
capital ratios exceeded the requirements necessary to be considered
well-capitalized at September 30, 2002 and December 31, 2001.

17



---



##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)

Note 6. Restructuring Charges

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

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

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

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

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

Note 7. Investment in Operating Lease Assets

Leasing expense represents expenses related to our auto leasing
activities. Because the leases are accounted for as operating leases, the
corresponding assets are capitalized and depreciated to their estimated
residual values over their lease terms. This depreciation expense is included
in leasing expenses, along with the amortization of capitalized initial direct
lease costs and impairment charges. Leasing expenses for the third quarter of
2002 were $12.9 million as compared to $16.6 million for the third quarter of
2001. Leasing expenses were $44.0 million for the first nine months of 2002 as
compared to $61.6 million for the first nine months of 2001. The decreases in
leasing expenses, as compared to respective prior periods, were primarily due
to lower provision for impairment combined with lower depreciation expense
associated with the declining balance of our auto-related operating lease
portfolio. These were partially offset by a $1.5 million accrual related to
certain residual and credit incentives

18



---



##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)

pursuant to our purchase contract with Lendco Financial Services recorded
during the second quarter of 2002. We ceased purchasing auto leases in June
2000. Leasing expenses for the nine-month period ended September 30, 2001
included $10.0 million of additional provision for impairment primarily as a
result of revising the estimated residual values associated with the auto lease
portfolio.

The Company performs a quarterly impairment analysis of its automobile
operating lease portfolio in accordance with Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, which we adopted effective January 1, 2002. Statement No. 144, which
supersedes Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, retains the fundamental
provisions of Statement No. 121 related to the recognition and measurement of
the impairment of long-lived assets to be held and used and the measurement of
long-lived assets to be disposed of by sale. There was no financial statement
impact upon adoption of Statement No. 144. A lease is considered impaired if
its gross future undiscounted cash flows are less than the net book value of
the lease. The net book value of the lease is defined as the original
capitalized cost of the automobile, including initial direct capitalized costs,
less the cumulative amount of depreciation recorded against the automobile and
the cumulative amount of amortization of the initial direct capitalized costs
recorded since the inception of the lease and less any impairment charges
recorded-to-date on that lease.

In determining gross future undiscounted cash flows, the Company contracts
with Automotive Lease Guide, commonly referred to as ALG, to provide estimates
of the residual value of the underlying automobiles at the end of their lease
terms assuming that the vehicles are in average condition. The Company then
estimates the probability that i.) the automobiles will be purchased by the
lessee prior to the end of the lease term, ii.) the automobile will be
purchased by the lessee at the end of the lease term, either at a discount or
at the full contractual residual amount, or iii.) the automobile will be
returned to the lessor at the end of the lease term. These probabilities are
estimated using a number of factors, including the Companys experience-to-date
and industry experience.

Using the projected ALG residual values, the Companys experience-to-date
relative to the projected ALG residual values (for example, for vehicle classes
where actual amounts realized were less than what ALG had projected, the
Company reduced the projected ALG residual values to equal the Companys
experience-to-date), and the probabilities of each of the three disposition
scenarios discussed above occurring, the Company determined a
probability-weighted gross future undiscounted cash flow for each automobile
lease. For those leases where the gross future undiscounted cash flows were
less than net book value, the lease was considered impaired.

For those leases considered impaired, the Company then estimated the fair
value of the lease. The fair value was determined by calculating the present
value of the future estimated cash flows again assuming the probabilities of
each of the three disposition scenarios. The present value was calculated
using current market rates which are similar to the original contract lease
rate. For those impaired leases where the estimated fair value was less than
the net book value, an impairment charge was recorded for the difference.
Since the inception of the lease portfolio in June 1998, the Company has
recorded additional monthly depreciation charges, also included in leasing
expense, to provide for losses that may be incurred at the end of the lease
terms.

19



---



##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)

Note 8. Income Taxes

The Company recorded tax expense of $187.4 million for the third quarter
and $181.8 million for the nine months ended September 30, 2002, of which $11.9
million is current and $169.9 million is deferred. The Company also recorded a
deferred tax benefit of $2.3 million on the cumulative effect of change in
accounting principle, which is presented net of this tax benefit. As a result
of the Companys plan of dissolution and stockholder liquidity, income tax
expense includes the effect of establishing a valuation allowance of $24.0
million on the realizability of deferred tax assets in years after 2002. The
realizability of deferred tax assets and the related valuation allowance are
based on total projected future income through the final liquidation of the
Company.

The effective tax rate used in computing the $181.8 million tax expense
for the first nine months of 2002 was 71.5%. This expected 2002 effective tax
rate is higher than the federal statutory rate due primarily to state income
taxes, the valuation allowance on deferred tax assets, disposition of
nondeductible goodwill and nondeductible compensation associated with the
Companys plan of dissolution and stockholder liquidity.

For the third quarter and first nine months of 2001, the Company recorded
a $0.4 million tax benefit and a $59.9 million tax benefit, respectively, both
at a 36.5% effective tax rate.

During 2000, the Company recorded a $26.0 million valuation allowance
against its gross deferred tax assets primarily relating to approximately $48.6
million in federal net operating loss carryforwards that were expiring in 2001
as the Company did not expect to be able to fully utilize these amounts prior
to their expiration date. In May 2001, the Company raised $137.5 million of
additional capital which enabled the Company to implement a new strategic plan,
including the disposition of non-core and higher-risk assets. As a result of
these actions, the Companys ability to generate future taxable income became
more predictable. During 2001, the Company also executed certain transactions
that resulted in significant amounts of taxable income. These transactions
included the sale of the BVFMAC legal entity which generated significant
taxable income related to previously deferred gains in the franchise
securitization trusts. The Company also executed a financing secured by the
contractual cash flows of our auto operating lease portfolio that was treated
as a sale for income tax purposes and generated $136.5 million in taxable
income. Primarily as a result of these transactions, the Company generated
sufficient taxable income during the year to be able to utilize the majority of
its net operating loss carryforwards expiring in 2001. In addition, the
Company identified tax-planning strategies which included the sale of certain
assets obtained in connection with a previous purchase business combination
with significant built-in gains for tax purposes which would be triggered in
the event of a sale. Such a transaction would not only generate significant
levels of taxable income, but would also increase the limitation on the
utilization of the net operating loss carryforward acquired in connection with
a previous purchase business combination. As a result, the Company eliminated
the $26.0 million valuation allowance against its gross deferred tax assets
during 2001. As of September 30, 2002, in anticipation of the close of the
sale of the Banks retail banking assets to U.S. Bank and other 2002 asset
sales transactions, the Company will utilize approximately $143.6 million of
its net deferred tax assets.

20



---



##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)

Note 9. Investment Securities

During 2001, we transferred $631.7 million in held-to-maturity securities
to our available-for-sale portfolio. In accordance with Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities, we recorded $1.5 million of unrealized losses related to
the transfer. As a result of the transfer and subsequent sales of securities
from our held-to-maturity portfolio, combined with our adoption of liquidation
basis accounting, we do not intend to hold any securities as held-to-maturity
in the foreseeable future.

In accordance with liquidation basis accounting, our investment securities
will continue to be classified as available-for-sale and marked to their fair
values through income as liquidation basis adjustments. We realized net gains
of $2.0 million related to mark-to-market adjustments, which were previously
recorded as other comprehensive income, on our investment securities upon our
adoption of liquidation basis accounting effective September 30, 2002.

Proceeds from sales of mortgage-backed investment securities during the
first nine months of 2002 were $163.7 million. Gross gains of $1.2 million
were realized on the sales.

Note 10. Allowance for Loan and Lease Losses

As a result of our adoption of liquidation basis accounting, the allowance
for loan and lease losses at September 30, 2002 was reallocated as
mark-to-market adjustments to individual loans and leases and groups of
homogeneous loans in liquidation. At September 30, 2002, each of the loan
portfolios were reviewed to determine the appropriate level of mark-to-market
adjustments using the most appropriate method for that portfolio. These
methods include existing sales contracts and letters of intent and external
indications of value such as broker quotes. See Note 2 for further discussion
of updated loan and lease accounting policies.

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

21



---



##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)

The following table illustrates the changes in the allowance for losses on
loans and leases for the periods indicated, including the reallocation of the
allowance as mark-to-market adjustments to individual loans and leases and
groups of homogeneous loans in liquidation as of September 30, 2002:

|                                                                                                                                      |                                                                                 |   |               |                        |               |   |              |         |   |   |         |         |  
|------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | - | ------------- | ---------------------- | ------------- | - | ------------ | ------- | - | - | ------- | ------- | -
|                                                                                                                                      |                                                                                 |   | Three Months  |                        | Nine Months   |   | Year        
|                                                                                                                                      |                                                                                 |   | Ended         |                        | Ended         |   | Ended       
|                                                                                                                                      |                                                                                 |   | September 30, |                        | September 30, |   | December 31,
|                                                                                                                                      |                                                                                 |   | 2002          |                        | 2002          |   | 2001        
|                                                                                                                                      |                                                                                 |   |               |                        |               |   |             
|                                                                                                                                      |                                                                                 |   |               | (Dollars in thousands)
|Beginning balance                                                                                                                     |                                                                                 | $ | 38,945        |                        |               | $ | 49,791       |         |   | $ | 73,738  |        
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|Transfers of loans to held-for-sale                                                                                                   |                                                                                 |   | (8,822        | )                      |               |   | (10,658      | )       |   |   | (53,606 | )      
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|Charge-offs:                                                                                                                          |                                                                                 |   |               |                        |               |   |              |         |   |   |         |        
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Mortgage                                                                        |   |               |                       |               |   |              |        |   |   |         | (1,488  | )
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Home equity loans and lines of credit                                           |   |               | (473                   | )             |   |              | (1,309  | ) |   |         | (10,296 | )
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Auto                                                                            |   |               | (1,324                 | )             |   |              | (3,696  | ) |   |         | (3,809  | )
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Asset-based loans, syndicated loans, factored
receivables and
commercial leases |   |               | (837                   | )             |   |              | (6,987  | ) |   |         | (9,397  | )
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Franchise                                                                       |   |               | (1,300                 | )             |   |              | (11,363 | ) |   |         | (24,197 | )
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Business                                                                        |   |               | (350                   | )             |   |              | (416    | ) |   |         | (2,509  | )
|                                                                                                                                      |                                                                                 |   |               |                        |               |   |              |         |   |   |         |        
|                                                                                                                                      |                                                                                 |   | (4,284        | )                      |               |   | (23,771      | )       |   |   | (51,696 | )      
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|Recoveries:                                                                                                                           |                                                                                 |   |               |                        |               |   |              |         |   |   |         |        
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Mortgage                                                                        |   |               |                       |               |   |              |        |   |   |         | 283     |  
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Home equity loans and lines of credit                                           |   |               | 139                    |               |   |              | 464     |   |   |         | 4,602   |  
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Auto                                                                            |   |               | 182                    |               |   |              | 1,039   |   |   |         | 1,526   |  
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Asset-based loans, syndicated loans, factored
receivables and
commercial leases |   |               | 505                    |               |   |              | 1,220   |   |   |         | 2,479   |  
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Franchise                                                                       |   |               | 78                     |               |   |              | 126     |   |   |         | 196     |  
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Business                                                                        |   |               | 6                      |               |   |              | 38      |   |   |         | 379     |  
|                                                                                                                                      |                                                                                 |   |               |                        |               |   |              |         |   |   |         |        
|                                                                                                                                      |                                                                                 |   | 910           |                        |               |   | 2,887        |         |   |   | 9,465   |        
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|Net charge-offs                                                                                                                       |                                                                                 |   | (3,374        | )                      |               |   | (20,884      | )       |   |   | (42,231 | )      
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|Provision for losses on loans and leases                                                                                              |                                                                                 |   | 2,200         |                        |               |   | 10,700       |         |   |   | 71,890  |        
|                                                                                                                                      |                                                                                 |   |               |                        |               |   |              |         |   |   |         |        
|Reallocation of allowance as mark-to-market adjustments to
individual loans and leases and groups of homogeneous
loans in liquidation |                                                                                 |   | (28,949       | )                      |               |   | (28,949      | )       |   |   |        |        
|                                                                                                                                      |                                                                                 |   |               |                        |               |   |              |         |   |   |         |        
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|Ending balance                                                                                                                        |                                                                                 | $ |              |                        |               | $ |             |         |   | $ | 49,791  |        
|                                                                                                                                      |                                                                                 |   |               |                        |               |   |              |         |   |   |         |        
|Net charge-offs to average loans and leases (annualized)                                                                              |                                                                                 |   | 0.83          | %                      |               |   | 1.29         | %       |   |   | 1.51    | %      
|                                                                                                                                      |                                                                                 |   |               |                        |               |   |              |         |   |   |         |        

Note 11. Commitments and Contingencies

Litigation

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

22



---



##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)

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

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

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

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

Note 12. Accounting for Goodwill and Other Intangible Assets

As of January 1, 2002, we adopted Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets, which requires that
certain goodwill and intangible assets with indefinite useful lives no longer
be amortized but instead be tested for impairment at least annually. As of
January 1, 2002, the amortization of the existing goodwill ceased and
amortization of the other identifiable assets with definite useful lives
continue to be amortized.

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

|                                               |  |                                                  |        |                            |  |               |       |               |  |   |        |  |  |   |          |  
|---------------------------------------------- |  | ------------------------------------------------ | ------ | -------------------------- |  | ------------- | ----- | ------------- |  | - | ------ |  |  | - | -------- | -
|                                               |  | For the Three Months Ended,                      |        | For the Nine Months Ended,
|                                               |  |                                                  |        |                           
|                                               |  | September 30,                                    |        | September 30,              |  | September 30, |       | September 30,
|                                               |  | 2002                                             |        | 2001                       |  | 2002          |       | 2001         
|                                               |  |                                                  |        |                            |  |               |       |              
|                                               |  | (Amounts in thousands, except per share amounts)
|Reported net earnings (loss)                   |  | $                                                | 87,749 |                            |  | $             | (632  | )             |  | $ | 71,661 |  |  | $ | (103,948 | )
|                                              
|                                              
|                                              
|                                              
|Goodwill amortization, net of tax              |  |                                                  |       |                            |  |               | 2,368 |               |  |   |       |  |  |   | 7,104    |  
|                                               |  |                                                  |        |                            |  |               |       |               |  |   |        |  |  |   |          |  
|Adjusted net earnings (loss)                   |  | $                                                | 87,749 |                            |  | $             | 1,736 |               |  | $ | 71,661 |  |  | $ | (96,844  | )
|                                               |  |                                                  |        |                            |  |               |       |               |  |   |        |  |  |   |          |  
|Reported net basic earnings (loss) per share   |  | $                                                | 1.40   |                            |  | $             | (0.01 | )             |  | $ | 1.14   |  |  | $ | (2.22    | )
|                                              
|                                              
|                                              
|                                              
|Goodwill amortization                          |  |                                                  |       |                            |  |               | 0.04  |               |  |   |       |  |  |   | 0.15     |  
|                                               |  |                                                  |        |                            |  |               |       |               |  |   |        |  |  |   |          |  
|Adjusted net basic earnings (loss) per share   |  | $                                                | 1.40   |                            |  | $             | 0.03  |               |  | $ | 1.14   |  |  | $ | (2.07    | )
|                                               |  |                                                  |        |                            |  |               |       |               |  |   |        |  |  |   |          |  
|Reported net diluted earnings (loss) per share |  | $                                                | 1.39   |                            |  | $             | (0.01 | )             |  | $ | 1.13   |  |  | $ | (2.22    | )
|                                              
|                                              
|                                              
|                                              
|Goodwill amortization                          |  |                                                  |       |                            |  |               | 0.04  |               |  |   |       |  |  |   | 0.15     |  
|                                               |  |                                                  |        |                            |  |               |       |               |  |   |        |  |  |   |          |  
|Adjusted net diluted earnings (loss) per share |  | $                                                | 1.39   |                            |  | $             | 0.03  |               |  | $ | 1.13   |  |  | $ | (2.07    | )
|                                               |  |                                                  |        |                            |  |               |       |               |  |   |        |  |  |   |          |  

23



---



##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)

The Company completed the first step of the transitional goodwill
impairment test as of June 30, 2002. This test compared the fair value of each
one of the Companys reporting units with its respective carrying amount,
including goodwill. The Company established the fair value of each of the
reporting units through determination of the amount at which the reporting unit
could be bought or sold in a current transaction between willing parties, or if
this information was not available, through the utilization of discounted cash
flows and relative market multiples for comparable businesses. As a result of
the first step of the transitional goodwill impairment test, the Company
determined goodwill related to all of its reporting units, excluding the
Asset-Based Lending reporting unit, were not expected to be impaired. The step
one test indicated there might be potential impairment related to the $15.7
million of goodwill recorded at June 30, 2002 in the Asset-Based Lending unit
of our Commercial Finance Group. This reporting unit is reported as part of
the Commercial Platform. The transitional provisions of Statement No. 142
allows the Company to perform the second step of the goodwill impairment test
by December 31, 2002 to measure the actual amount of any impairment loss
related to this reporting unit.

The Company completed the second step of the goodwill impairment test as
of September 30, 2002. In connection with the Companys planned sale of the
Banks retail banking assets to U. S. Bank, all goodwill and intangible assets
from previous branch and deposit acquisitions were realized as part of the
liquidation basis valuation adjustments related to the sale transaction (and
were recorded as a reduction to the deposit premium). The goodwill and
intangible assets realized included the unamortized balances of goodwill and
core deposit intangibles, totaling $86.8 million and $4.2 million,
respectively, from the EurekaBank and Luther Burbank branch acquisitions. As a
result of our plan of liquidation and our corresponding negotiations to sell
certain businesses, we were able to obtain the fair values of the Asset-based
lending, Factored Receivables and Commercial leasing reporting units based on
recent bids on the businesses in the form of existing sales contracts or
letters of intent. As a result, the Company recorded $18.9 million in
impairment charges, net of taxes, for goodwill not expected to be realized upon
the disposition of these businesses. As required by the transitional
provisions of Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets, which the Company adopted January 1, 2002, the
impairment loss is measured and recorded as of the date of adoption and
recognized as the cumulative effect of a change in accounting principle as of
January 1, 2002.

Goodwill of $6.5 million related to the San Mateo-based factoring business
was realized as a result of the sale of this unit on June 5, 2002.

Amortization expense related to intangible assets with definite useful
lives, core-deposit intangibles, was $0.3 million for the third quarter of
2002.

