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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549


FORM 10-Q

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

For the quarterly period ended June 30, 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 July 31, 2002
62,697,831 shares

1



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TABLE OF CONTENTS



|                              |                                                                                               |                                                                       |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | --------------------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | Item 1. Financial Statements                                                                 
|                              |                                                                                               | Consolidated Statements of Financial Condition                       
|                              |                                                                                               | Consolidated Statements of Operations and Comprehensive Income (Loss)
|                              |                                                                                               | Consolidated Statements of Operations and Comprehensive Income (Loss)
|                              |                                                                                               | Consolidated Statements of Stockholders Equity                      
|                              |                                                                                               | Consolidated Statements of Cash Flows                                
|                              |                                                                                               | Consolidated Statements of Cash Flows (continued)                    
|                              |                                                                                               | Notes to Consolidated Financial Statements                           
|                              | Note 4. Merger and Acquisition-Related Activity                                              
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|PART II. OTHER INFORMATION   
|SIGNATURES                   
|Exhibit 12                   



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##### Table of Contents



FORM 10-Q
INDEX

BAY VIEW CAPITAL CORPORATION

|         |  |                                                                                                                        |  |        
|-------- |  | ---------------------------------------------------------------------------------------------------------------------- |  | -------
|         |  |                                                                                                                        |  | Page(s)
|         |  |                                                                                                                        |  |        
|PART I.  |  | FINANCIAL INFORMATION                                                                                                  |  |        
|        
|Item 1.  |  | Financial Statements (Unaudited):                                                                                      |  |        
|        
|         |  | Consolidated Statements of Financial Condition                                                                         |  | 4      
|        
|         |  | Consolidated Statements of Operations and Comprehensive Income (Loss)                                                  |  | 5-6    
|        
|         |  | Consolidated Statements of Stockholders Equity                                                                        |  | 7      
|        
|         |  | Consolidated Statements of Cash Flows                                                                                  |  | 8-9    
|        
|         |  | Notes to Consolidated Financial Statements                                                                             |  | 10-24  
|        
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                  |  | 25-54  
|        
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                                                             |  | 55-58  
|        
|PART II. |  | OTHER INFORMATION                                                                                                      |  |        
|        
|         |  | Other Information                                                                                                      |  | 59-60  
|        
|         |  | Signatures                                                                                                             |  | 61     
|        
|         |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 |  | 61     

2



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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;                                                                                                  
| 
| |  | increases in our provision for losses on loans and leases;                                                                                                                              
| 
| |  | our inability to sustain or improve the performance of our subsidiaries;                                                                                                                
| 
| |  | our inability to achieve the financial goals in our strategic plans, including any financial goals related to both
contemplated and consummated asset and deposit sales or acquisitions;
| 
| |  | the outcome of lawsuits or regulatory disputes;                                                                                                                                         
| 
| |  | credit and other risks of lending, leasing and investment activities; and                                                                                                               
| 
| |  | our inability to use the net operating loss carryforwards and other net deferred tax assets that we currently have.                                                                     

Certain risk factors exist in connection with the transactions with
Washington Mutual and U.S. Bank and our plan of dissolution and stockholder
liquidity as further discussed in Note 13 to the Financial
Statements and the Strategic Overview section of Management's
Discussion and Analysis of Financial Condition and Results of
Operations. The
risk factors include:



| |  | the possibility of not making any distributions to our stockholders, if our plan of dissolution and stockholder liquidity is
not authorized at the special stockholder meeting, unless and until we enter into an agreement regarding another transaction
that would provide a source of funds for stockholder liquidity;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the possibility of not proceeding with our plan of dissolution and stockholder liquidity if the sale of our retail banking
assets to U.S. Bank does not close;                                                                                                                                                           
| 
| |  | the possibility of not being able to close the sale of our retail banking assets to U.S. Bank if we cannot consummate other
asset transactions resulting in proceeds of not less than approximately $1.3 billion;                                                                                                        
| 
| |  | the uncertainty of the amount we ultimately distribute to our stockholders; and                                                                                                                                                                                                                                          
| 
| |  | 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.                                                                                                                                           