Note 13. Segment and Related Information

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

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

A Commercial Platform which was comprised of multi-family and commercial
real estate loans, franchise loans, franchise asset-backed securities,
asset-based loans, syndicated loans, factored receivables and commercial

24



---



##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)

leases, and business banking products and services. The Commercial Platforms
revenues are derived from customers throughout the United States.

Each of our business platforms contributed to our overall operations. We
evaluated the performance of our segments based upon contribution by platform.
Contribution by platform is defined as each platforms net interest income and
noninterest income less each platforms allocated provision for losses on loans
and leases, direct general and administrative expenses, including certain
expense allocations, and other noninterest expense, including the amortization
of intangible assets.

In computing net interest income by platform, the interest expense
associated with our warehouse lines, which were used primarily to fund
franchise loans held-for-sale during 2001, was allocated directly to the
Commercial Platform. The interest expense associated with our remaining
funding sources, including the noninterest expense associated with our 9.76%
Capital Securities, was allocated to each platform on a pro-rata basis
determined by the relative amount of average interest-bearing liabilities,
excluding warehouse lines, that were required to fund the platforms
interest-earning assets.

The Retail Platform incurred the direct general and administrative
expenses related to operating our branch network, which served primarily to
generate deposits used to fund interest-earning assets in the Retail and
Commercial Platforms. A portion of these direct general and administrative
expenses was allocated to the
Commercial Platform based upon the relative amount of average interest-bearing
liabilities that were required to fund the platforms interest-earning assets.

All indirect general and administrative expenses not specifically
identifiable with, or allocable to, our business platforms were included in
indirect corporate overhead. Indirect, corporate overhead included expenses
associated with our administrative and support functions.

Liquidation adjustments recorded during the quarter in connection with our
adoption of liquidation basis accounting were not allocated to our business
platforms.

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

25



---



##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)

|                                                                 |  |                                               |           |            |  |       |         |   |  |   |           |  
|---------------------------------------------------------------- |  | --------------------------------------------- | --------- | ---------- |  | ----- | ------- | - |  | - | --------- | -
|                                                                 |  | For the Three Months Ended September 30, 2002
|                                                                 |  |                                              
|                                                                 |  | Retail                                        |           | Commercial |  | Total
|                                                                 |  |                                               |           |            |  |      
|                                                                 |  | (Dollars in thousands)                       
|Interest income                                                  |  | $                                             | 21,824    |            |  | $     | 17,239  |   |  | $ | 39,063    |  
|                                                                
|                                                                
|                                                                
|                                                                
|Interest expense                                                 |  |                                               | (15,880   | )          |  |       | (4,603  | ) |  |   | (20,483   | )
|                                                                
|                                                                
|                                                                
|                                                                
|Provision for losses on loans and leases                         |  |                                               | (2,159    | )          |  |       | (41     | ) |  |   | (2,200    | )
|                                                                
|                                                                
|                                                                
|                                                                
|Noninterest income                                               |  |                                               | 30,800    |            |  |       | 9,183   |   |  |   | 39,983    |  
|                                                                
|                                                                
|                                                                
|                                                                
|Direct general and administrative expenses                       |  |                                               | (23,574   | )          |  |       | (2,048  | ) |  |   | (25,622   | )
|                                                                
|                                                                
|                                                                
|                                                                
|Allocation of branch network general and administrative expenses |  |                                               | 4,128     |            |  |       | (4,128  | ) |  |   |          |  
|                                                                
|                                                                
|                                                                
|                                                                
|Leasing expenses                                                 |  |                                               | (12,911   | )          |  |       |        |   |  |   | (12,911   | )
|                                                                
|                                                                
|                                                                
|                                                                
|Dividend expense on Capital Securities                           |  |                                               | (1,971    | )          |  |       | (703    | ) |  |   | (2,674    | )
|                                                                
|                                                                
|                                                                
|                                                                
|Real estate owned operations including provision for losses, net |  |                                               |          |            |  |       | (150    | ) |  |   | (150      | )
|                                                                
|                                                                
|                                                                
|                                                                
|Amortization of intangible assets                                |  |                                               | (331      | )          |  |       |        |   |  |   | (331      | )
|                                                                 |  |                                               |           |            |  |       |         |   |  |   |           |  
|Contribution by platform                                         |  | $                                             | (74       | )          |  | $     | 14,749  |   |  | $ | 14,675    |  
|                                                                 |  |                                               |           |            |  |       |         |   |  |   |           |  
|Indirect corporate overhead                                      |  |                                               |           |            |  |       |         |   |  |   | (6,051    | )
|                                                                
|                                                                
|                                                                
|                                                                
|Adjustment for liquidation basis                                 |  |                                               |           |            |  |       |         |   |  |   | 266,510   |  
|                                                                
|                                                                
|                                                                
|                                                                
|Income tax expense                                               |  |                                               |           |            |  |       |         |   |  |   | (187,385  | )
|                                                                 |  |                                               |           |            |  |       |         |   |  |   |           |  
|Net income                                                       |  |                                               |           |            |  |       |         |   |  | $ | 87,749    |  
|                                                                 |  |                                               |           |            |  |       |         |   |  |   |           |  
|At September 30, 2002:                                           |  |                                               |           |            |  |       |         |   |  |   |           |  
|                                                                
|                                                                
|                                                                
|                                                                
|Interest-earning assets plus operating lease assets              |  | $                                             | 3,277,407 |            |  | $     | 358,258 |   |  | $ | 3,635,665 |  
|                                                                 |  |                                               |           |            |  |       |         |   |  |   |           |  
|Noninterest-earning assets                                       |  |                                               |           |            |  |       |         |   |  |   | 260,808   |  
|                                                                 |  |                                               |           |            |  |       |         |   |  |   |           |  
|Total assets                                                     |  |                                               |           |            |  |       |         |   |  | $ | 3,896,473 |  
|                                                                 |  |                                               |           |            |  |       |         |   |  |   |           |  

|                                                                 |  |                                               |           |            |  |       |           |   |  |   |           |  
|---------------------------------------------------------------- |  | --------------------------------------------- | --------- | ---------- |  | ----- | --------- | - |  | - | --------- | -
|                                                                 |  | For the Three Months Ended September 30, 2001
|                                                                 |  |                                              
|                                                                 |  | Retail                                        |           | Commercial |  | Total
|                                                                 |  |                                               |           |            |  |      
|                                                                 |  | (Dollars in thousands)                       
|Interest income                                                  |  | $                                             | 28,595    |            |  | $     | 36,734    |   |  | $ | 65,329    |  
|                                                                
|                                                                
|                                                                
|                                                                
|Interest expense                                                 |  |                                               | (22,279   | )          |  |       | (15,279   | ) |  |   | (37,558   | )
|                                                                
|                                                                
|                                                                
|                                                                
|Provision for losses on loans and leases                         |  |                                               | (500      | )          |  |       | (2,757    | ) |  |   | (3,257    | )
|                                                                
|                                                                
|                                                                
|                                                                
|Noninterest income                                               |  |                                               | 29,047    |            |  |       | 1,195     |   |  |   | 30,242    |  
|                                                                
|                                                                
|                                                                
|                                                                
|Direct general and administrative expenses                       |  |                                               | (26,060   | )          |  |       | (3,477    | ) |  |   | (29,537   | )
|                                                                
|                                                                
|                                                                
|                                                                
|Allocation of branch network general and administrative expenses |  |                                               | 7,361     |            |  |       | (7,361    | ) |  |   |          |  
|                                                                
|                                                                
|                                                                
|                                                                
|Restructuring expenses                                           |  |                                               |          |            |  |       | 1,812     |   |  |   | 1,812     |  
|                                                                
|                                                                
|                                                                
|                                                                
|Revaluation of franchise-related assets                          |  |                                               |          |            |  |       | 1,382     |   |  |   | 1,382     |  
|                                                                
|                                                                
|                                                                
|                                                                
|Leasing expenses                                                 |  |                                               | (16,567   | )          |  |       |          |   |  |   | (16,567   | )
|                                                                
|                                                                
|                                                                
|                                                                
|Dividend expense on Capital Securities                           |  |                                               | (1,323    | )          |  |       | (964      | ) |  |   | (2,287    | )
|                                                                
|                                                                
|                                                                
|                                                                
|Real estate owned operations including provision for losses, net |  |                                               | (261      | )          |  |       |          |   |  |   | (261      | )
|                                                                
|                                                                
|                                                                
|                                                                
|Amortization of intangible assets                                |  |                                               | (2,076    | )          |  |       | (728      | ) |  |   | (2,804    | )
|                                                                 |  |                                               |           |            |  |       |           |   |  |   |           |  
|Contribution by platform                                         |  | $                                             | (4,063    | )          |  | $     | 10,557    |   |  | $ | 6,494     |  
|                                                                 |  |                                               |           |            |  |       |           |   |  |   |           |  
|Indirect corporate overhead                                      |  |                                               |           |            |  |       |           |   |  |   | (7,490    | )
|                                                                
|                                                                
|                                                                
|                                                                
|Income tax benefit                                               |  |                                               |           |            |  |       |           |   |  |   | 364       |  
|                                                                 |  |                                               |           |            |  |       |           |   |  |   |           |  
|Net loss                                                         |  |                                               |           |            |  |       |           |   |  | $ | (632      | )
|                                                                 |  |                                               |           |            |  |       |           |   |  |   |           |  
|At September 30, 2001:                                           |  |                                               |           |            |  |       |           |   |  |   |           |  
|                                                                
|                                                                
|                                                                
|                                                                
|Interest-earning assets plus operating lease assets              |  | $                                             | 1,997,610 |            |  | $     | 1,647,957 |   |  | $ | 3,645,567 |  
|                                                                 |  |                                               |           |            |  |       |           |   |  |   |           |  
|Noninterest-earning assets                                       |  |                                               |           |            |  |       |           |   |  |   | 457,762   |  
|                                                                 |  |                                               |           |            |  |       |           |   |  |   |           |  
|Total assets                                                     |  |                                               |           |            |  |       |           |   |  | $ | 4,103,329 |  
|                                                                 |  |                                               |           |            |  |       |           |   |  |   |           |  

26



---



##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)

|                                                                  |  |                                              |         |            |  |       |         |   |  |   |          |  
|----------------------------------------------------------------- |  | -------------------------------------------- | ------- | ---------- |  | ----- | ------- | - |  | - | -------- | -
|                                                                  |  | For the Nine Months Ended September 30, 2002
|                                                                  |  |                                             
|                                                                  |  | Retail                                       |         | Commercial |  | Total
|                                                                  |  |                                              |         |            |  |      
|                                                                  |  | (Dollars in thousands)                      
|Interest income                                                   |  | $                                            | 69,054  |            |  | $     | 76,185  |   |  | $ | 145,239  |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Interest expense                                                  |  |                                              | (40,182 | )          |  |       | (19,886 | ) |  |   | (60,068  | )
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Provision for losses on loans and leases                          |  |                                              | (2,106  | )          |  |       | (8,594  | ) |  |   | (10,700  | )
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Noninterest income                                                |  |                                              | 78,775  |            |  |       | 12,790  |   |  |   | 91,565   |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Direct general and administrative expenses                        |  |                                              | (68,712 | )          |  |       | (7,813  | ) |  |   | (76,525  | )
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Allocation of branch network general and administrative expenses  |  |                                              | 18,466  |            |  |       | (18,466 | ) |  |   |         |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Litigation settlement expense                                     |  |                                              |        |            |  |       | (13,100 | ) |  |   | (13,100  | )
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Leasing expenses                                                  |  |                                              | (43,984 | )          |  |       |        |   |  |   | (43,984  | )
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Dividend expense on Capital Securities                            |  |                                              | (4,809  | )          |  |       | (3,064  | ) |  |   | (7,873   | )
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Real estate owned operations including provision for losses, net  |  |                                              |        |            |  |       | (1,222  | ) |  |   | (1,222   | )
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Amortization of intangible assets                                 |  |                                              | (993    | )          |  |       |        |   |  |   | (993     | )
|                                                                  |  |                                              |         |            |  |       |         |   |  |   |          |  
|Contribution by platform                                          |  | $                                            | 5,509   |            |  | $     | 16,830  |   |  | $ | 22,339   |  
|                                                                  |  |                                              |         |            |  |       |         |   |  |   |          |  
|Indirect corporate overhead                                       |  |                                              |         |            |  |       |         |   |  |   | (16,476  | )
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Adjustment for liquidation basis                                  |  |                                              |         |            |  |       |         |   |  |   | 266,510  |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Income tax expense                                                |  |                                              |         |            |  |       |         |   |  |   | (181,792 | )
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Cumulative effect of change in accounting principle, net of taxes |  |                                              |         |            |  |       |         |   |  |   | (18,920  | )
|                                                                  |  |                                              |         |            |  |       |         |   |  |   |          |  
|Net income                                                        |  |                                              |         |            |  |       |         |   |  | $ | 71,661   |  
|                                                                  |  |                                              |         |            |  |       |         |   |  |   |          |  

|                                                                 |  |                                              |         |            |  |       |          |   |  |   |          |  
|---------------------------------------------------------------- |  | -------------------------------------------- | ------- | ---------- |  | ----- | -------- | - |  | - | -------- | -
|                                                                 |  | For the Nine Months Ended September 30, 2001
|                                                                 |  |                                             
|                                                                 |  | Retail                                       |         | Commercial |  | Total
|                                                                 |  |                                              |         |            |  |      
|                                                                 |  | (Dollars in thousands)                      
|Interest income                                                  |  | $                                            | 112,356 |            |  | $     | 131,527  |   |  | $ | 243,883  |  
|                                                                
|                                                                
|                                                                
|                                                                
|Interest expense                                                 |  |                                              | (88,860 | )          |  |       | (65,024  | ) |  |   | (153,884 | )
|                                                                
|                                                                
|                                                                
|                                                                
|Provision for losses on loans and leases                         |  |                                              | (6,109  | )          |  |       | (56,881  | ) |  |   | (62,990  | )
|                                                                
|                                                                
|                                                                
|                                                                
|Noninterest income (expense)                                     |  |                                              | 89,708  |            |  |       | (9,308   | ) |  |   | 80,400   |  
|                                                                
|                                                                
|                                                                
|                                                                
|Direct general and administrative expenses                       |  |                                              | (76,094 | )          |  |       | (18,527  | ) |  |   | (94,621  | )
|                                                                
|                                                                
|                                                                
|                                                                
|Allocation of branch network general and administrative expenses |  |                                              | 21,388  |            |  |       | (21,388  | ) |  |   |         |  
|                                                                
|                                                                
|                                                                
|                                                                
|Restructuring expenses                                           |  |                                              | (4,998  | )          |  |       | (3,216   | ) |  |   | (8,214   | )
|                                                                
|                                                                
|                                                                
|                                                                
|Revaluation of franchise-related assets                          |  |                                              | (2,733  | )          |  |       | (65,913  | ) |  |   | (68,646  | )
|                                                                
|                                                                
|                                                                
|                                                                
|Leasing expenses                                                 |  |                                              | (61,610 | )          |  |       |         |   |  |   | (61,610  | )
|                                                                
|                                                                
|                                                                
|                                                                
|Dividend expense on Capital Securities                           |  |                                              | (3,932  | )          |  |       | (2,930   | ) |  |   | (6,862   | )
|                                                                
|                                                                
|                                                                
|                                                                
|Real estate owned operations including provision for losses, net |  |                                              | (252    | )          |  |       |         |   |  |   | (252     | )
|                                                                
|                                                                
|                                                                
|                                                                
|Amortization of intangible assets                                |  |                                              | (6,290  | )          |  |       | (2,186   | ) |  |   | (8,476   | )
|                                                                 |  |                                              |         |            |  |       |          |   |  |   |          |  
|Contribution by platform                                         |  | $                                            | (27,426 | )          |  | $     | (113,846 | ) |  | $ | (141,272 | )
|                                                                 |  |                                              |         |            |  |       |          |   |  |   |          |  
|Indirect corporate overhead                                      |  |                                              |         |            |  |       |          |   |  |   | (22,529  | )
|                                                                
|                                                                
|                                                                
|                                                                
|Income tax benefit                                               |  |                                              |         |            |  |       |          |   |  |   | 59,853   |  
|                                                                 |  |                                              |         |            |  |       |          |   |  |   |          |  
|Net loss                                                         |  |                                              |         |            |  |       |          |   |  | $ | (103,948 | )
|                                                                 |  |                                              |         |            |  |       |          |   |  |   |          |  

27



---



##### Table of Contents






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

Strategic Overview

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

Our Mission and Strategy

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

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

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

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

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

28



---



##### Table of Contents



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

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

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

As a result of the stockholders approval of our plan of dissolution and
stockholder liquidity and the close of the U.S. Bank transaction on November 1,
2002, we adopted liquidation basis accounting, effective September 30, 2002, in
accordance with GAAP.

With the adoption of liquidation basis accounting, our stockholders
equity was transferred to net assets in liquidation. Our net assets in
liquidation totaled $413.7 million at September 30, 2002 or $6.50 in net assets
in liquidation per outstanding share based on 63,631,680 diluted shares in
liquidation.

On November 1, 2002, the Company completed the U.S. Bank sale transaction.
At the closing of the transaction, U.S. Bank paid Bay View Bank the sum of: (i)
a 14% deposit premium (based on the average daily balances of deposits for the
30 calendar days ending on the business day prior to the closing date) plus
$5.0 million, or approximately $463.7 million; (ii) the principal amount of the
loans acquired of approximately $337.2 million less a loan loss reserve of
approximately $2.2 million; (iii) the net book value of real property and
personal property utilized by the branches and improvements thereto and other
assets assumed of approximately $15.2 million and (iv) the face amount of coins
and currency of approximately $9.8 million. Bay View Bank paid to U.S. Bank at
the closing an amount equal to the deposits being assumed by U.S. Bank of
approximately $3.307 billion, less of the amounts payable by U.S. Bank to Bay
View Bank as described above. The amounts paid at closing are subject to a
post-closing adjustment based upon a balance sheet as of the closing date.

Although we need to take a number of actions to implement our plan of
dissolution and stockholder liquidity, including obtaining the permission of
the Federal Reserve Bank and the OCC to make stockholder distributions, we
anticipate that such distributions will substantially be completed between
December 31, 2003 and June 30, 2004.

Retail and Commercial Platforms

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

Our Retail Platform has historically included single-family real estate
loans, home equity loans and lines of credit, auto loans and leases,
mortgage-backed securities and other investments, and other consumer banking
products and services.

The Retail Platform originates and purchases fixed-rate loans secured by
new and used autos. In executing our strategy, we identify product niches
which are not the primary focus of traditional competitors in the auto lending

29



---



##### Table of Contents



area, such as banks and captive finance companies. One such niche includes
auto loans where a highly qualified
borrower desires a higher relative loan amount and/or a longer term than is
offered by other more traditional auto financing sources. In return for the
flexibility of the products offered, we charge higher interest rates while
still applying traditional underwriting criteria to mitigate potential loan
losses.

Our Commercial Platform has historically included multi-family and
commercial real estate loans, franchise loans, asset-based loans, syndicated
loans, factored receivables, commercial leases, and other business banking
products and services. We purchased and originated franchise loans until the
restructuring of our franchise lending division, which was shut down in
September 2000. Since this restructuring, we have significantly reduced our
concentration of franchise assets. We ceased originating multi-family and
commercial mortgage loans in August 2002 subsequent to the Washington Mutual
sale transaction.

Critical Accounting Policies

We have identified the most critical accounting policies upon which our
financial status depends. We determined the critical policies by considering
accounting principles that involve the most complex or subjective decisions or
assessments. We have identified our most critical accounting policies to be
those related to investment in operating lease assets, income taxes and the
value of assets and liabilities in liquidation and the reserve for estimated
costs during the period of liquidation. Descriptions of these accounting
policies are found in both the notes to the consolidated financial statements
and at relevant sections in this managements discussion and analysis.

Results of Operations

Our net income for the third quarter and for the first nine months of
2002, including net adjustments required to convert from a going concern basis
to a liquidation basis of accounting, totaled $87.7 million, or $1.39 per
diluted share, and $71.7 million, or $1.13 per diluted share, respectively.
Our net loss for the third quarter and the first nine months of 2001, presented
on a going concern basis of accounting, was $0.6 million, or $0.01 per diluted
share, and $103.9 million, or $2.22 per diluted share, respectively. Excluding
the liquidation adjustments, our operating income before taxes totaled $8.6
million and $5.9 million for the third quarter and first nine months of 2002,
respectively, as compared to operating losses before taxes of $1.0 million and
$163.8 million for the third quarter and first nine months of 2001,
respectively.

In accordance with liquidation basis accounting, our assets have been
valued at their estimated net realizable value and liabilities include
estimated costs associated with carrying out the plan of dissolution and
stockholder liquidity. We recorded pre-tax adjustments totaling $266.5 million
related to the mark-to-market valuation of our assets and liabilities in
connection with our adoption of liquidation basis accounting during the
quarter. The valuation adjustments primarily consisted of the following:



| |  |  | $463.5 million deposit premium, which was calculated as 14% of
non-brokered retail deposits based on October average deposit levels
plus $5 million pursuant to the agreement with U.S. Bank;                                                                                         
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | $91.0 million reduction in goodwill related to the deposits being
sold;                                                                                                                                                                                                               
|
| |  |  | $37.0 million mark-to-market adjustment related to loan balances
reflecting the estimated net realizable value of our remaining loan
portfolios under an accelerated timeline to sell such loans pursuant to
the plan of dissolution and stockholder liquidity;                       
|
| |  |  | $51.1 million in charges related to the sale of our retail banking
assets including $26.6 million in severance payments, $12.7 million in
investment banking and other professional fees, and $11.8 million in net
accruals for closed facilities and other contracts and settlements;
|
| |  |  | $8.8 million in charges related to the prepayment of our and Bay View
Banks Subordinated Notes including a $4.2 million write-off of issuance
costs and $4.6 million in prepayment penalties;                                                                                        
|
| |  |  | $4.9 million write-off of franchise loan securitization residual
assets; and                                                                                                                                                                                                          
|
| |  |  | $3.7 million write-off of unamortized issuance costs on the Capital
Securities in anticipation of these securities being called in 2003.                                                                                                                                              

30



---



##### Table of Contents



Also during the quarter, we recorded $18.9 million in impairment charges,
net of taxes, for goodwill related to three of our commercial lending
businesses which is not expected to be realized upon the disposition of these
businesses. As required by the transitional provisions of Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets,
which we adopted as of January 1, 2002, the impairment loss is measured and
recorded as of the date of adoption and recognized as the cumulative effect of
a change in accounting principle as of January 1, 2002.

Our results for the third quarter of 2002 reflect the impact of asset
sales consummated to generate the funds necessary to close the U.S. Bank sale
transaction. During the quarter, we completed the sale of approximately $1.0
billion of multi-family mortgage and commercial real estate loans to Washington
Mutual. Additionally, we securitized and sold approximately $450.0 million of
our auto loan receivables and sold $49.8 million of franchise loans and $71.1
million of mortgage-backed and other investment securities. Net gains on sales
of assets totaling $18.1 million were recognized during the quarter primarily
consisting of $11.8 million gain on the securitization and sale of auto loans and $6.3
million net gain on the sale of multi-family and commercial real estate loans.

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

On June 5, 2002, we completed the sale of our San Mateo-based factoring
business, Bay View Funding, to a group of investors led by the factoring
companys management team. Through this transaction, we converted
approximately $6.5 million of goodwill to tangible equity.

Net Interest Income and Net Interest Margin

Net interest income was $18.6 million for the third quarter of 2002 as
compared to $27.8 million for the third quarter of 2001. Net interest income
for the first nine months of 2002 was $85.2 million as compared to $90.0
million for the first nine months of 2001. Net interest margin was 2.31% for
the third quarter of 2002 as compared to 3.17% for the third quarter of 2001.
Net interest margin was 3.56% for the first nine months of 2002 as compared to
2.96% for the first nine months of 2001.

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

|                    |  |                            |        |                    |  |          |      |          |  |   |        |  |  |  |      |  
|------------------- |  | -------------------------- | ------ | ------------------ |  | -------- | ---- | -------- |  | - | ------ |  |  |  | ---- | -
|                    |  | For the Three Months Ended
|                    |  |                           
|                    |  | September 30, 2002         |        | September 30, 2001
|                    |  |                            |        |                   
|                    |  | Net                        |        | Net                |  | Net      |      | Net     
|                    |  | Interest                   |        | Interest           |  | Interest |      | Interest
|                    |  | Income                     |        | Margin             |  | Income   |      | Margin  
|                    |  |                            |        |                    |  |          |      |         
|                    |  | (Dollars in thousands)    
|Retail Platform
(1) |  | $                          | 5,944  |                    |  |          | 1.02 | %        |  | $ | 6,316  |  |  |  | 1.42 | %
|                   
|                   
|                   
|                   
|Commercial
Platform |  |                            | 12,636 |                    |  |          | 5.53 |          |  |   | 21,455 |  |  |  | 5.11 |  
|                    |  |                            |        |                    |  |          |      |          |  |   |        |  |  |  |      |  
|Total               |  | $                          | 18,580 |                    |  |          | 2.31 | %        |  | $ | 27,771 |  |  |  | 3.17 | %
|                    |  |                            |        |                    |  |          |      |          |  |   |        |  |  |  |      |  

31



---



##### Table of Contents



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



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

The decrease in net interest income for the third quarter of 2002, as
compared to the third quarter of 2001, was due to a decrease in net interest
margin as well as average interest-earning assets. The substantial decrease in
net interest margin was largely attributable to a change in the asset mix
causing lower average yields on assets as we converted higher-yielding loans
and investment securities to cash that was invested in short-term investments
in anticipation of the close of the U.S. Bank transaction combined with
increased cost of deposits due to the acquisition of brokered certificates of
deposit. The decrease in average interest-earning assets was primarily due to
sales of loans, mortgage-backed securities and other investment securities, as
well as payoffs throughout the fourth quarter of 2001 and the first nine months
of 2002.

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

Our net interest margin, calculated in accordance with GAAP, excludes the
revenue from our auto leasing activities, but includes the associated funding
costs. Because our auto leases are accounted for as operating leases, the
rental income and related expenses, including depreciation expense, are
reflected in noninterest income and noninterest expense in accordance with
GAAP.

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

|                    |  |                          |           |               |  |   |           | 
|------------------- |  | ------------------------ | --------- | ------------- |  | - | --------- | 
|                    |  | Average Balances for the
|                    |  | Three Months Ended      
|                    |  |                         
|                    |  | September 30,            |           | September 30,
|                    |  | 2002                     |           | 2001         
|                    |  |                          |           |              
|                    |  | (Dollars in thousands)  
|Retail Platform     |  | $                        | 2,283,572 |               |  | $ | 1,842,104 | 
|                   
|                   
|                   
|                   
|Commercial
Platform |  |                          | 913,154   |               |  |   | 1,648,620 | 
|                    |  |                          |           |               |  |   |           | 
|Total               |  | $                        | 3,196,726 |               |  | $ | 3,490,724 | 
|                    |  |                          |           |               |  |   |           | 

32



---



##### Table of Contents



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

The increase in the Retail Platforms average interest-earning assets,
excluding our auto-related operating lease assets for the third quarter of
2002, as compared to the third quarter of 2001, reflects the impact of the
change in the mix of assets as proceeds from sales of loans, including
Commercial Platform loan sales, and investment securities during the third
quarter of 2002 were reinvested in short-term investments. The increase in
short-term investments within the Retail Platform was partially offset by the
impact sales of loans and investment securities during 2002.

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

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

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

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

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

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

33



---



##### Table of Contents



Average Balance Sheet

The following tables illustrate average yields on our interest-earning
assets and average rates on our interest-bearing liabilities for the periods
indicated. These average yields and rates were calculated by dividing interest
income by the average balance of interest-earning assets and by dividing
interest expense by the average balance of interest-bearing liabilities, for
the periods indicated. Average balances of interest-earning assets and
interest-bearing liabilities were calculated by averaging the relevant
month-end amounts for the respective periods.

34



---



##### Table of Contents



|                                           |                                |   |                                    |           |                            |   |            |        |         |  |                        |      |            |   |           |           |         |   |        |        |  |  |      |      |  
|------------------------------------------ | ------------------------------ | - | ---------------------------------- | --------- | -------------------------- | - | ---------- | ------ | ------- |  | ---------------------- | ---- | ---------- | - | --------- | --------- | ------- | - | ------ | ------ |  |  | ---- | ---- | -
|                                           |                                |   | AVERAGE BALANCES, YIELDS AND RATES
|                                           |                                |   |                                   
|                                           |                                |   | For the Three Months Ended         |           | For the Three Months Ended
|                                           |                                |   | September 30, 2002                 |           | September 30, 2001        
|                                           |                                |   |                                    |           |                           
|                                           |                                |   | Average                            |           |                            |   |            |        | Average |  | Average                |      |            |   |           |           | Average
|                                           |                                |   | Balance                            |           | Interest                   |   | Yield/Rate |        | Balance |  | Interest               |      | Yield/Rate
|                                           |                                |   |                                    |           |                            |   |            |        |         |  |                        |      |           
|                                           |                                |   |                                    |           |                            |   |            |        |         |  | (Dollars in thousands) |      |            |   |           |           |         |   |       
|Assets                                     |                                |   |                                    |           |                            |   |            |        |         |  |                        |      |            |   |           |           |         |   |        |        |  |  |      |     
|                                          
|                                          
|                                          
|                                          
|Interest-earning assets:                   |                                |   |                                    |           |                            |   |            |        |         |  |                        |      |            |   |           |           |         |   |        |        |  |  |      |     
|                                          
|                                          
|                                          
|                                          
|                                           | Loans and leases               | $ | 1,627,939                          |           |                            | $ | 30,174     |        |         |  | 7.62                   | %    |            | $ | 2,580,268 |           |         | $ | 55,156 |        |  |  | 8.50 | %   
|                                          
|                                          
|                                          
|                                          
|                                           | Mortgage-backed securities (1) |   | 155,087                            |           |                            |   | 1,749      |        |         |  | 4.52                   |      |            |   | 310,465   |           |         |   | 4,231  |        |  |  | 5.46 |     
|                                          
|                                          
|                                          
|                                          
|                                           | Investments (1)                |   | 1,413,700                          |           |                            |   | 7,140      |        |         |  | 1.99                   |      |            |   | 599,991   |           |         |   | 5,942  |        |  |  | 3.89 |     
|                                           |                                |   |                                    |           |                            |   |            |        |         |  |                        |      |            |   |           |           |         |   |        |        |  |  |      |     
|Total interest-earning assets              |                                |   | 3,196,726                          |           |                            |   | 39,063     |        |         |  | 4.86                   | %    |            |   | 3,490,724 |           |         |   | 65,329 |        |  |  | 7.44 | %   
|                                           |                                |   |                                    |           |                            |   |            |        |         |  |                        |      |            |   |           |           |         |   |        |        |  |  |      |     
|Other assets                               |                                |   | 729,257                            |           |                            |   |            |        |         |  |                        |      |            |   | 732,486   |           |         |   |        |        |  |  |      |     
|                                           |                                |   |                                    |           |                            |   |            |        |         |  |                        |      |            |   |           |           |         |   |        |        |  |  |      |     
|Total assets                               |                                | $ | 3,925,983                          |           |                            |   |            |        |         |  |                        |      |            | $ | 4,223,210 |           |         |   |        |        |  |  |      |     
|                                           |                                |   |                                    |           |                            |   |            |        |         |  |                        |      |            |   |           |           |         |   |        |        |  |  |      |     
|Liabilities and Stockholders Equity       |                                |   |                                    |           |                            |   |            |        |         |  |                        |      |            |   |           |           |         |   |        |        |  |  |      |     
|                                          
|                                          
|                                          
|                                          
|Interest-bearing liabilities:              |                                |   |                                    |           |                            |   |            |        |         |  |                        |      |            |   |           |           |         |   |        |        |  |  |      |     
|                                          
|                                          
|                                          
|                                          
|                                           | Deposits                       |   | $                                  | 3,266,192 |                            |   | $          | 15,978 |         |  |                        | 1.94 | %          |   | $         | 3,436,575 |         |   | $      | 30,691 |  |  |      | 3.54 | %
|                                          
|                                          
|                                          
|                                          
|                                           | Borrowings (2)                 |   |                                    | 239,019   |                            |   |            | 4,505  |         |  |                        | 7.53 |            |   |           | 342,243   |         |   |        | 6,867  |  |  |      | 7.97 |  
|                                           |                                |   |                                    |           |                            |   |            |        |         |  |                        |      |            |   |           |           |         |   |        |        |  |  |      |     
|Total interest-bearing liabilities         |                                |   | 3,505,211                          |           |                            |   | 20,483     |        |         |  | 2.32                   | %    |            |   | 3,778,818 |           |         |   | 37,558 |        |  |  | 3.94 | %   
|                                           |                                |   |                                    |           |                            |   |            |        |         |  |                        |      |            |   |           |           |         |   |        |        |  |  |      |     
|Other liabilities                          |                                |   | 65,561                             |           |                            |   |            |        |         |  |                        |      |            |   | 114,068   |           |         |   |        |        |  |  |      |     
|                                           |                                |   |                                    |           |                            |   |            |        |         |  |                        |      |            |   |           |           |         |   |        |        |  |  |      |     
|Total liabilities                          |                                |   | 3,570,772                          |           |                            |   |            |        |         |  |                        |      |            |   | 3,892,886 |           |         |   |        |        |  |  |      |     
|                                          
|                                          
|                                          
|                                          
|Stockholders equity                       |                                |   | 355,211                            |           |                            |   |            |        |         |  |                        |      |            |   | 330,324   |           |         |   |        |        |  |  |      |     
|                                           |                                |   |                                    |           |                            |   |            |        |         |  |                        |      |            |   |           |           |         |   |        |        |  |  |      |     
|Total liabilities and stockholders equity |                                | $ | 3,925,983                          |           |                            |   |            |        |         |  |                        |      |            | $ | 4,223,210 |           |         |   |        |        |  |  |      |     
|                                           |                                |   |                                    |           |                            |   |            |        |         |  |                        |      |            |   |           |           |         |   |        |        |  |  |      |     
|Net interest income/net interest spread    |                                |   |                                    |           |                            | $ | 18,580     |        |         |  | 2.54                   | %    |            |   |           |           |         | $ | 27,771 |        |  |  | 3.50 | %   
|                                           |                                |   |                                    |           |                            |   |            |        |         |  |                        |      |            |   |           |           |         |   |        |        |  |  |      |     
|Net interest-bearing liabilities           |                                | $ | (308,485                           | )         |                            |   |            |        |         |  |                        |      |            | $ | (288,094  | )         |         |   |        |        |  |  |      |     
|                                           |                                |   |                                    |           |                            |   |            |        |         |  |                        |      |            |   |           |           |         |   |        |        |  |  |      |     
|Net interest margin (3)                    |                                |   |                                    |           |                            |   |            |        |         |  | 2.31                   | %    |            |   |           |           |         |   |        |        |  |  | 3.17 | %   
|                                           |                                |   |                                    |           |                            |   |            |        |         |  |                        |      |            |   |           |           |         |   |        |        |  |  |      |     



|(1) |  | Average balances and yields for securities and other investments
classified as available-for-sale are based on historical amortized cost.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Interest expense for borrowings excludes expenses related to our
Capital Securities.                                                     
|   
|   
|   
|   
|(3) |  | Annualized net interest income divided by average interest-earning
assets.                                                               

35



---



##### Table of Contents



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



|(1) |  | Average balances and yields for securities and other investments
classified as available-for-sale are based on historical amortized cost.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Interest expense for borrowings excludes expenses related to our
Capital Securities.                                                     
|   
|   
|   
|   
|(3) |  | Annualized net interest income divided by average interest-earning
assets.                                                               