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



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##### Table of Contents






PART I. FINANCIAL INFORMATION




Item 1. Financial Statements




| |  |                                                                                                         |  | 
| |  | ------------------------------------------------------------------------------------------------------- |  | 
| |  | Bay View Capital
Corporation and Subsidiaries
Consolidated Statements of Financial Condition(Unaudited)

|                                                                                                                                                          |                                                                                                                                                                                           |                                                              |           |                        |      |              |           |           |      |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | --------- | ---------------------- | ---- | ------------ | --------- | --------- | ---- | -
|                                                                                                                                                          |                                                                                                                                                                                           |                                                              |           | June 30,               |      | December 31,
|                                                                                                                                                          |                                                                                                                                                                                           |                                                              |           | 2002                   |      | 2001        
|                                                                                                                                                          |                                                                                                                                                                                           |                                                              |           |                        |      |             
|                                                                                                                                                          |                                                                                                                                                                                           |                                                              |           | (Dollars in thousands)
|ASSETS                                                                                                                                                    |                                                                                                                                                                                           |                                                              |           |                        |      |              |           |          
|Cash and cash equivalents:                                                                                                                                |                                                                                                                                                                                           |                                                              |           |                        |      |              |           |          
|                                                                                                                                                          | Cash and due from depository institutions                                                                                                                                                 |                                                              | $         | 54,632                 |      |              | $         | 357,008   |     
|                                                                                                                                                          | Short-term investments                                                                                                                                                                    |                                                              |           | 408,567                |      |              |           | 164,380   |     
|                                                                                                                                                          |                                                                                                                                                                                           |                                                              |           |                        |      |              |           |          
|                                                                                                                                                          |                                                                                                                                                                                           |                                                              | 463,199   |                        |      |              | 521,388   |          
|Securities available-for-sale:                                                                                                                            |                                                                                                                                                                                           |                                                              |           |                        |      |              |           |          
|                                                                                                                                                          | Investment securities                                                                                                                                                                     |                                                              |           | 112,325                |      |              |           | 98,980    |     
|                                                                                                                                                          | Mortgage-backed securities                                                                                                                                                                |                                                              |           | 171,342                |      |              |           | 278,891   |     
|Loans and leases held-for-sale                                                                                                                            |                                                                                                                                                                                           |                                                              | 30,478    |                        |      |              | 40,608    |          
|Loans and leases held-for-investment, net of allowance for loan and lease losses of
$38.9 million at June 30, 2002 and $49.8 million at December 31, 2001 |                                                                                                                                                                                           |                                                              | 2,286,867 |                        |      |              | 2,326,787 |          
|Investment in operating lease assets, net                                                                                                                 |                                                                                                                                                                                           |                                                              | 266,736   |                        |      |              | 339,349   |          
|Investment in stock of the Federal Home Loan Bank of San Francisco                                                                                        |                                                                                                                                                                                           |                                                              | 15,612    |                        |      |              | 24,157    |          
|Investment in stock of the Federal Reserve Bank                                                                                                           |                                                                                                                                                                                           |                                                              | 13,304    |                        |      |              | 11,866    |          
|Real estate owned, net                                                                                                                                    |                                                                                                                                                                                           |                                                              | 4,611     |                        |      |              | 9,462     |          
|Premises and equipment, net                                                                                                                               |                                                                                                                                                                                           |                                                              | 11,417    |                        |      |              | 13,145    |          
|Intangible assets                                                                                                                                         |                                                                                                                                                                                           |                                                              | 116,426   |                        |      |              | 123,573   |          
|Income taxes, net                                                                                                                                         |                                                                                                                                                                                           |                                                              | 180,723   |                        |      |              | 174,360   |          
|Other assets                                                                                                                                              |                                                                                                                                                                                           |                                                              | 79,255    |                        |      |              | 51,539    |          
|                                                                                                                                                          |                                                                                                                                                                                           |                                                              |           |                        |      |              |           |          
|Total assets                                                                                                                                              |                                                                                                                                                                                           | $                                                            | 3,752,295 |                        |      | $            | 4,014,105 |          
|                                                                                                                                                          |                                                                                                                                                                                           |                                                              |           |                        |      |              |           |          
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                      |                                                                                                                                                                                           |                                                              |           |                        |      |              |           |          
|Deposits:                                                                                                                                                 |                                                                                                                                                                                           |                                                              |           |                        |      |              |           |          
|                                                                                                                                                          | Transaction accounts                                                                                                                                                                      |                                                              | $         | 1,837,291              |      |              | $         | 1,950,699 |     
|                                                                                                                                                          | Retail certificates of deposit                                                                                                                                                            |                                                              |           | 1,195,510              |      |              |           | 1,284,228 |     
|                                                                                                                                                          |                                                                                                                                                                                           |                                                              |           |                        |      |              |           |          
|                                                                                                                                                          |                                                                                                                                                                                           |                                                              | 3,032,801 |                        |      |              | 3,234,927 |          
|Subordinated Notes, net                                                                                                                                   |                                                                                                                                                                                           |                                                              | 149,664   |                        |      |              | 149,632   |          
|Other borrowings                                                                                                                                          |                                                                                                                                                                                           |                                                              | 95,993    |                        |      |              | 137,536   |          
|Other liabilities                                                                                                                                         |                                                                                                                                                                                           |                                                              | 41,766    |                        |      |              | 65,823    |          
|                                                                                                                                                          |                                                                                                                                                                                           |                                                              |           |                        |      |              |           |          
|Total liabilities                                                                                                                                         |                                                                                                                                                                                           |                                                              | 3,320,224 |                        |      |              | 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  62,746,682 shares; 2001 - 62,627,980 shares;
outstanding, 2002  62,697,831 shares; 2001  62,579,129 shares |                                                              |           | 627                    |      |              |           | 626       |     
|                                                                                                                                                          | Additional paid-in capital                                                                                                                                                                |                                                              |           | 597,228                |      |              |           | 595,258   |     
|                                                                                                                                                          | Accumulated deficit                                                                                                                                                                       |                                                              |           | (255,210               | )    |              |           | (258,047  | )   
|                                                                                                                                                          | Treasury stock, at cost; 48,851 shares                                                                                                                                                    |                                                              |           | (808                   | )    |              |           | (808      | )   
|                                                                                                                                                          | Accumulated other comprehensive income (loss):                                                                                                                                            |                                                              |           |                        |      |              |           |           |     
|                                                                                                                                                          |                                                                                                                                                                                           | Unrealized gain on securities available-for-sale, net of tax |           |                        | 528  |              |           |           | 523  |  
|                                                                                                                                                          |                                                                                                                                                                                           | Minimum pension liability adjustment, net of tax             |           |                        | (294 | )            |           |           | (294 | )
|                                                                                                                                                          | Debt of Employee Stock Ownership Plan                                                                                                                                                     |                                                              |           |                       |      |              |           | (1,071    | )   
|                                                                                                                                                          |                                                                                                                                                                                           |                                                              |           |                        |      |              |           |          
|Total stockholders equity                                                                                                                                |                                                                                                                                                                                           |                                                              | 342,071   |                        |      |              | 336,187   |          
|                                                                                                                                                          |                                                                                                                                                                                           |                                                              |           |                        |      |              |           |          
|Total liabilities and stockholders equity                                                                                                                |                                                                                                                                                                                           | $                                                            | 3,752,295 |                        |      | $            | 4,014,105 |          
|                                                                                                                                                          |                                                                                                                                                                                           |                                                              |           |                        |      |              |           |          