36



---



##### Table of Contents



Interest Income

Interest income was $39.1 million for the third quarter of 2002 as
compared to $65.3 million for the third quarter of 2001. Interest income was
$145.2 million for the first nine months of 2002 as compared to $243.9 million
for the first nine months of 2001. The average yield on interest-earning
assets was 4.86% for the third quarter of 2002 as compared to 7.44% for the
third quarter of 2001. The average yield on interest-earning assets was 6.08%
for the first nine months of 2002 as compared to 8.08% for the first nine
months of 2001. The following tables illustrate interest income, by platform,
for the periods indicated:

|                           |  |                            |           |                    |  |         |        |         |  |                        |      |         |  |   |           |  |  |   |        |  |  |  |      |  
|-------------------------- |  | -------------------------- | --------- | ------------------ |  | ------- | ------ | ------- |  | ---------------------- | ---- | ------- |  | - | --------- |  |  | - | ------ |  |  |  | ---- | -
|                           |  | For the Three Months Ended
|                           |  |                           
|                           |  | September 30, 2002         |           | September 30, 2001
|                           |  |                            |           |                   
|                           |  | Average                    |           | Interest           |  | Average |        | Average |  | Interest               |      | Average
|                           |  | Balance                    |           | Income             |  | Yield   |        | Balance |  | Income                 |      | Yield  
|                           |  |                            |           |                    |  |         |        |         |  |                        |      |        
|                           |  |                            |           |                    |  |         |        |         |  | (Dollars in thousands) |      |         |  |   |           |  |  |  
|Retail Platform:           |  |                            |           |                    |  |         |        |         |  |                        |      |         |  |   |           |  |  |   |        |  |  |  |      |  
|                          
|                          
|                          
|                          
|Loans                      |  | $                          | 720,787   |                    |  | $       | 12,935 |         |  |                        | 7.13 | %       |  | $ | 938,810   |  |  | $ | 18,422 |  |  |  | 7.81 | %
|                          
|                          
|                          
|                          
|Mortgage-backed securities |  |                            | 155,087   |                    |  |         | 1,749  |         |  |                        | 4.52 |         |  |   | 310,465   |  |  |   | 4,231  |  |  |  | 5.46 |  
|                          
|                          
|                          
|                          
|Investments                |  |                            | 1,407,698 |                    |  |         | 7,140  |         |  |                        | 1.99 |         |  |   | 592,829   |  |  |   | 5,942  |  |  |  | 3.94 |  
|                           |  |                            |           |                    |  |         |        |         |  |                        |      |         |  |   |           |  |  |   |        |  |  |  |      |  
|Total Retail Platform      |  |                            | 2,283,572 |                    |  |         | 21,824 |         |  |                        | 3.79 |         |  |   | 1,842,104 |  |  |   | 28,595 |  |  |  | 6.17 |  
|                           |  |                            |           |                    |  |         |        |         |  |                        |      |         |  |   |           |  |  |   |        |  |  |  |      |  
|Commercial Platform:       |  |                            |           |                    |  |         |        |         |  |                        |      |         |  |   |           |  |  |   |        |  |  |  |      |  
|                          
|                          
|                          
|                          
|Loans and leases           |  |                            | 907,152   |                    |  |         | 17,239 |         |  |                        | 7.58 |         |  |   | 1,641,458 |  |  |   | 36,734 |  |  |  | 8.89 |  
|                          
|                          
|                          
|                          
|Investments                |  |                            | 6,002     |                    |  |         |       |         |  |                        |     |         |  |   | 7,162     |  |  |   |       |  |  |  |     |  
|                           |  |                            |           |                    |  |         |        |         |  |                        |      |         |  |   |           |  |  |   |        |  |  |  |      |  
|Total Commercial Platform  |  |                            | 913,154   |                    |  |         | 17,239 |         |  |                        | 7.53 |         |  |   | 1,648,620 |  |  |   | 36,734 |  |  |  | 8.85 |  
|                           |  |                            |           |                    |  |         |        |         |  |                        |      |         |  |   |           |  |  |   |        |  |  |  |      |  
|Total                      |  | $                          | 3,196,726 |                    |  | $       | 39,063 |         |  |                        | 4.86 | %       |  | $ | 3,490,724 |  |  | $ | 65,329 |  |  |  | 7.44 | %
|                           |  |                            |           |                    |  |         |        |         |  |                        |      |         |  |   |           |  |  |   |        |  |  |  |      |  

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

Retail Platform

Interest income for the Retail Platform was $21.8 million for the third
quarter of 2002 as compared to $28.6 million for the third quarter of 2001.
Interest income for the Retail Platform was $69.1 million for the first nine
months of 2002 as compared to $112.4 million for the first nine months of 2001.
The average yield on interest-earning assets for the Retail Platform was 3.79%
for the third quarter of 2002 as compared to 6.17% for the third quarter of
2001. The average yield on interest-earning assets for the Retail Platform was
5.06% for the first nine months of 2002 as compared to 7.09% for the first nine
months of 2001.

37



---



##### Table of Contents



The Retail Platforms interest income on loans was $12.9 million for the
third quarter of 2002 as compared to $18.4 million for the third quarter of
2001. The Retail Platforms interest income on loans was $46.4 million for the
first nine months of 2002 as compared to $62.3 million for the first nine
months of 2001. The Retail Platforms average loan yield
was 7.13% for the third quarter of 2002 as compared to 7.81% for the third
quarter of 2001. The Retail Platforms average loan yield was 7.76% for the
first nine months of 2002 as compared to 8.42% for the first nine months of
2001. The decreases in interest income on loans for the third quarter of 2002,
as compared to the third quarter of 2001, and for the first nine months of
2002, as compared to the first nine months of 2001, were due to lower average
loan balances, as previously discussed, combined with a decrease in the
platforms average loan yields due to the lower interest rate environment and
sales of higher-yielding loans during the fourth quarter of 2001 and the first
nine months of 2002.

The Retail Platforms interest income on mortgage-backed securities was
$1.7 million for the third quarter of 2002 as compared to $4.2 million for the
third quarter of 2001. The Retail Platforms interest income on
mortgage-backed securities was $8.3 million for the first nine months of 2002
as compared to $27.9 million for the first nine months of 2001. The Retail
Platforms average yield on mortgage-backed securities was 4.52% for the third
quarter of 2002 as compared to 5.46% for the third quarter of 2001. The Retail
Platforms average yield on mortgage-backed securities was 4.78% for the first
nine months of 2002 as compared to 6.97% for the first nine months of 2001.
The decreases in interest income on mortgage-backed securities for the third
quarter of 2002, as compared to the third quarter of 2001, and for the first
nine months of 2002, as compared to the first nine months of 2001, were
primarily due to lower average balances and yields. The average balances of
our mortgage-backed securities have declined as purchases of mortgage-backed
securities were more than offset by sales throughout 2002. The average yields
of our mortgage-backed securities decreased due to the continuing impact of the
low interest rate environment and the sales of relatively higher-yielding
fixed-rate mortgage-backed securities, including GNMA securities, during 2002.

The Retail Platforms interest income on investment securities, which
consist primarily of short-term investments, trust preferred and asset-backed
securities and our retained interests in auto loan securitizations, was $7.1
million for the third quarter of 2002 as compared to $5.9 million for the third
quarter of 2001. The Retail Platforms interest income on investment
securities was $14.4 million for the first nine months of 2002 as compared to
$22.2 million for the first nine months of 2001. The Retail Platforms average
yield on investment securities was 1.99% for the third quarter of 2002 as
compared to 3.94% for the third quarter of 2001. The Retail Platforms average
yield on investment securities was 2.42% for the first nine months of 2002 as
compared to 4.99% for the first nine months of 2001. The increases in interest
income on investments for the third quarter of 2002, as compared to the third
quarter of 2001, and for the first nine months of 2002, as compared to the
first nine months of 2001, were primarily due to higher average balances
partially offset by lower average yields. Average balances and yields on
investment securities were impacted by the reinvestment of proceeds from sales
of higher-yielding loans, including Commercial Platform loan sales, and
investment securities into lower-yielding short-term investments.
Additionally, the low interest rate environment continues to adversely impact
the average yields on investment securities.

Commercial Platform

Interest income for the Commercial Platform was $17.2 million for the
third quarter of 2002 as compared to $36.7 million for the third quarter of
2001. Interest income for the Commercial Platform was $76.2 million for the
first nine months of 2002 as compared to $131.5 million for the first nine
months of 2001. The average yield on interest-earning assets for the
Commercial Platform was 7.53% for the third quarter of 2002 as compared to
8.85% for the third quarter of 2001. The average yield on interest-earning
assets for the Commercial Platform was 7.42% for the first nine months of 2002
as compared to 9.17% for the first nine months of 2001.

The Commercial Platforms interest income on loans was $17.2 million for
the third quarter of 2002 as compared to $36.7 million for the third quarter of
2001. The Commercial Platforms interest income on loans was $75.9 million for
the first nine months of 2002 as compared to $130.4 million for the first nine
months of 2001. The Commercial Platforms average loan and lease yield was
7.58% for the third quarter of 2002 as compared to 8.89% for the third quarter
of 2001. The Commercial Platforms average loan and lease yield was 7.42% for
the first nine months of 2002 as
38Table of Contents

compared to 9.15% for the first nine months of
2001. The decreases in interest income on loans and leases for the third
quarter of 2002, as compared to the third quarter of 2001, and for the first
nine months of 2002, as compared to the first nine months of 2001, were due to
lower average loan and lease balances, resulting from loan sales during the
fourth quarter of 2001 and throughout 2002 and writedowns related to the
revaluation of franchise loans during 2001, combined with decreases in average
yields.

There was no interest income on investment securities in the Commercial
Platform during the third quarter of 2002 and the third quarter of 2001. The
Commercial Platforms interest income on investment securities, which consist
of franchise asset-backed securities and residual interests in franchise loan
securitization was $332 thousand for the first nine months of 2002 as compared
to $1.1 million for the first nine months of 2001. The Company ceased
accreting the discount on these securities during the third quarter of 2002.
The Commercial Platforms average yield on investment securities was 7.47% for
the first nine months of 2002 as compared to 11.35% for the first nine months
of 2001. The decrease in interest income on investment securities for the
first nine months of 2002, as compared to the first nine months of 2001, was
largely due to lower average balances resulting from writedowns related to the
revaluation of residual interests in franchise loan securitizations during
2001. We wrote-off our residual interests in franchise loan securitizations
during the third quarter of 2002 in connection with our adoption of liquidation
basis accounting.

Interest Expense

Deposits

Interest expense on our deposits was $16.0 million for the third quarter
of 2002 as compared to $30.7 million for the third quarter of 2001. Interest
expense on our deposits was $44.5 million for the first nine months of 2002 as
compared to $114.1 million for the first nine months of 2001. The average cost
of deposits was 1.94% for the third quarter of 2002 as compared to 3.54% for
the third quarter of 2001. The average cost of deposits was 1.89% for the
first nine months of 2002 as compared to 4.28% for the first nine months of
2001.

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

39



---



##### Table of Contents



The following tables summarize our deposit costs by type for the periods
indicated:

|                                 |  |                            |           |               |  |                        |      |              |  |   |           |  |  |  |      |  
|-------------------------------- |  | -------------------------- | --------- | ------------- |  | ---------------------- | ---- | ------------ |  | - | --------- |  |  |  | ---- | -
|                                 |  | For the Three Months Ended
|                                 |  |                           
|                                 |  | September 30,              |           | September 30,
|                                 |  | 2002                       |           | 2001         
|                                 |  |                            |           |              
|                                 |  | Average Balance            |           | Average Rate  |  | Average Balance        |      | Average Rate
|                                 |  |                            |           |               |  |                        |      |             
|                                 |  |                            |           |               |  | (Dollars in thousands) |      |              |  |  
|Savings                          |  | $                          | 156,760   |               |  |                        | 0.73 | %            |  | $ | 164,712   |  |  |  | 1.17 | %
|                                
|                                
|                                
|                                
|Money Market                     |  |                            | 915,838   |               |  |                        | 1.75 |              |  |   | 1,266,258 |  |  |  | 3.36 |  
|                                
|                                
|                                
|                                
|Checking accounts                |  |                            | 730,138   |               |  |                        | 0.82 |              |  |   | 493,203   |  |  |  | 1.13 |  
|                                 |  |                            |           |               |  |                        |      |              |  |   |           |  |  |  |      |  
|Total transaction accounts       |  |                            | 1,802,736 |               |  |                        | 1.29 |              |  |   | 1,924,173 |  |  |  | 2.60 |  
|                                
|                                
|                                
|                                
|Retail certificates of deposit   |  |                            | 1,355,770 |               |  |                        | 2.78 |              |  |   | 1,512,402 |  |  |  | 4.74 |  
|                                
|                                
|                                
|                                
|Brokered certificates of deposit |  |                            | 107,686   |               |  |                        | 2.35 |              |  |   |          |  |  |  |     |  
|                                 |  |                            |           |               |  |                        |      |              |  |   |           |  |  |  |      |  
|Total deposits                   |  | $                          | 3,266,192 |               |  |                        | 1.94 | %            |  | $ | 3,436,575 |  |  |  | 3.54 | %
|                                 |  |                            |           |               |  |                        |      |              |  |   |           |  |  |  |      |  

|                                 |  |                           |           |               |  |                        |      |              |  |   |           |  |  |  |      |  
|-------------------------------- |  | ------------------------- | --------- | ------------- |  | ---------------------- | ---- | ------------ |  | - | --------- |  |  |  | ---- | -
|                                 |  | For the Nine Months Ended
|                                 |  |                          
|                                 |  | September 30,             |           | September 30,
|                                 |  | 2002                      |           | 2001         
|                                 |  |                           |           |              
|                                 |  | Average Balance           |           | Average Rate  |  | Average Balance        |      | Average Rate
|                                 |  |                           |           |               |  |                        |      |             
|                                 |  |                           |           |               |  | (Dollars in thousands) |      |              |  |  
|Savings                          |  | $                         | 159,805   |               |  |                        | 0.58 | %            |  | $ | 136,689   |  |  |  | 1.37 | %
|                                
|                                
|                                
|                                
|Money Market                     |  |                           | 991,639   |               |  |                        | 1.72 |              |  |   | 1,141,178 |  |  |  | 3.95 |  
|                                
|                                
|                                
|                                
|Checking accounts                |  |                           | 734,123   |               |  |                        | 0.84 |              |  |   | 437,279   |  |  |  | 1.13 |  
|                                 |  |                           |           |               |  |                        |      |              |  |   |           |  |  |  |      |  
|Total transaction accounts       |  |                           | 1,885,567 |               |  |                        | 1.28 |              |  |   | 1,715,146 |  |  |  | 3.02 |  
|                                
|                                
|                                
|                                
|Retail certificates of deposit   |  |                           | 1,219,779 |               |  |                        | 2.83 |              |  |   | 1,753,231 |  |  |  | 5.45 |  
|                                
|                                
|                                
|                                
|Brokered certificates of deposit |  |                           | 36,290    |               |  |                        | 2.35 |              |  |   | 154,213   |  |  |  | 7.24 |  
|                                 |  |                           |           |               |  |                        |      |              |  |   |           |  |  |  |      |  
|Total deposits                   |  | $                         | 3,141,636 |               |  |                        | 1.89 | %            |  | $ | 3,622,590 |  |  |  | 4.28 | %
|                                 |  |                           |           |               |  |                        |      |              |  |   |           |  |  |  |      |  

Borrowings

Interest expense on our borrowings was $4.5 million for the third quarter
of 2002 as compared to $6.9 million for the third quarter of 2001. Interest
expense on our borrowings was $15.6 million for the first nine months of 2002
as compared to $39.8 million for the first nine months of 2001. The average
cost of borrowings was 7.53% for the third quarter of 2002 as compared to 7.97%
for the third quarter of 2001. The average cost of borrowings was 7.67% for
the first nine months of 2002 as compared to 7.05% for the first nine months of
2001. In accordance with GAAP, these amounts exclude the expense associated
with our Capital Securities.

The decrease in interest expense on borrowings for the third quarter of
2002, as compared to the third quarter of 2001, was primarily due to lower
average balances combined with lower funding costs. The decrease in average
balances was primarily due to the payoff of the warehouse line and the paydown
of our Federal Home Loan Bank advances. The decrease in borrowing costs was
primarily due to the elimination of the high costs associated with our
warehouse line, including the accelerated amortization of fees resulting from
the payoff of the warehouse line in August 2001.

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

40



---



##### Table of Contents



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

|                    |                            |   |                                                        |         |          |   |                        |         |   |   |         |         |  
|------------------- | -------------------------- | - | ------------------------------------------------------ | ------- | -------- | - | ---------------------- | ------- | - | - | ------- | ------- | -
|                    |                            |   | For the Three Months Ended September 30, 2002 vs. 2001
|                    |                            |   |                                                       
|                    |                            |   | Rate                                                   |         | Volume   |   | Total                 
|                    |                            |   | Variance                                               |         | Variance |   | Variance              
|                    |                            |   |                                                        |         |          |   |                       
|                    |                            |   |                                                        |         |          |   | (Dollars in thousands) |         |   |   |        
|Interest income:    |                            |   |                                                        |         |          |   |                        |         |   |   |         |        
|                   
|                   
|                   
|                   
|                    | Loans and leases           |   | $                                                      | (5,473  | )        |   | $                      | (19,509 | ) |   | $       | (24,982 | )
|                   
|                   
|                   
|                   
|                    | Mortgage-backed securities |   |                                                        | (635    | )        |   |                        | (1,847  | ) |   |         | (2,482  | )
|                   
|                   
|                   
|                   
|                    | Investment securities      |   |                                                        | (674    | )        |   |                        | 1,872   |   |   |         | 1,198   |  
|                    |                            |   |                                                        |         |          |   |                        |         |   |   |         |         |  
|                    |                            |   | (6,782                                                 | )       |          |   | (19,484                | )       |   |   | (26,266 | )      
|                    |                            |   |                                                        |         |          |   |                        |         |   |   |         |         |  
|Interest expense:   |                            |   |                                                        |         |          |   |                        |         |   |   |         |        
|                   
|                   
|                   
|                   
|                    | Deposits                   |   |                                                        | (13,259 | )        |   |                        | (1,454  | ) |   |         | (14,713 | )
|                   
|                   
|                   
|                   
|                    | Borrowings                 |   |                                                        | (365    | )        |   |                        | (1,997  | ) |   |         | (2,362  | )
|                    |                            |   |                                                        |         |          |   |                        |         |   |   |         |         |  
|                    |                            |   | (13,624                                                | )       |          |   | (3,451                 | )       |   |   | (17,075 | )      
|                    |                            |   |                                                        |         |          |   |                        |         |   |   |         |         |  
|Net interest income |                            | $ | 6,842                                                  |         |          | $ | (16,033                | )       |   | $ | (9,191  | )      
|                    |                            |   |                                                        |         |          |   |                        |         |   |   |         |         |  

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

Provision for Losses on Loans and Leases

The provision for losses on loans and leases for the third quarter of 2002
was $2.2 million as compared to $3.3 million for the third quarter of 2001.
The provision for losses on loans and leases for the first nine months of 2002
was $10.7 million as compared to $63.0 million for the first nine months of
2001.