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

4



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

|                                                                          |                                                                                                                                                                                             |   |        |                            |  |          |          |         |   | 
|------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------ | -------------------------- |  | -------- | -------- | ------- | - | 
|                                                                          |                                                                                                                                                                                             |   |        | For the Three Months Ended
|                                                                          |                                                                                                                                                                                             |   |        |                           
|                                                                          |                                                                                                                                                                                             |   |        | June 30,                   |  | June 30,
|                                                                          |                                                                                                                                                                                             |   |        | 2002                       |  | 2001    
|                                                                          |                                                                                                                                                                                             |   |        |                            |  |         
|                                                                          |                                                                                                                                                                                             |   |        | (Amounts in thousands,    
|                                                                          |                                                                                                                                                                                             |   |        | except per share amounts) 
|Interest income:                                                          |                                                                                                                                                                                             |   |        |                            |  |          |          |        
|                                                                          | Interest on loans and leases                                                                                                                                                                |   | $      | 45,563                     |  |          | $        | 65,192  |  
|                                                                          | Interest on mortgage-backed securities                                                                                                                                                      |   |        | 3,014                      |  |          |          | 11,406  |  
|                                                                          | Interest and dividends on investment securities                                                                                                                                             |   |        | 3,906                      |  |          |          | 7,497   |  
|                                                                          |                                                                                                                                                                                             |   |        |                            |  |          |          |        
|                                                                          |                                                                                                                                                                                             |   | 52,483 |                            |  |          | 84,095   |        
|Interest expense:                                                         |                                                                                                                                                                                             |   |        |                            |  |          |          |        
|                                                                          | Interest on deposits                                                                                                                                                                        |   |        | 13,529                     |  |          |          | 39,453  |  
|                                                                          | Interest on borrowings                                                                                                                                                                      |   |        | 1,792                      |  |          |          | 11,183  |  
|                                                                          | Interest on Subordinated Notes                                                                                                                                                              |   |        | 3,715                      |  |          |          | 3,715   |  
|                                                                          |                                                                                                                                                                                             |   |        |                            |  |          |          |        
|                                                                          |                                                                                                                                                                                             |   | 19,036 |                            |  |          | 54,351   |        
|Net interest income                                                       |                                                                                                                                                                                             |   | 33,447 |                            |  |          | 29,744   |        
|Provision for losses on loans and leases                                  |                                                                                                                                                                                             |   | 3,600  |                            |  |          | 52,433   |        
|                                                                          |                                                                                                                                                                                             |   |        |                            |  |          |          |        
|Net interest income (loss) after provision for losses on loans and leases |                                                                                                                                                                                             |   | 29,847 |                            |  |          | (22,689  | )      
|Noninterest income:                                                       |                                                                                                                                                                                             |   |        |                            |  |          |          |        
|                                                                          | Leasing income                                                                                                                                                                              |   |        | 18,953                     |  |          |          | 23,624  |  
|                                                                          | Loan fees and charges                                                                                                                                                                       |   |        | 1,193                      |  |          |          | 1,683   |  
|                                                                          | Loan servicing income                                                                                                                                                                       |   |        | 208                        |  |          |          | 1,550   |  
|                                                                          | Account fees                                                                                                                                                                                |   |        | 1,983                      |  |          |          | 1,892   |  
|                                                                          | Sales commissions                                                                                                                                                                           |   |        | 1,944                      |  |          |          | 1,501   |  
|                                                                          | Gain (loss) on sale of assets and liabilities, net                                                                                                                                          |   |        | 203                        |  |          |          | (22,722 | )
|                                                                          | Other, net                                                                                                                                                                                  |   |        | 916                        |  |          |          | 523     |  
|                                                                          |                                                                                                                                                                                             |   |        |                            |  |          |          |        