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

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

41



---



##### Table of Contents



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

|                    |  |                            |       |               |  |   |       | 
|------------------- |  | -------------------------- | ----- | ------------- |  | - | ----- | 
|                    |  | For the Three Months Ended
|                    |  |                           
|                    |  | September 30,              |       | September 30,
|                    |  | 2002                       |       | 2001         
|                    |  |                            |       |              
|                    |  | (Dollars in thousands)    
|Retail Platform     |  | $                          | 2,159 |               |  | $ | 500   | 
|                   
|                   
|                   
|                   
|Commercial Platform |  |                            | 41    |               |  |   | 2,757 | 
|                    |  |                            |       |               |  |   |       | 
|Total               |  | $                          | 2,200 |               |  | $ | 3,257 | 
|                    |  |                            |       |               |  |   |       | 

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

Noninterest Income

Noninterest income for the third quarter of 2002 was $40.0 million as
compared to $30.2 million for the third quarter of 2001. Noninterest income
for the first nine months of 2002 was $91.6 million as compared to $80.4
million for the first nine months of 2001. Excluding net gains or losses on
sales of assets and liabilities, noninterest income for the third quarter and
the first nine months of 2002 were $21.9 million and $72.9 million,
respectively, as compared to $28.0 million and $90.2 million for the third
quarter and first nine months of 2001, respectively. The decreases in
noninterest income, excluding net gains or losses on sales of assets and
liabilities, were largely due to lower auto leasing income in the Retail
Platform. Additionally, noninterest income for the first nine months of 2002,
as compared to the first nine months of 2001, was impacted by lower loan
servicing income in the Commercial Platform primarily resulting from the sale
of BVFMAC during 2001. The following tables illustrate noninterest income
(loss), by platform, for the periods indicated:

|                    |  |                            |        |               |  |   |        | 
|------------------- |  | -------------------------- | ------ | ------------- |  | - | ------ | 
|                    |  | For the Three Months Ended
|                    |  |                           
|                    |  | September 30,              |        | September 30,
|                    |  | 2002                       |        | 2001         
|                    |  |                            |        |              
|                    |  | (Dollars in thousands)    
|Retail Platform     |  | $                          | 30,800 |               |  | $ | 29,047 | 
|                   
|                   
|                   
|                   
|Commercial Platform |  |                            | 9,183  |               |  |   | 1,195  | 
|                    |  |                            |        |               |  |   |        | 
|Total               |  | $                          | 39,983 |               |  | $ | 30,242 | 
|                    |  |                            |        |               |  |   |        | 

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

42



---



##### Table of Contents



Noninterest income for the third quarter of 2002 included net gains on
sales of assets totaling $18.1 million consisting primarily of an $11.8 million
gain related to the securitization and sale of approximately $450.0 million of
auto loans within the Retail Platform and a $6.3 million gain on the sale of
multi-family loans and commercial real estate to
Washington Mutual within the Commercial Platform. Noninterest income for
the second quarter of 2002 included net gains on sales of assets totaling $0.2
million consisting primarily of a $0.8 million gain on the sale of
mortgage-backed securities within the Retail Platform offset by a $0.4 million
loss on the sale of Bay View Funding and $0.2 million loss on the sale of
franchise loans within the Commercial Platform. Noninterest income for the
first quarter of 2002 included net gains on sales of assets totaling $0.3
million consisting primarily of a $0.4 million gain on the sale of
mortgage-backed securities within the Retail Platform offset by a $0.1 million
loss on the sale of a franchise-related asset within the Commercial Platform.

Noninterest income for the third quarter of 2001 included gains on sales
of assets totaling $2.3 million, all of which were in the Retail Platform,
consisting of $1.6 million in net gains on sales of mortgage-backed and other
investment securities and a $0.6 million contingent gain received during the
third quarter of 2001 related to the June 2001 sale of home equity loans.
Noninterest income for the second quarter of 2001 included losses on sales of
assets totaling $22.7 million, consisting of net losses of $23.9 million within
the Commercial Platform partially offset by net gains of $1.2 million within
the Retail Platform. The loss within the Commercial Platform was largely due
to the $22.9 million loss on the sale of BVFMAC. The gain within the Retail
Platform was primarily due to the $11.9 million gain on the sale of GNMA
mortgage-backed securities offset by the $11.0 million loss on the sale of home equity
loans. Noninterest income for the first quarter of 2001 included $10.1 million
of contingent gains received during the first quarter of 2001 related to
December 2000 asset sales, consisting of $6.5 million within the Commercial
Platform and $3.6 million within the Retail Platform.

Noninterest Expense

General and Administrative Expenses

General and administrative expenses for the third quarter of 2002 were
$31.7 million as compared to $37.0 million for the third quarter of 2001.
General and administrative expenses for the first nine months of 2002 were
$93.0 million as compared to $117.2 million for the first nine months of 2001.
Excluding special mention items, as discussed below, the decreases in general
and administrative expenses for the third quarter of 2002, as compared to the
third quarter of 2001, and for the first nine months of 2002, as compared to
the first nine months of 2001, were primarily due to the elimination of BVFMAC
servicing platform expenses with the sale of the legal entity BVFMAC during
2001, the elimination of Bay View Funding expenses with the sale of our San
Mateo-based factoring division effective June 2002 as well as certain
cost-savings we continue to realize from our ongoing restructuring initiated in
2001.

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

General and administrative expenses for the third quarter of 2001 included
$3.3 million in special mention items consisting of $2.3 million related to the
prepayment of FHLB advances and $1.0 million in other non-recurring items.
General and administrative expenses for the second quarter of 2001 included
$8.7 million in special mention items primarily consisting of $2.6 million
related to the Companys issuance of stock options during the quarter with
below market strike prices, $2.4 million related to the prepayment of FHLB
advances and $2.4 million in legal and professional fees related to the
implementation of the Companys new strategic plan. There were no special
mention items included in general and administrative expenses for the first
quarter of 2001.

43



---



##### Table of Contents



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

|                                |  |                            |        |               |  |   |        | 
|------------------------------- |  | -------------------------- | ------ | ------------- |  | - | ------ | 
|                                |  | For the Three Months Ended
|                                |  |                           
|                                |  | September 30,              |        | September 30,
|                                |  | 2002                       |        | 2001         
|                                |  |                            |        |              
|                                |  | (Dollars in thousands)    
|Retail Platform                 |  | $                          | 23,574 |               |  | $ | 26,060 | 
|                               
|                               
|                               
|                               
|Commercial Platform             |  |                            | 2,048  |               |  |   | 3,477  | 
|                                |  |                            |        |               |  |   |        | 
|Subtotal                        |  |                            | 25,622 |               |  |   | 29,537 | 
|                               
|                               
|                               
|                               
|Indirect corporate overhead (1) |  |                            | 6,051  |               |  |   | 7,490  | 
|                                |  |                            |        |               |  |   |        | 
|Total                           |  | $                          | 31,673 |               |  | $ | 37,027 | 
|                                |  |                            |        |               |  |   |        | 

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

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

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

|                                                                                                                  |  |                            |           |               |  |   |           |  
|----------------------------------------------------------------------------------------------------------------- |  | -------------------------- | --------- | ------------- |  | - | --------- | -
|                                                                                                                  |  | For the Three Months Ended
|                                                                                                                  |  |                           
|                                                                                                                  |  | September 30,              |           | September 30,
|                                                                                                                  |  | 2002                       |           | 2001         
|                                                                                                                  |  |                            |           |              
|                                                                                                                  |  | (Dollars in thousands)    
|General and administrative expenses                                                                               |  | $                          | 31,673    |               |  | $ | 37,027    |  
|                                                                                                                 
|                                                                                                                 
|                                                                                                                 
|                                                                                                                 
|Average total assets, including auto-related
securitized assets                                                   |  | $                          | 4,200,818 |               |  | $ | 4,357,844 |  
|                                                                                                                  |  |                            |           |               |  |   |           |  
|Annualized general and administrative
expenses to
average total assets, including auto-related
securitized assets |  |                            | 3.02      | %             |  |   | 3.40      | %
|                                                                                                                  |  |                            |           |               |  |   |           |  

44



---



##### Table of Contents



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

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

The following tables illustrate the efficiency ratio for the periods
indicated:

|                                    |  |                            |        |               |  |   |        |  
|----------------------------------- |  | -------------------------- | ------ | ------------- |  | - | ------ | -
|                                    |  | For the Three Months Ended
|                                    |  |                           
|                                    |  | September 30,              |        | September 30,
|                                    |  | 2002                       |        | 2001         
|                                    |  |                            |        |              
|                                    |  | (Dollars in thousands)    
|General and administrative
expenses |  | $                          | 31,673 |               |  | $ | 37,027 |  
|                                   
|                                   
|                                   
|                                   
|Operating revenues, as defined      |  | $                          | 45,264 |               |  | $ | 41,710 |  
|                                    |  |                            |        |               |  |   |        |  
|Efficiency ratio                    |  |                            | 70.0   | %             |  |   | 88.8   | %
|                                    |  |                            |        |               |  |   |        |  

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

Revaluation of Franchise-Related Assets

Excluding the mark-to-market valuation adjustments related to our adoption
of liquidation basis accounting, there was no adjustment related to the
revaluation of franchise-related assets during the first nine months of 2002.
The revaluation of certain franchise-related assets resulted in a $68.6 million
pre-tax adjustment for the first nine months of 2001. The revaluation included
a $31.7 million adjustment, recorded in the second quarter, related to the sale
of approximately $278 million in loans to Goldman Sachs Mortgage Co. as well as
writedowns of other franchise-related assets recorded primarily in the first
and second quarters of 2001. The writedowns included $15.5 million in
adjustments to servicing assets, $11.1 million in adjustments to residual
interests on securitizations, reflecting anticipated market

45



---



##### Table of Contents



yields, and $5.0 million in adjustments to equity investments. During the
third quarter of 2001, the revaluation charges were reduced by $1.4 million due
to a $1.0 million reduction in previously recorded mark-to-market adjustments
on franchise loans associated with a pending sale and a $0.4 million recovery
of servicer advances written off in the second quarter of 2001.

Investment in Operating Lease Assets

Leasing expense represents expenses related to our auto leasing
activities. Because the leases are accounted for as operating leases, the
corresponding assets are capitalized and depreciated to their estimated
residual values over their lease terms. This depreciation expense is included
in leasing expenses, along with the amortization of capitalized initial direct
lease costs and impairment charges. Leasing expenses for the third quarter of
2002 were $12.9 million as compared to $16.6 million for the third quarter of
2001. Leasing expenses were $44.0 million for the first nine months of 2002 as
compared to $61.6 million for the first nine months of 2001. The decreases in
leasing expenses, as compared to respective prior periods, were primarily due
to lower provision for impairment combined with lower depreciation expense
associated with the declining balance of our auto-related operating lease
portfolio. These were partially offset by a $1.5 million accrual related to
certain residual and credit incentives pursuant to our purchase contract with
Lendco Financial Services recorded during the second quarter of 2002. We
ceased purchasing auto leases in June 2000. Leasing expenses for the
nine-month period ended September 30, 2001 included $10.0 million of additional
provision for impairment primarily as a result of revising the estimated
residual values associated with the auto lease portfolio.

The Company performs a quarterly impairment analysis of its automobile
operating lease portfolio in accordance with Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, which we adopted effective January 1, 2002. Statement No. 144, which
supersedes Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, retains the fundamental
provisions of Statement No. 121 related to the recognition and measurement of
the impairment of long-lived assets to be held and used and the measurement of
long-lived assets to be disposed of by sale. There was no financial statement
impact upon adoption of Statement No. 144. A lease is considered impaired if
its gross future undiscounted cash flows are less than the net book value of
the lease. The net book value of the lease is defined as the original
capitalized cost of the automobile, including initial direct capitalized costs,
less the cumulative amount of depreciation recorded against the automobile and
the cumulative amount of amortization of the initial direct capitalized costs
recorded since the inception of the lease and less any impairment charges
recorded-to-date on that lease.

In determining gross future undiscounted cash flows, the Company contracts
with Automotive Lease Guide, commonly referred to as ALG, to provide estimates
of the residual value of the underlying automobiles at the end of their lease
terms assuming that the vehicles are in average condition. The Company then
estimates the probability that i.) the automobiles will be purchased by the
lessee prior to the end of the lease term, ii.) the automobile will be
purchased by the lessee at the end of the lease term, either at a discount or
at the full contractual residual amount, or iii.) the automobile will be
returned to the lessor at the end of the lease term. These probabilities are
estimated using a number of factors, including the Companys experience-to-date
and industry experience.

Using the projected ALG residual values, the Companys experience-to-date
relative to the projected ALG residual values (for example, for vehicle classes
where actual amounts realized were less than what ALG had projected, the
Company reduced the projected ALG residual values to equal the Companys
experience-to-date), and the probabilities of each of the three disposition
scenarios discussed above occurring, the Company determined a
probability-weighted gross future undiscounted cash flow for each automobile
lease. For those leases where the gross future undiscounted cash flows were
less than net book value, the lease was considered impaired.

For those leases considered impaired, the Company then estimated the fair
value of the lease. The fair value was determined by calculating the present
value of the future estimated cash flows again assuming the probabilities of
each of the three disposition scenarios. The present value was calculated
using current market rates which are similar to the original contract lease
rate. For those impaired leases where the estimated fair value was less than
the net book value, an impairment charge was recorded for the difference.
Since the inception of the lease portfolio in June 1998, the Company

46



---



##### Table of Contents



has
recorded additional monthly depreciation charges, also included in leasing
expense, to provide for losses that may be
incurred at the end of the lease terms.

Significant assumptions underlying the automobile lease impairment
analysis that are susceptible to possible change in the near term include the
projected ALG residual values and the estimated probabilities of each of the
three disposition scenarios. For example, if ALG projected residual values
decline by $250 for each vehicle, approximately 379 additional vehicles of its
13,631 vehicles would be considered impaired at September 30, 2002 and
therefore subject to a possible impairment charge. At September 30, 2002, a
total of 5,934 vehicles were considered impaired. Further, if the aggregate
number of lessees that return their vehicle to the Company at the end of the
lease term is higher than currently projected, the number of impaired vehicles
could be higher as the amount realized under this scenario is generally less
than if the lessee purchases their automobile prior to the end of the lease
term, either at a discount or at the full contractual residual amount.

Capital Securities

On December 21, 1998, we issued $90 million in Capital Securities through
Bay View Capital I, a business trust formed to issue the securities. The
Capital Securities, which were sold in an underwritten public offering, accrue
quarterly cumulative dividends at an annual rate of 9.76% of the liquidation
value of $25 per share. Dividend expense on the Capital Securities was $2.7
million for the third quarter of 2002 as compared to $2.3 million for the third
quarter of 2001. Dividend expense on the Capital Securities was $7.9 million
for the first nine months of 2002 as compared to $6.9 million for the first
nine months of 2001.

In September of 2000, we entered into an agreement with the Federal
Reserve Bank which requires that we obtain their approval prior to disbursing
any dividends associated with our Capital Securities. Beginning with the third
quarter of 2000, we began deferring distributions of the quarterly dividends in
accordance with the terms of the Capital Securities. During this deferral
period, distributions to which holders are entitled will continue to accrue at
an annual rate of 9.76% of the liquidation amount of $25 per Capital Security,
plus accumulated additional distributions at the same rate, compounded
quarterly, on any unpaid distributions (to the extent permitted by law).
Holders of the Capital Securities at the time the distribution of dividends is
resumed will receive the cumulative deferred distributions plus the cumulative
interest thereon. Deferred dividends and interest, which were fully accrued,
were $21.8 million at September 30, 2002 as compared to $14.1 million at
December 31, 2001.

We anticipate paying the deferred dividends on December 31, 2002, pending
regulatory approvals. While we remain subject to the formal agreement with the
Federal Reserve Bank, future dividend payments will remain subject to their
prior approval.

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

47



---



##### Table of Contents



Real Estate Owned

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

Income Taxes

The Company recorded tax expense of $187.4 million for the third quarter
and $181.8 million for the nine months ended September 30, 2002, of which $11.9
million is current and $169.9 million is deferred. The Company also recorded a
deferred tax benefit of $2.3 million on the cumulative effect of change in
accounting principle, which is presented net of this tax benefit. As a result
of the Companys plan of dissolution and stockholder liquidity, income tax
expense includes the effect of establishing a valuation allowance of $24.0
million on the realizability of deferred tax assets in years after 2002. The
realizability of deferred tax assets and the related valuation allowance are
based on total projected future income through the final liquidation of the
Company.

The effective tax rate used in computing the $181.8 million tax expense
for the first nine months of 2002 was 71.5%. This expected 2002 effective tax
rate is higher than the federal statutory rate due primarily to state income
taxes, the valuation allowance on deferred tax assets, disposition of
nondeductible goodwill and nondeductible compensation associated with the
Companys plan of dissolution and stockholder liquidity.

For the third quarter and first nine months of 2001, the Company recorded
a $0.4 million tax benefit and a $59.9 million tax benefit, respectively, both
at a 36.5% effective tax rate.

During 2000, the Company recorded a $26.0 million valuation allowance
against its gross deferred tax assets primarily relating to approximately $48.6
million in federal net operating loss carryforwards that were expiring in 2001
as the Company did not expect to be able to fully utilize these amounts prior
to their expiration date. In May 2001, the Company raised $137.5 million of
additional capital which enabled the Company to implement a new strategic plan,
including the disposition of non-core and higher-risk assets. As a result of
these actions, the Companys ability to generate future taxable income became
more predictable. During 2001, the Company also executed certain transactions
that resulted in significant amounts of taxable income. These transactions
included the sale of the BVFMAC legal entity which generated significant
taxable income related to previously deferred gains in the franchise
securitization trusts. The Company also executed a financing secured by the
contractual cash flows of our auto operating lease portfolio that was treated
as a sale for income tax purposes and generated $136.5 million in taxable
income. Primarily as a result of these transactions, the Company generated
sufficient taxable income during the year to be able to utilize the majority of
its net operating loss carryforwards expiring in 2001. In addition, the
Company identified tax-planning strategies which included the sale of certain
assets obtained in connection with a previous purchase business combination
with significant built-in gains for tax purposes which would be triggered in
the event of a sale. Such a transaction would not only generate significant
levels of taxable income, but would also increase the limitation on the
utilization of the net operating loss carryforward acquired in connection with
a previous purchase business combination. As a result, the Company eliminated
the $26.0 million valuation allowance against its gross deferred tax assets
during 2001. As of September 30, 2002, in anticipation of the close of the
sale of the Banks retail banking assets to U.S. Bank and other 2002 asset
sales transactions, the Company will utilize approximately $143.6 million of
its net deferred tax assets.

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

48



---



##### Table of Contents



Non-GAAP Disclosures

With our adoption of liquidation basis accounting effective September 30,
2002, our stockholders equity was transferred to net assets in liquidation.
Our net assets in liquidation at September 30, 2002 exclude the
mark-to-liquidation value gain on our auto lending business.

|                                                                                      |  |                |         |           |  |   |      | 
|------------------------------------------------------------------------------------- |  | -------------- | ------- | --------- |  | - | ---- | 
|                                                                                      |  | Total          |         |           |  |  
|                                                                                      |  | (in thousands) |         | Per Share
|                                                                                      |  |                |         |          
|Net assets in liquidation                                                             |  | $              | 413,675 |           |  | $ | 6.50 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Deferred gain on auto lending business(1)                                             |  |                | 12,817  |           |  |   | 0.20 | 
|                                                                                      |  |                |         |           |  |   |      | 
|Pro-forma net assets in liquidation                                                   |  |                | 426,492 |           |  |   | 6.70 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Projected future after-tax earnings(1)                                                |  |                | 2,925   |           |  |   | 0.05 | 
|                                                                                      |  |                |         |           |  |   |      | 
|Pro-forma net assets in liquidation, adjusted for projected
future after-tax earnings |  | $              | 429,417 |           |  | $ | 6.75 | 
|                                                                                      |  |                |         |           |  |   |      | 



---

| |  | (1)Amounts represent current estimates of future transactions and
operations, actual amounts may differ.
| |  | --------------------------------------------------------------------------------------------------------

As indicated in the table above, the estimated after-tax deferred gain on
the Companys auto lending business is $12.8 million or $0.20 per outstanding
share based on 63,631,680 diluted shares in liquidation. The projected future
after-tax earnings of $2.9 million, or $0.05 per outstanding share, is a
non-GAAP measure.

49



---



##### Table of Contents



Balance Sheet Analysis

Securities

The following table illustrates our securities portfolio as of the dates
indicated:

|                                            |                                          |   |                        |        |                   |   |           |        |       |   |         |         |  |   |         |         | 
|------------------------------------------- | ---------------------------------------- | - | ---------------------- | ------ | ----------------- | - | --------- | ------ | ----- | - | ------- | ------- |  | - | ------- | ------- | 
|                                            |                                          |   | September 30, 2002     |        | December 31, 2001
|                                            |                                          |   |                        |        |                  
|                                            |                                          |   | Amortized              |        | Fair              |   | Amortized |        | Fair 
|                                            |                                          |   | Cost                   |        | Value             |   | Cost      |        | Value
|                                            |                                          |   |                        |        |                   |   |           |        |      
|                                            |                                          |   | (Dollars in thousands)
|Available-for-sale                          |                                          |   |                        |        |                   |   |           |        |       |   |         |         |  |   |         |        
|                                           
|                                           
|                                           
|                                           
|Federal National Mortgage Association stock |                                          | $ |                       |        |                   | $ |          |        |       | $ | 580     |         |  | $ | 761     |        
|                                           
|                                           
|                                           
|                                           
|Federal Home Loan Bank callable notes       |                                          |   |                       |        |                   |   |          |        |       |   | 10,000  |         |  |   | 9,988   |        
|                                           
|                                           
|                                           
|                                           
|Asset-backed securities                     |                                          |   | 7,767                  |        |                   |   | 7,767     |        |       |   | 14,129  |         |  |   | 14,096  |        
|                                           
|                                           
|                                           
|                                           
|Trust preferred securities                  |                                          |   | 4,271                  |        |                   |   | 4,271     |        |       |   | 48,082  |         |  |   | 47,907  |        
|                                           
|                                           
|                                           
|                                           
|Other investment securities                 |                                          |   | 11,191                 |        |                   |   | 11,191    |        |       |   | 12,287  |         |  |   | 12,354  |        
|                                           
|                                           
|                                           
|                                           
|Retained interests in securitizations       |                                          |   | 32,432                 |        |                   |   | 32,432    |        |       |   | 13,874  |         |  |   | 13,874  |        
|                                            |                                          |   |                        |        |                   |   |           |        |       |   |         |         |  |   |         |        
|Total investment securities                 |                                          |   | 55,661                 |        |                   |   | 55,661    |        |       |   | 98,952  |         |  |   | 98,980  |        
|                                            |                                          |   |                        |        |                   |   |           |        |       |   |         |         |  |   |         |        
|Mortgage-backed securities:                 |                                          |   |                        |        |                   |   |           |        |       |   |         |         |  |   |         |        
|                                           
|                                           
|                                           
|                                           
|                                            | Fannie Mae                               |   |                        | 23,389 |                   |   |           | 23,389 |       |   |         | 89,083  |  |   |         | 90,256  | 
|                                           
|                                           
|                                           
|                                           
|                                            | Freddie Mac                              |   |                        | 36,046 |                   |   |           | 36,046 |       |   |         | 73,850  |  |   |         | 73,670  | 
|                                           
|                                           
|                                           
|                                           
|                                            | Government National Mortgage Association |   |                        | 2,269  |                   |   |           | 2,269  |       |   |         | 2,837   |  |   |         | 2,835   | 
|                                           
|                                           
|                                           
|                                           
|                                            | Collateralized mortgage obligations      |   |                        | 58,254 |                   |   |           | 58,254 |       |   |         | 112,247 |  |   |         | 112,130 | 
|                                            |                                          |   |                        |        |                   |   |           |        |       |   |         |         |  |   |         |        
|Total mortgage-backed securities            |                                          |   | 119,958                |        |                   |   | 119,958   |        |       |   | 278,017 |         |  |   | 278,891 |        
|                                            |                                          |   |                        |        |                   |   |           |        |       |   |         |         |  |   |         |        
|Total securities available-for-sale         |                                          | $ | 175,619                |        |                   | $ | 175,619   |        |       | $ | 376,969 |         |  | $ | 377,871 |        
|                                            |                                          |   |                        |        |                   |   |           |        |       |   |         |         |  |   |         |        

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

During 2001, we transferred our remaining held-to-maturity securities
totaling $631.7 million to available-for-sale. In accordance with Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities, we recorded $1.5 million of unrealized losses
related to the transfer. As a result of the transfer and subsequent sales of
securities from our held-to-maturity portfolio, combined with our adoption of
liquidation basis accounting, we do not intend to hold any securities as
held-to-maturity in the foreseeable future. In accordance with liquidation
basis accounting, our investment securities will continue to be classified as
available-for-sale and marked to their fair values through income as
liquidation basis adjustments. We realized net gains of $2.0 million related
to mark-to-market adjustments, which were previously recorded as other
comprehensive income, on our investment securities upon our adoption of
liquidation basis accounting effective September 30, 2002.

We sold $103.6 million of mortgage-backed securities and $59.0 million of
other investment securities, primarily trust preferred and asset-backed
securities, during the first nine months of 2002. Gross gains of $1.2 million
were realized on the sales. The sales were offset by purchases of $60.0
million of mortgage-backed securities and $54.9 of asset-backed securities
during the first nine months of 2002.

Mortgage-backed securities pose risks not associated with fixed maturity
bonds, primarily related to the ability of the borrower to prepay the
underlying loan with or without penalty. This risk, known as prepayment risk,
may cause the mortgage-backed securities to remain outstanding for a period of
time different than that assumed at the time of purchase. When interest rates
decline, prepayments generally tend to increase, causing the average expected
remaining life of the

50



---



##### Table of Contents



mortgage-backed securities to decline. Conversely, if
interest rates rise, prepayments tend to decrease, lengthening the average
expected remaining life of the mortgage-backed securities.

Loans and Leases

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

|                                                        |                                   |                                                                                 |         |                        |         |              |           |           |         | 
|------------------------------------------------------- | --------------------------------- | ------------------------------------------------------------------------------- | ------- | ---------------------- | ------- | ------------ | --------- | --------- | ------- | 
|                                                        |                                   |                                                                                 |         | September 30,          |         | December 31,
|                                                        |                                   |                                                                                 |         | 2002                   |         | 2001        
|                                                        |                                   |                                                                                 |         |                        |         |             
|                                                        |                                   |                                                                                 |         | (Dollars in thousands)
|Loans and leases receivable:                            |                                   |                                                                                 |         |                        |         |              |           |          
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Retail Platform:                  |                                                                                 |         |                        |         |              |           |           |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                   | Single-family mortgage loans                                                    |         | $                      | 148,329 |              |           | $         | 277,288 | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                   | High loan-to-value home equity loans and lines of credit                        |         |                        | 7,178   |              |           |           | 13,835  | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                   | Other home equity loans and lines of credit                                     |         |                        | 151,742 |              |           |           | 130,784 | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                   | Auto loans(1)                                                                   |         |                        | 84,938  |              |           |           | 444,607 | 
|                                                        |                                   |                                                                                 |         |                        |         |              |           |          
|                                                        | Total retail loans                |                                                                                 |         | 392,187                |         |              |           | 866,514   |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Commercial Platform:              |                                                                                 |         |                        |         |              |           |           |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                   | Multi-family mortgage loans                                                     |         |                        | 3,563   |              |           |           | 697,339 | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                   | Commercial mortgage loans                                                       |         |                        | 51,527  |              |           |           | 289,093 | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                   | Franchise loans                                                                 |         |                        | 59,433  |              |           |           | 160,072 | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                   | Asset-based loans, syndicated loans, factored receivables
and commercial leases |         |                        | 185,714 |              |           |           | 310,070 | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                   | Business loans                                                                  |         |                        | 56,970  |              |           |           | 79,883  | 
|                                                        |                                   |                                                                                 |         |                        |         |              |           |          
|                                                        | Total commercial loans and leases |                                                                                 |         | 357,207                |         |              |           | 1,536,457 |        
|                                                       
|                                                       
|                                                       
|                                                       
|Premiums and discounts and deferred fees and costs, net |                                   |                                                                                 |        |                        |         |              | 14,215    |          
|                                                        |                                   |                                                                                 |         |                        |         |              |           |          
|Gross loans and leases receivable                       |                                   |                                                                                 | 749,394 |                        |         |              | 2,417,186 |          
|                                                       
|                                                       
|                                                       
|                                                       
|Allowance for loan and lease losses                     |                                   |                                                                                 |        |                        |         |              | (49,791   | )        
|                                                        |                                   |                                                                                 |         |                        |         |              |           |          
|Loans and leases receivable(2)(3)                       |                                   | $                                                                               | 749,394 |                        |         | $            | 2,367,395 |          
|                                                        |                                   |                                                                                 |         |                        |         |              |           |          



---

| |  | (1) Amounts exclude auto-related operating lease assets reported separately
from loans and leases totaling $228.5 million at
September 30, 2002 and $339.3 million at December 31, 2001.               
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|
|
| |  | (2) All loans and leases are classified as held-for-sale at September 30,
2002. Total loans and leases at December 31, 2002 include
franchise loans classified as held-for-sale totaling $40.6 million.
|
|
|
|
| |  | (3) Includes mark-to-market valuation adjustments of $70.6 million and $14.0
million at September 30, 2002 and December 31,2001,
respectively.                                                         

The decrease in loans and leases receivable at September 30, 2002, as
compared to December 31, 2001 was primarily due to the impact of asset sales
consummated during the third quarter to generate the funds necessary to close
the U.S. Bank sale transaction. During the quarter, we completed the sale of
approximately $1.0 billion of our multi-family and commercial mortgage loans to
Washington Mutual and securitized and sold approximately $450.0 million of our
auto loans. Additionally, our loans and leases receivable was impacted by the
sale of $56.5 million of franchise loans, the sale of $25.3 million of factored
receivables related to the sale of Bay View Funding, the June settlement
agreement with JP Morgan Chase Bank which resulted in the removal of
approximately $12 million in nonaccruing franchise loans from our consolidated
balance sheet and loan payoffs during the first nine months of 2002.

Our exposure to higher-risk franchise assets was further reduced during
the quarter as the net book value of our franchise loan portfolio, net of
mark-to-market valuation adjustments, decreased to $59.4 million at September
30, 2002 from $160.1 million at December 31, 2001. In connection with our plan
of dissolution and stockholder liquidity, our entire loans and leases
receivable is classified as held-for-sale at September 30, 2002.

51



---



##### Table of Contents



The following tables illustrate our loan and lease originations for the
periods indicated:

|                             |                    |                                                                                           |   |                            |        |               |   |         |        | 
|---------------------------- | ------------------ | ----------------------------------------------------------------------------------------- | - | -------------------------- | ------ | ------------- | - | ------- | ------ | 
|                             |                    |                                                                                           |   | For the Three Months Ended
|                             |                    |                                                                                           |   |                           
|                             |                    |                                                                                           |   | September 30,              |        | September 30,
|                             |                    |                                                                                           |   | 2002                       |        | 2001         
|                             |                    |                                                                                           |   |                            |        |              
|                             |                    |                                                                                           |   | (Dollars in thousands)    
|Loan and lease originations: |                    |                                                                                           |   |                            |        |               |   |        
|                            
|                            
|                            
|                            
|                             |                    | Home equity loans and lines of credit                                                     |   | $                          | 26,397 |               |   | $       | 30,928 | 
|                            
|                            
|                            
|                            
|                             |                    | Auto loans                                                                                |   |                            | 76,230 |               |   |         | 87,106 | 
|                            
|                            
|                            
|                            
|                             |                    | Multi-family and commercial mortgage loans                                                |   |                            | 27,105 |               |   |         | 89,508 | 
|                            
|                            
|                            
|                            
|                             |                    | Asset-based loans, syndicated loans, factored receivables and
commercial 
         leases |   |                            | 8,617  |               |   |         | 7,806  | 
|                            
|                            
|                            
|                            
|                             |                    | Business loans                                                                            |   |                            | 9,393  |               |   |         | 16,908 | 
|                             |                    |                                                                                           |   |                            |        |               |   |        
|                             | Total originations |                                                                                           | $ | 147,742                    |        |               | $ | 232,256 |       
|                             |                    |                                                                                           |   |                            |        |               |   |        

|                             |                    |                                                                                           |   |                           |         |               |   |         |         | 
|---------------------------- | ------------------ | ----------------------------------------------------------------------------------------- | - | ------------------------- | ------- | ------------- | - | ------- | ------- | 
|                             |                    |                                                                                           |   | For the Nine Months Ended
|                             |                    |                                                                                           |   |                          
|                             |                    |                                                                                           |   | September 30,             |         | September 30,
|                             |                    |                                                                                           |   | 2002                      |         | 2001         
|                             |                    |                                                                                           |   |                           |         |              
|                             |                    |                                                                                           |   | (Dollars in thousands)   
|Loan and lease originations: |                    |                                                                                           |   |                           |         |               |   |        
|                            
|                            
|                            
|                            
|                             |                    | Home equity loans and lines of credit                                                     |   | $                         | 80,857  |               |   | $       | 68,830  | 
|                            
|                            
|                            
|                            
|                             |                    | Auto loans                                                                                |   |                           | 245,267 |               |   |         | 240,270 | 
|                            
|                            
|                            
|                            
|                             |                    | Multi-family and commercial mortgage loans                                                |   |                           | 217,788 |               |   |         | 185,240 | 
|                            
|                            
|                            
|                            
|                             |                    | Asset-based loans, syndicated loans, factored receivables and
commercial 
         leases |   |                           | 25,408  |               |   |         | 55,988  | 
|                            
|                            
|                            
|                            
|                             |                    | Business loans                                                                            |   |                           | 31,977  |               |   |         | 42,172  | 
|                             |                    |                                                                                           |   |                           |         |               |   |        
|                             | Total originations |                                                                                           | $ | 601,297                   |         |               | $ | 592,500 |        
|                             |                    |                                                                                           |   |                           |         |               |   |        

We ceased originating multi-family and commercial mortgage loans in August
2002 subsequent to the Washington Mutual sale transaction. The home equity
loans and commercial and business loans are part of the retail business assumed
by U.S. Bank.

Credit Quality

We define nonperforming assets as nonaccrual loans and leases, real estate
owned, defaulted mortgage-backed securities and other repossessed assets. We
define nonaccrual loans and leases as loans and leases 90 days or more
delinquent as to principal and interest payments (unless the principal and
interest are well secured and in the process of collection) and loans and
leases less than 90 days delinquent designated as nonperforming when we
determine that the full collection of principal and/or interest is doubtful.
We generally do not record interest on nonaccrual loans and leases.

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

|                            |  |                        |        |              |  |   |        | 
|--------------------------- |  | ---------------------- | ------ | ------------ |  | - | ------ | 
|                            |  | September 30,          |        | December 31,
|                            |  | 2002                   |        | 2001        
|                            |  |                        |        |             
|                            |  | (Dollars in thousands)
|Nonaccrual loans and leases |  | $                      | 34,703 |              |  | $ | 79,722 | 
|                           
|                           
|                           
|                           
|Real estate owned           |  |                        | 4,576  |              |  |   | 9,462  | 
|                           
|                           
|                           
|                           
|Other repossessed assets    |  |                        | 846    |              |  |   | 633    | 
|                            |  |                        |        |              |  |   |        | 
|Nonperforming assets        |  | $                      | 40,125 |              |  | $ | 89,817 | 
|                            |  |                        |        |              |  |   |        | 

52



---



##### Table of Contents



The decrease in total nonperforming assets at September 30, 2002, as
compared to December 31, 2001, was primarily due to the removal of the $12
million in nonperforming franchise loans related to the JP Morgan Chase
settlement, the sale of approximately $1.8 million in franchise real estate owned, a
decrease in nonaccruing franchise loans and mark-to-market valuation
adjustments of $19.2 million resulting from the adoption of liquidation basis
accounting. Nonperforming assets excluding franchise-related assets were $16.9
million at September 30, 2002, as compared to $20.2 million at December 31,
2001, while non-franchise nonaccrual loans and leases were $15.8 million at
September 30, 2002 as compared to $17.5 million at December 31, 2001.