|                                                                          |                                                                                                                                                                                             |   | 25,400 |                            |  |          | 8,051    |        
|Noninterest expense:                                                      |                                                                                                                                                                                             |   |        |                            |  |          |          |        
|                                                                          | General and administrative                                                                                                                                                                  |   |        | 30,536                     |  |          |          | 44,706  |  
|                                                                          | Litigation settlement expense                                                                                                                                                               |   |        | 13,100                     |  |          |          |        |  
|                                                                          | Restructuring expenses                                                                                                                                                                      |   |        |                           |  |          |          | 10,026  |  
|                                                                          | Revaluation of franchise-related assets                                                                                                                                                     |   |        |                           |  |          |          | 53,083  |  
|                                                                          | Leasing expenses                                                                                                                                                                            |   |        | 16,066                     |  |          |          | 27,286  |  
|                                                                          | Dividend expense on Capital Securities                                                                                                                                                      |   |        | 2,626                      |  |          |          | 2,287   |  
|                                                                          | Real estate owned operations, net                                                                                                                                                           |   |        | 328                        |  |          |          | 9       |  
|                                                                          | Amortization of intangible assets                                                                                                                                                           |   |        | 331                        |  |          |          | 2,804   |  
|                                                                          |                                                                                                                                                                                             |   |        |                            |  |          |          |        
|                                                                          |                                                                                                                                                                                             |   | 62,987 |                            |  |          | 140,201  |        
|Loss before income tax benefit                                            |                                                                                                                                                                                             |   | (7,740 | )                          |  |          | (154,839 | )      
|Income tax benefit                                                        |                                                                                                                                                                                             |   | (3,658 | )                          |  |          | (59,489  | )      
|                                                                          |                                                                                                                                                                                             |   |        |                            |  |          |          |        
|Net loss                                                                  |                                                                                                                                                                                             | $ | (4,082 | )                          |  | $        | (95,350  | )      
|                                                                          |                                                                                                                                                                                             |   |        |                            |  |          |          |        
|Basic loss per share                                                      |                                                                                                                                                                                             | $ | (0.07  | )                          |  | $        | (2.11    | )      
|                                                                          |                                                                                                                                                                                             |   |        |                            |  |          |          |        
|Diluted loss per share                                                    |                                                                                                                                                                                             | $ | (0.07  | )                          |  | $        | (2.11    | )      
|                                                                          |                                                                                                                                                                                             |   |        |                            |  |          |          |        
|Weighted-average basic shares outstanding                                 |                                                                                                                                                                                             |   | 62,715 |                            |  |          | 45,170   |        
|                                                                          |                                                                                                                                                                                             |   |        |                            |  |          |          |        
|Weighted-average diluted shares outstanding                               |                                                                                                                                                                                             |   | 62,715 |                            |  |          | 45,170   |        
|                                                                          |                                                                                                                                                                                             |   |        |                            |  |          |          |        
|Net loss                                                                  |                                                                                                                                                                                             | $ | (4,082 | )                          |  | $        | (95,350  | )      
|Other comprehensive income (loss), net of tax:                            |                                                                                                                                                                                             |   |        |                            |  |          |          |        
|                                                                          | Change in unrealized gain (loss) on securities available-for-sale, net
of tax expense (benefit) of $219 and ($602) for the three months ended
June 30, 2002 and June 30, 2001, respectively |   |        | 302                        |  |          |          | (854    | )
|                                                                          |                                                                                                                                                                                             |   |        |                            |  |          |          |        
|Other comprehensive income (loss)                                         |                                                                                                                                                                                             |   | 302    |                            |  |          | (854     | )      
|                                                                          |                                                                                                                                                                                             |   |        |                            |  |          |          |        
|Comprehensive loss                                                        |                                                                                                                                                                                             | $ | (3,780 | )                          |  | $        | (96,204  | )      
|                                                                          |                                                                                                                                                                                             |   |        |                            |  |          |          |        