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

|                          |                                                                                 |   |                                              |        |                   |  |                      |      |   |   |        |        |  |  |      |      |  
|------------------------- | ------------------------------------------------------------------------------- | - | -------------------------------------------- | ------ | ----------------- |  | -------------------- | ---- | - | - | ------ | ------ |  |  | ---- | ---- | -
|                          |                                                                                 |   |                                              |        |                   |  | Nonperforming Assets |      |   |   |       
|                          |                                                                                 |   | as a Percentage of Consolidated Total Assets
|                          |                                                                                 |   |                                             
|                          |                                                                                 |   | September 30, 2002                           |        | December 31, 2001
|                          |                                                                                 |   |                                              |        |                  
|                          |                                                                                 |   | (Dollars in thousands)                      
|Retail Platform:          |                                                                                 |   |                                              |        |                   |  |                      |      |   |   |        |        |  |  |      |     
|                         
|                         
|                         
|                         
|                          | Single-family mortgage loans                                                    |   | $                                            | 2,729  |                   |  |                      | 0.07 | % |   | $      | 2,455  |  |  |      | 0.06 | %
|                         
|                         
|                         
|                         
|                          | Home equity loans and lines of credit                                           |   |                                              | 693    |                   |  |                      | 0.02 |   |   |        | 470    |  |  |      | 0.01 |  
|                         
|                         
|                         
|                         
|                          | Auto loans                                                                      |   |                                              | 1,024  |                   |  |                      | 0.03 |   |   |        | 1,034  |  |  |      | 0.03 |  
|                          |                                                                                 |   |                                              |        |                   |  |                      |      |   |   |        |        |  |  |      |     
|Total retail platform     |                                                                                 |   | 4,446                                        |        |                   |  | 0.12                 |      |   |   | 3,959  |        |  |  | 0.10 |     
|                         
|                         
|                         
|                         
|Commercial Platform:      |                                                                                 |   |                                              |        |                   |  |                      |      |   |   |        |        |  |  |      |     
|                         
|                         
|                         
|                         
|                          | Multi-family mortgage loans                                                     |   |                                              | 74     |                   |  |                      |     |   |   |        | 67     |  |  |      |     |  
|                         
|                         
|                         
|                         
|                          | Commercial real estate loans                                                    |   |                                              | 3,700  |                   |  |                      | 0.09 |   |   |        | 7,822  |  |  |      | 0.19 |  
|                         
|                         
|                         
|                         
|                          | Franchise loans                                                                 |   |                                              | 23,218 |                   |  |                      | 0.60 |   |   |        | 69,583 |  |  |      | 1.74 |  
|                         
|                         
|                         
|                         
|                          | Asset-based loans, syndicated loans,
factored receivables
and commercial leases |   |                                              | 8,141  |                   |  |                      | 0.21 |   |   |        | 8,003  |  |  |      | 0.20 |  
|                         
|                         
|                         
|                         
|                          | Business loans                                                                  |   |                                              | 546    |                   |  |                      | 0.01 |   |   |        | 383    |  |  |      | 0.01 |  
|                          |                                                                                 |   |                                              |        |                   |  |                      |      |   |   |        |        |  |  |      |     
|Total commercial platform |                                                                                 |   | 35,679                                       |        |                   |  | .91                  |      |   |   | 85,858 |        |  |  | 2.14 |     
|                          |                                                                                 |   |                                              |        |                   |  |                      |      |   |   |        |        |  |  |      |     
|Total                     |                                                                                 | $ | 40,125                                       |        |                   |  | 1.03                 | %    |   | $ | 89,817 |        |  |  | 2.24 | %   
|                          |                                                                                 |   |                                              |        |                   |  |                      |      |   |   |        |        |  |  |      |     

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

|                    |  |                                             |        |                   |  |  |      |   |  |   |        |  |  |  |      |  
|------------------- |  | ------------------------------------------- | ------ | ----------------- |  |  | ---- | - |  | - | ------ |  |  |  | ---- | -
|                    |  | Loans and Leases Delinquent 60 Days or More
|                    |  | as a Percentage of Loans and Leases        
|                    |  |                                            
|                    |  | September 30, 2002                          |        | December 31, 2001
|                    |  |                                             |        |                  
|                    |  | (Dollars in thousands)                     
|Retail Platform     |  | $                                           | 5,710  |                   |  |  | 0.76 | % |  | $ | 7,802  |  |  |  | 0.32 | %
|                   
|                   
|                   
|                   
|Commercial Platform |  |                                             | 26,195 |                   |  |  | 3.50 |   |  |   | 62,221 |  |  |  | 2.58 |  
|                    |  |                                             |        |                   |  |  |      |   |  |   |        |  |  |  |      |  
|Total               |  | $                                           | 31,905 |                   |  |  | 4.26 | % |  | $ | 70,023 |  |  |  | 2.90 | %
|                    |  |                                             |        |                   |  |  |      |   |  |   |        |  |  |  |      |  

Allowance for Loan and Lease Losses (ALLL)

As of September 30, 2002, the Company adopted liquidation basis accounting
and reallocated the balance of the ALLL as mark-to-market adjustments to
individual loans and leases and groups of homogeneous loans in liquidation.
Prior to this reallocation, we used the process described below to evaluate the
loan portfolio and determine the adequacy of the allowance for loan and lease
losses consistent with going concern basis accounting. See Note 2 for
discussion of mark-to-market valuation adjustments to the loan portfolio.

Credit risk and potential loss are inherent in the lending process. The
purpose of the ALLL is to absorb losses that are probable and estimable in our
loan and lease portfolio. The ALLL is augmented through charges to earnings
called

53



---



##### Table of Contents



provisions. Known losses are charged to the ALLL. Management seeks to
reduce credit risk and therefore potential loss by administering established
lending policies and underwriting procedures combined with continuous
monitoring of the portfolio.

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

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



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

The allowance for loan and lease losses at September 30, 2002 of $28.9
million was reallocated as mark-to-market adjustments to individual loans and
leases and groups of homogeneous loans in liquidation. The ALLL was $49.8
million at December 31, 2001. The decrease in the allowance for losses on
loans and leases before reallocation was

54



---



##### Table of Contents



primarily related to net charge-offs
in excess of loan loss provision expense during the three- and nine-month
periods ended September 30, 2002.

The following table illustrates the changes in the allowance for losses on
loans and leases for the periods indicated, including the reallocation of the
allowance to individual loans and leases and groups of homogeneous loans in
liquidation as of September 30, 2002:

|                                                                                                                                      |                                                                                 |   |                        |        |               |   |              |         |   |   |         |         |  
|------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | - | ---------------------- | ------ | ------------- | - | ------------ | ------- | - | - | ------- | ------- | -
|                                                                                                                                      |                                                                                 |   | Three Months           |        | Nine Months   |   | Year        
|                                                                                                                                      |                                                                                 |   | Ended                  |        | Ended         |   | Ended       
|                                                                                                                                      |                                                                                 |   | September 30,          |        | September 30, |   | December 31,
|                                                                                                                                      |                                                                                 |   | 2002                   |        | 2002          |   | 2001        
|                                                                                                                                      |                                                                                 |   |                        |        |               |   |             
|                                                                                                                                      |                                                                                 |   | (Dollars in thousands)
|Beginning balance                                                                                                                     |                                                                                 | $ | 38,945                 |        |               | $ | 49,791       |         |   | $ | 73,738  |        
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|Transfers of loans to held-for-sale                                                                                                   |                                                                                 |   | (8,822                 | )      |               |   | (10,658      | )       |   |   | (53,606 | )      
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|Charge-offs:                                                                                                                          |                                                                                 |   |                        |        |               |   |              |         |   |   |         |        
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Mortgage                                                                        |   |                        |       |               |   |              |        |   |   |         | (1,488  | )
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Home equity loans and lines of credit                                           |   |                        | (473   | )             |   |              | (1,309  | ) |   |         | (10,296 | )
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Auto                                                                            |   |                        | (1,324 | )             |   |              | (3,696  | ) |   |         | (3,809  | )
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Asset-based loans, syndicated loans, factored
receivables and
commercial leases |   |                        | (837   | )             |   |              | (6,987  | ) |   |         | (9,397  | )
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Franchise                                                                       |   |                        | (1,300 | )             |   |              | (11,363 | ) |   |         | (24,197 | )
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Business                                                                        |   |                        | (350   | )             |   |              | (416    | ) |   |         | (2,509  | )
|                                                                                                                                      |                                                                                 |   |                        |        |               |   |              |         |   |   |         |        
|                                                                                                                                      |                                                                                 |   | (4,284                 | )      |               |   | (23,771      | )       |   |   | (51,696 | )      
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|Recoveries:                                                                                                                           |                                                                                 |   |                        |        |               |   |              |         |   |   |         |        
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Mortgage                                                                        |   |                        |       |               |   |              |        |   |   |         | 283     |  
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Home equity loans and lines of credit                                           |   |                        | 139    |               |   |              | 464     |   |   |         | 4,602   |  
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Auto                                                                            |   |                        | 182    |               |   |              | 1,039   |   |   |         | 1,526   |  
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Asset-based loans, syndicated loans, factored
receivables and
commercial leases |   |                        | 505    |               |   |              | 1,220   |   |   |         | 2,479   |  
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Franchise                                                                       |   |                        | 78     |               |   |              | 126     |   |   |         | 196     |  
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                      | Business                                                                        |   |                        | 6      |               |   |              | 38      |   |   |         | 379     |  
|                                                                                                                                      |                                                                                 |   |                        |        |               |   |              |         |   |   |         |        
|                                                                                                                                      |                                                                                 |   | 910                    |        |               |   | 2,887        |         |   |   | 9,465   |        
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|Net charge-offs                                                                                                                       |                                                                                 |   | (3,374                 | )      |               |   | (20,884      | )       |   |   | (42,231 | )      
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|Provision for losses on loans and leases                                                                                              |                                                                                 |   | 2,200                  |        |               |   | 10,700       |         |   |   | 71,890  |        
|                                                                                                                                      |                                                                                 |   |                        |        |               |   |              |         |   |   |         |        
|Reallocation of allowance as mark-to-market adjustments to
individual loans and leases and groups of homogeneous
loans
in liquidation |                                                                                 |   | (28,949                | )      |               |   | (28,949      | )       |   |   |        |        
|                                                                                                                                      |                                                                                 |   |                        |        |               |   |              |         |   |   |         |        
|Ending balance                                                                                                                        |                                                                                 | $ |                       |        |               | $ |             |         |   | $ | 49,791  |        
|                                                                                                                                      |                                                                                 |   |                        |        |               |   |              |         |   |   |         |        
|Net charge-offs to average loans and leases (annualized)                                                                              |                                                                                 |   | 0.83                   | %      |               |   | 1.29         | %       |   |   | 1.51    | %      
|                                                                                                                                      |                                                                                 |   |                        |        |               |   |              |         |   |   |         |        

Prior to its reallocation as mark-to-market adjustments, the ALLL
decreased as we transferred and subsequently sold loans from our
held-for-investment portfolio to our held-for-sale portfolio during 2001 and
the first nine months of 2002. During 2001, the transfer of loans from
held-for-investment to held-for-sale resulted in a $53.6 million reduction to
the ALLL related to mark-to-market adjustments on these loans, consisting of
$48.8 million in net reductions related to the sale of franchise loans and $4.8
million related to home equity loans. During the first nine months of 2002,
the transfer of loans from held-for-investment to held-for-sale resulted in a
$10.7 million reduction in the ALLL related to the sale and payoff of
multi-family mortgage, commercial real estate, auto and franchise and other
commercial loans.

55



---



##### Table of Contents



Deposits

The following table illustrates deposits as of the dates indicated:

|                                                       |  |                    |           |                   |  |                        |      |       |  |   |           |  |  |  |      |  
|------------------------------------------------------ |  | ------------------ | --------- | ----------------- |  | ---------------------- | ---- | ----- |  | - | --------- |  |  |  | ---- | -
|                                                       |  | September 30, 2002 |           | December 31, 2001
|                                                       |  |                    |           |                  
|                                                       |  | Amount             |           | Rates             |  | Amount                 |      | Rates
|                                                       |  |                    |           |                   |  |                        |      |      
|                                                       |  |                    |           |                   |  | (Dollars in thousands) |      |       |  |  
|Transaction accounts                                   |  | $                  | 1,779,452 |                   |  |                        | 1.29 | %     |  | $ | 1,950,699 |  |  |  | 1.48 | %
|                                                      
|                                                      
|                                                      
|                                                      
|Retail certificates of deposit                         |  |                    | 1,467,816 |                   |  |                        | 2.84 |       |  |   | 1,284,228 |  |  |  | 3.53 |  
|                                                       |  |                    |           |                   |  |                        |      |       |  |   |           |  |  |  |      |  
|Total retail deposits                                  |  |                    | 3,247,268 |                   |  |                        | 1.99 |       |  |   | 3,234,927 |  |  |  | 2.29 |  
|                                                      
|                                                      
|                                                      
|                                                      
|Brokered certificates of deposit                       |  |                    | 251,367   |                   |  |                        | 2.03 |       |  |   |          |  |  |  |     |  
|                                                      
|                                                      
|                                                      
|                                                      
|Deposit premium at September 30, 2002                  |  |                    | (463,534  | )                 |  |                        |     |       |  |   |          |  |  |  |     |  
|                                                       |  |                    |           |                   |  |                        |      |       |  |   |           |  |  |  |      |  
|Total                                                  |  | $                  | 3,035,101 |                   |  |                        | 1.99 | %     |  | $ | 3,234,927 |  |  |  | 2.29 | %
|                                                       |  |                    |           |                   |  |                        |      |       |  |   |           |  |  |  |      |  
|Transaction accounts as a
percentage of total deposits |  |                    |           |                   |  |                        | 54.8 | %     |  |   |           |  |  |  | 60.3 | %
|                                                       |  |                    |           |                   |  |                        |      |       |  |   |           |  |  |  |      |  

On November 1, 2002, Bay View Bank sold its retail deposits to U.S. Bank
National Association.

Borrowings

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

During 2001, we significantly reduced our borrowings as part of our
strategic plan, completely eliminating short-term borrowings including
collateralized advances from the Federal Home Loan Bank of San Francisco,
warehouse lines and securities sold under agreements to repurchase. At
September 30, 2002, our remaining borrowings include subordinated debt, capital
securities and other borrowings related to the financing secured by our auto
lease contractual cash flows during the fourth quarter of 2001.

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

|                            |  |                        |         |                   |  |   |         | 
|--------------------------- |  | ---------------------- | ------- | ----------------- |  | - | ------- | 
|                            |  | September 30, 2002     |         | December 31, 2001
|                            |  |                        |         |                  
|                            |  | (Dollars in thousands)
|Subordinated Notes, net (1) |  | $                      | 154,563 |                   |  | $ | 149,632 | 
|                           
|                           
|                           
|                           
|Other borrowings            |  |                        | 77,828  |                   |  |   | 137,536 | 
|                           
|                           
|                           
|                           
|Capital Securities          |  |                        | 90,000  |                   |  |   | 90,000  | 
|                            |  |                        |         |                   |  |   |         | 
|Total                       |  | $                      | 322,391 |                   |  | $ | 377,168 | 
|                            |  |                        |         |                   |  |   |         | 

|(1) |  | At September 30, 2002, includes $4.6 million prepayment penalty associated with the anticipated
call of the securities during the fourth quarter of 2002.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

The Company and the Bank have obtained regulatory approvals necessary for
the early redemption of their outstanding debt securities, and have the funds
needed for redemption. These include the Companys $100 million of 9-1/8 %
Subordinated Notes which will be redeemed at the applicable price of par plus a
premium of 4.563% on November 29, 2002 and the Banks $50 million of 10%
Subordinated Notes which will be redeemed at par on December 9, 2002. Notices
of redemption have been sent to holders by the trustee of each of the debt
securities.

56



---



##### Table of Contents



Liquidity

The objective of our liquidity management program is to ensure that funds
are available in a timely manner to meet loan demand and depositors needs, and
to service other liabilities as they come due, without causing an undue amount
of cost or risk, and without causing a disruption to normal operating
conditions.

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

The ability to attract a stable, low-cost base of deposits is a
significant source of liquidity. Other sources of liquidity available to us
include short-term borrowings, which consist of advances from the Federal Home
Loan Bank of San Francisco, repurchase agreements and other short-term
borrowing arrangements. Our liquidity requirements can also be met through the
use of our portfolio of liquid assets. Liquid assets, as defined by us,
include cash and cash equivalents in excess of the minimum levels necessary to
carry out normal business operations, federal funds sold, commercial paper and
other short-term investments.

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

On September 29, 2000, Bay View Capital Corporation entered into an
agreement with the Federal Reserve Bank of San Francisco. In addition to
requiring prior approval to pay common stock dividends, the agreement requires
us to obtain prior approval to disburse dividends associated with our 9.76%
Capital Securities. Pursuant to the terms of the Capital Securities, we have
deferred distributions on the debentures. During this deferral period,
distributions to which holders are entitled will continue to accrue at an
annual rate of 9.76% of the liquidation amount of $25 per Capital Security,
plus accumulated additional distributions at the same rate, compounded
quarterly, on any unpaid distributions (to the extent permitted by law). We
anticipate paying the deferred dividends on December 31, 2002, pending
regulatory approvals. While we remain subject to the formal agreement with the
Federal Reserve Bank, future dividend payments will remain subject to their
prior approval.

At September 30, 2002, we had liquidity levels with cash and cash
equivalents in excess of $2.5 billion, representing approximately 84% of total
deposits, as we converted loans and investment securities to cash and cash
equivalents in anticipation of the close of the U.S. Bank transaction. On
November 1, 2002, following the close of the U.S. Bank sale transaction, we had
cash and cash equivalents of $275 million. As we complete our liquidation, the
funding to repay outstanding brokered certificates of deposit, borrowings, the
Capital Securities, and other liabilities will be generated from sales of the
remaining assets. Future originations of auto loans are anticipated to be
funded with a warehouse line of credit combined with periodic securitizations
of warehoused loans.

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

Capital Resources

Management seeks to maintain adequate capital to support anticipated
credit risks and to ensure that Bay View Capital Corporation and Bay View Bank
are in compliance with all regulatory capital guidelines.

57



---



##### Table of Contents



With the adoption of liquidation basis accounting effective September 30,
2002, our stockholders equity was transferred to net assets in liquidation.
Our net assets in liquidation totaled $413.7 million at September 30, 2002 or
$6.50 in net assets in liquidation per outstanding share based on 63,631,680
diluted shares in liquidation.

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

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

|                                                |  |                           |         |              |  |   |          |  
|----------------------------------------------- |  | ------------------------- | ------- | ------------ |  | - | -------- | -
|                                                |  | At                        |         | At          
|                                                |  | September 30,             |         | December 31,
|                                                |  | 2002                      |         | 2001        
|                                                |  |                           |         |             
|                                                |  | (Dollars in thousands,   
|                                                |  | except per share amounts)
|Stockholders equity                            |  | $                         |        |              |  | $ | 336,187  |  
|                                               
|                                               
|                                               
|                                               
|Intangible assets                               |  |                           |        |              |  |   | (123,573 | )
|                                                |  |                           |         |              |  |   |          |  
|Tangible stockholders equity                   |  | $                         |        |              |  | $ | 212,614  |  
|                                                |  |                           |         |              |  |   |          |  
|Book value per share                            |  | $                         |        |              |  | $ | 5.37     |  
|                                                |  |                           |         |              |  |   |          |  
|Tangible book value per share                   |  | $                         |        |              |  | $ | 3.40     |  
|                                                |  |                           |         |              |  |   |          |  
|Net assets in liquidation                       |  | $                         | 413,675 |              |  |   |          |  
|                                                |  |                           |         |              |  |   |          |  
|Net assets in liquidation per outstanding share |  | $                         | 6.50    |              |  |   |          |  
|                                                |  |                           |         |              |  |   |          |  

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

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

Bay View Banks regulatory capital levels at September 30, 2002 exceeded
both the requirements necessary to be considered adequately capitalized as well
as the requirements necessary to be considered well-capitalized as illustrated
in the following table:

|                  |  |        |         |             |  |             |       |       |  |                        |         |                  |  |  |      |   |  |   |         |  |  |  |       |  
|----------------- |  | ------ | ------- | ----------- |  | ----------- | ----- | ----- |  | ---------------------- | ------- | ---------------- |  |  | ---- | - |  | - | ------- |  |  |  | ----- | -
|                  |  |        |         |             |  |             |       |       |  | Minimum                |         | Well-Capitalized
|                  |  | Actual |         | Requirement |  | Requirement
|                  |  |        |         |             |  |            
|                  |  | Amount |         | Ratio       |  | Amount      |       | Ratio |  | Amount                 |         | Ratio           
|                  |  |        |         |             |  |             |       |       |  |                        |         |                 
|                  |  |        |         |             |  |             |       |       |  | (Dollars in thousands) |         |                  |  |  |      |   |  |  
|Tier 1 leverage   |  | $      | 592,747 |             |  |             | 15.78 | %     |  | $                      | 150,255 |                  |  |  | 4.00 | % |  | $ | 187,819 |  |  |  | 5.00  | %
|                 
|                 
|                 
|                 
|Tier 1 risk-based |  | $      | 592,747 |             |  |             | 22.77 | %     |  | $                      | 104,116 |                  |  |  | 4.00 | % |  | $ | 156,175 |  |  |  | 6.00  | %
|                 
|                 
|                 
|                 
|Total risk-based  |  | $      | 642,747 |             |  |             | 24.69 | %     |  | $                      | 208,233 |                  |  |  | 8.00 | % |  | $ | 260,291 |  |  |  | 10.00 | %

Similarly, Bay View Capital Corporation is subject to various regulatory
capital guidelines administered by the Board of Governors of the Federal
Reserve. The capital guidelines provide definitions of regulatory capital
ratios and the methods of calculating capital and each ratio for bank holding
companies. The federal banking agencies require a
58Table of Contents

minimum ratio of qualifying
total risk-based capital to risk-adjusted assets of 8% and a minimum ratio of
Tier 1 capital to risk-adjusted assets of 4%. In addition to the risk-based
guidelines, federal banking regulators require banking organizations to
maintain a minimum amount of Tier 1 capital to total average assets, referred
to as the leverage ratio. For a banking organization rated in the highest of
the five categories used by regulators to rate banking organizations, the
minimum leverage ratio of Tier 1 capital to total average assets is 3%.
For organizations not rated in the highest of the five categories, the
regulations advise an additional cushion of at least 100 basis points. In
addition to these uniform risk-based capital guidelines and leverage ratios
that apply across the industry, the regulators have the discretion to set
individual minimum capital requirements for specific institutions at rates
significantly above the minimum guidelines and ratios.

At September 30, 2002, Bay View Capital Corporations regulatory capital
levels exceeded the requirements necessary to be considered adequately
capitalized as illustrated in the following table:

|                  |  |        |         |             |  |                        |       |       |  |         |         |  |  |  |      |  
|----------------- |  | ------ | ------- | ----------- |  | ---------------------- | ----- | ----- |  | ------- | ------- |  |  |  | ---- | -
|                  |  |        |         |             |  |                        |       |       |  | Minimum
|                  |  | Actual |         | Requirement
|                  |  |        |         |            
|                  |  | Amount |         | Ratio       |  | Amount                 |       | Ratio
|                  |  |        |         |             |  |                        |       |      
|                  |  |        |         |             |  | (Dollars in thousands) |       |       |  |        
|Tier 1 leverage   |  | $      | 503,658 |             |  |                        | 13.17 | %     |  | $       | 152,975 |  |  |  | 4.00 | %
|                 
|                 
|                 
|                 
|Tier 1 risk-based |  | $      | 503,658 |             |  |                        | 18.76 | %     |  | $       | 107,384 |  |  |  | 4.00 | %
|                 
|                 
|                 
|                 
|Total risk-based  |  | $      | 638,221 |             |  |                        | 23.77 | %     |  | $       | 214,768 |  |  |  | 8.00 | %

Share Repurchase Program

Our outstanding shares of common stock were 62,769,676 at September 30,
2002 and 62,579,129 at December 31, 2001. In August 1998, our Board of
Directors authorized the repurchase of up to $50 million in shares of our
common stock. We repurchased 460,000 shares of our common stock during 1999.
We did not repurchase any shares of our common stock during 2000, 2001 and the
first nine months of 2002. In November 1999, all of our treasury shares were
reissued in conjunction with the acquisition of FMAC. At September 30, 2002,
we had approximately $17.6 million in remaining authorization available for
future share repurchases. Pursuant to our agreement with the Federal Reserve
Bank of San Francisco, we must obtain prior written approval before
repurchasing shares.

59



---



##### Table of Contents






Item 3. Quantitative and Qualitative Disclosures About Market Risk

Asset and Liability Management

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

Interest Rate Risk

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

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

Caps

Interest rate caps are option contracts that limit the cap holders risk
associated with an increase in interest rates. If rates go above a specified
interest rate (strike price or cap rate), the cap holder is entitled to receive
cash payments equal to the excess of the market rate over the strike price
multiplied by the notional amount. We had interest rate caps with notional
amounts of $100.0 million at September 30, 2002 and $180.0 million at December
31, 2001. Our interest rate caps had cap rates at 7.00% and a cap index based
on either the one- or three-month LIBOR rate. These caps are reported at their
fair value with realized and unrealized gains and losses charged to earnings
when incurred. The fair value of our interest rate caps was $0 and $5,000 at
September 30, 2002 and December 31, 2001, respectively.

60



---



##### Table of Contents



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

Interest Rate Sensitivity

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

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

61



---



##### Table of Contents



The following table illustrates our combined asset and liability repricing as
of September 30, 2002(1):

|                                                   |                                  |   |                        |           |             |   |            |   |       |   |         |   |  |   |          |   |  |   |           |           | 
|-------------------------------------------------- | -------------------------------- | - | ---------------------- | --------- | ----------- | - | ---------- | - | ----- | - | ------- | - |  | - | -------- | - |  | - | --------- | --------- | 
|                                                   |                                  |   | Repricing Period      
|                                                   |                                  |   |                       
|                                                   |                                  |   | Under                  |           | Between     |   | Between    |   | Over  |   |         |   | 
|                                                   |                                  |   | One                    |           | One and     |   | Three and  |   | Five  |   |         |   | 
|                                                   |                                  |   | Year                   |           | Three Years |   | Five Years |   | Years |   | Total  
|                                                   |                                  |   |                        |           |             |   |            |   |       |   |        
|                                                   |                                  |   | (Dollars in thousands)
|Assets:                                            |                                  |   |                        |           |             |   |            |   |       |   |         |   |  |   |          |   |  |   |           |          
|Cash and investments                               |                                  | $ | 2,549,922              |           |             | $ | 16,348     |   |       | $ | 12,559  |   |  | $ | 52,500   |   |  | $ | 2,631,329 |          
|Mortgage-backed securities and loans and leases(2) |                                  |   | 707,840                |           |             |   | 217,732    |   |       |   | 148,350 |   |  |   | 23,974   |   |  |   | 1,097,896 |          
|                                                   |                                  |   |                        |           |             |   |            |   |       |   |         |   |  |   |          |   |  |   |           |          
|Total interest rate sensitive assets               |                                  | $ | 3,257,762              |           |             | $ | 234,080    |   |       | $ | 160,909 |   |  | $ | 76,474   |   |  | $ | 3,729,225 |          
|                                                   |                                  |   |                        |           |             |   |            |   |       |   |         |   |  |   |          |   |  |   |           |          
|Liabilities:                                       |                                  |   |                        |           |             |   |            |   |       |   |         |   |  |   |          |   |  |   |           |          
|Deposits:                                          |                                  |   |                        |           |             |   |            |   |       |   |         |   |  |   |          |   |  |   |           |          
|                                                   | Transaction accounts             |   | $                      | 1,263,427 |             |   | $          |  |       |   | $       |  |  |   | $        |  |  |   | $         | 1,263,427 | 
|                                                   | Retail certificates of deposit   |   |                        | 1,520,307 |             |   |            |  |       |   |         |  |  |   |          |  |  |   |           | 1,520,307 | 
|                                                   | Brokered certificates of deposit |   |                        | 251,367   |             |   |            |  |       |   |         |  |  |   |          |  |  |   |           | 251,367   | 
|Borrowings (3)                                     |                                  |   | 49,212                 |           |             |   | 28,616     |   |       |   |        |   |  |   | 244,563  |   |  |   | 322,391   |          
|                                                   |                                  |   |                        |           |             |   |            |   |       |   |         |   |  |   |          |   |  |   |           |          
|Total interest rate sensitive liabilities          |                                  | $ | 3,084,313              |           |             | $ | 28,616     |   |       | $ |        |   |  | $ | 244,563  |   |  | $ | 3,357,492 |          
|                                                   |                                  |   |                        |           |             |   |            |   |       |   |         |   |  |   |          |   |  |   |           |          
|Repricing gap-positive (negative)                  |                                  | $ | 173,449                |           |             | $ | 205,464    |   |       | $ | 160,909 |   |  | $ | (168,089 | ) |  | $ | 371,733   |          
|                                                   |                                  |   |                        |           |             |   |            |   |       |   |         |   |  |   |          |   |  |   |           |          
|Cumulative repricing gap-positive                  |                                  | $ | 173,449                |           |             | $ | 378,913    |   |       | $ | 539,822 |   |  | $ | 371,733  |   |  |   |           |          
|                                                   |                                  |   |                        |           |             |   |            |   |       |   |         |   |  |   |          |   |  |   |           |          



|(1) |  | We completed the sale of the Banks retail banking assets to U.S.
Bank effective November 1, 2002. Accordingly, these assets and retail deposits
have been reflected herein as repricing within one year. See note 2 for further
discussion.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Based on assumed annual prepayment and amortization rates, which
approximate our historical experience.                                                                                                                                     
|   
|(3) |  | Includes Capital Securities.                                                                                                                                                                                                                

62



---



##### Table of Contents



The
simulation model discussed above has, in the past, provided our Risk Management
Committee with the ability to simulate our net interest income. However, the Companys plan of dissolution and stockholder liquidity, which was approved on October 3, 2002, preempted our historical
asset and liability management strategies and results in significant amounts of liquidity. The simulation results, set forth below, reflect a limited number of
elements of this plan of dissolution which had been executed effective September 30, 2002, including the sale of the
Banks retail banking assets to U.S. Bank. In order to
measure, at September 30, 2002, the sensitivity of our forecasted net interest
income to changing interest rates, both a rising and falling interest rate
scenario were projected and compared to a base market interest rate forecast
derived from the current treasury yield curve. For the rising and falling
interest rate scenarios, the base market interest rate forecast was increased,
on an instantaneous and sustained basis, by 100 to 300 basis points and
decreased by 100 and 200 basis points. At September 30, 2002, our net interest
income was outside of our policy guidelines given the aforementioned hypothetical changes in market interest rates. This is a result of the significant mismatch
of interest rate sensitive assets and liabilities produced by implementation of the plan of dissolution and stockholder liquidity.
 The following table
illustrates the sensitivity of our net income relative to the hypothetical
changes to the market rates:

|                                                    |  |                     |        |         |  |         |        |         |  |         |        |    |  |   |        |    |  |   |        |   
|--------------------------------------------------- |  | ------------------- | ------ | ------- |  | ------- | ------ | ------- |  | ------- | ------ | -- |  | - | ------ | -- |  | - | ------ | --
|                                                    |  | Net Interest Income
|                                                    |  |                    
|Projected effect:                                   |  | -200 bp             |        | -100 bp |  | +100 bp |        | +200 bp |  | +300 bp
|                                                    |  |                     |        |         |  |         |        |         |  |        
|Net interest income                                 |  | $                   | 6,684  |         |  | $       | 14,452 |         |  | $       | 37,475 |    |  | $ | 47,107 |    |  | $ | 56,490 |   
|                                                   
|                                                   
|                                                   
|                                                   
|% Increase (decrease) from
base net interest income |  |                     | (74.53 | )%      |  |         | (44.94 | )%      |  |         | 42.78  | %  |  |   | 79.48  | %  |  |   | 115.23 | % 
|                                                   
|                                                   
|                                                   
|                                                   
|Policy guideline                                    |  |                     | (8.00  | )%      |  |         | (5.00  | )%      |  |         | (5.00  | )% |  |   | (8.00  | )% |  |   | (15.00 | )%

The computation of prospective effects of hypothetical interest rate
changes are based on numerous assumptions, including relative levels of market
interest rates, asset prepayments and deposit decay, and should not be relied
upon as indicative of actual results. Further, the computations do not
contemplate any actions we may undertake in response to changes in interest
rates. These simulation results do not comprehend managements liquidation plans subsequent to September 30, 2002; management believes
these actions result in substantially less interest rate risk than
indicated by the simulation results. Actual amounts may differ from those projections set forth above should
market conditions vary from the underlying assumptions used.




Item 4. Controls and Procedures



| | (a) |  | Evaluation of disclosure controls and procedures. The Companys
principal executive officer and its principal financial officer, after
evaluating the effectiveness of the Companys disclosure controls and
procedures (as defined in Exchange Act
Rules 12(a)  and
15(d)  14(c))
as of a date within 90 days of the filing of this quarterly report, have
concluded that, as of such date, the Companys disclosure controls and
procedures were adequate and effective to ensure that material
information relating to the Company and its consolidated subsidiaries
would be made known to them by others within those entities.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Changes in internal controls. There have been no significant changes
in the Companys internal controls or in the other factors that could
significantly affect the Companys disclosure controls and procedures
subsequent to the date of their evaluation, nor were there any
significant deficiencies or material weaknesses in the Companys
internal controls. As a result, no corrective actions were required or
undertaken.                                                                                                                                                                                                   

63



---



##### Table of Contents






PART II. OTHER INFORMATION




Item 1. Legal Proceedings



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




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



| | None
| | ----




Item 6. Exhibits and Reports on Form 8-K



|a(i)  | Computation of Ratios of Earnings to Fixed Charges (Exhibit 12)                                                                                                                                                                                                                                                                                                                                                                                                                                             
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|b(i)  | The Registrant filed the following report on Form 8-K dated
July 24, 2002 as amended by Form 8-K/A during the three months ended
September 30, 2002:                                                                                                                                                                                                                                                                                                                                                        
|     
|      | On July 22, 2002, the Registrant announced (i) the signing of a
definitive agreement to sell Bay View Banks retail banking assets to
U.S. Bank, (ii) a strategic plan to convert the Companys assets to
cash with the goal of making cash distributions to the Companys
stockholders and (iii) the signing of a definitive agreement by Bay
View Bank to sell multi-family and commercial real estate loans to
Washington Mutual Bank.                                                                   
|     
|b(ii) | The Registrant filed the following report on Form 8-K dated August
15, 2002 during the three months ended September 30, 2002:                                                                                                                                                                                                                                                                                                                                                                               
|     
|      | On August 12, 2002, the Registrant and its wholly owned subsidiary
Bay View Bank announced the sale of commercial and multi-family
loans to Washington Mutual Bank. The Registrant also announced the
filing of a preliminary proxy statement with the Securities and
Exchange Commission on August 7, 2002 to solicit shareholder
approval of the proposed sale of Bay View Banks retail banking
assets to U.S. Bank National Association and the Companys plan of
dissolution and stockholder liquidity.

64



---



##### Table of Contents






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 14, 2002 |  | BY:                                     |  | /s/ John W. Rose                                    
|                        |  |                                         |  |                                                     
|                        |  |                                         |  | John W. Rose                                        
|                       
|                       
|                       
|                       
|                        |  |                                         |  | Executive Vice President and Chief Financial Officer
|                        |  |                                         |  | (Principal Financial Officer)                       
|                        |  |                                         |  |                                                     
|                        |  | BY:                                     |  | /s/ Jeffrey O. Butcher                              
|                        |  |                                         |  |                                                     
|                        |  |                                         |  | Jeffrey O. Butcher                                  
|                        |  |                                         |  | Senior Vice President and Controller                
|                        |  |                                         |  | (Principal Accounting Officer)                      

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER OF BAY
VIEW CAPITAL CORPORATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

We certify that, to the best of our knowledge and belief, the Quarterly
Report on Form 10-Q of Bay View Capital Corporation for the period ending
September 30, 2002:



|(1) |  | complies with the requirements of Section 13 (a) or 15 (d) of the
Securities Exchange Act of 1934; and                                                               
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of Bay View
Capital Corporation.

|                         |  |                                                           |  |     |  |                                                                  
|------------------------ |  | --------------------------------------------------------- |  | --- |  | -----------------------------------------------------------------
|BY:                      |  | /s/ Robert B. Goldstein                                   |  | BY: |  | /s/ John W. Rose                                                 
|                         |  |                                                           |  |     |  |                                                                  
|                         |  | Robert B. Goldstein
President and Chief Executive Officer |  |     |  | John W. Rose
Executive Vice President
and Chief Financial Officer
|                         |  |                                                           |  |     |  |                                                                  
|DATE:  November 14, 2002 |  |                                                           |  |    

65



---



##### Table of Contents



CERTIFICATIONS

I, Robert B. Goldstein, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Bay View Capital
Corporation;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this quarter
report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002

| |  |                                                                                  |  | 
| |  | -------------------------------------------------------------------------------- |  | 
| |  | /s/ Robert B. GoldsteinRobert B. Goldstein
President and Chief
Executive Officer |  | 





---



##### Table of Contents



CERTIFICATIONS

I, John W. Rose, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Bay View Capital
Corporation;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this quarter
report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002

| |  |                                                                   |  | 
| |  | ----------------------------------------------------------------- |  | 
| |  | /s/ John W. Rose                                                  |  | 
| |  |                                                                   |  | 
| |  | John W. Rose
Executive Vice President and
Chief Financial Officer |  |