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

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##### Table of Contents






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

|                                                                   |                                                                                                                                                                                         |   |         |                           |  |          |          |         |   | 
|------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------- | ------------------------- |  | -------- | -------- | ------- | - | 
|                                                                   |                                                                                                                                                                                         |   |         | For the Six Months Ended 
|                                                                   |                                                                                                                                                                                         |   |         |                          
|                                                                   |                                                                                                                                                                                         |   |         | June 30,                  |  | June 30,
|                                                                   |                                                                                                                                                                                         |   |         | 2002                      |  | 2001    
|                                                                   |                                                                                                                                                                                         |   |         |                           |  |         
|                                                                   |                                                                                                                                                                                         |   |         | (Amounts in thousands,   
|                                                                   |                                                                                                                                                                                         |   |         | except per share amounts)
|Interest income:                                                   |                                                                                                                                                                                         |   |         |                           |  |          |          |        
|                                                                   | Interest on loans and leases                                                                                                                                                            |   | $       | 92,034                    |  |          | $        | 137,542 |  
|                                                                   | Interest on mortgage-backed securities                                                                                                                                                  |   |         | 6,565                     |  |          |          | 23,621  |  
|                                                                   | Interest and dividends on investment securities                                                                                                                                         |   |         | 7,577                     |  |          |          | 17,391  |  
|                                                                   |                                                                                                                                                                                         |   |         |                           |  |          |          |        
|                                                                   |                                                                                                                                                                                         |   | 106,176 |                           |  |          | 178,554  |        
|Interest expense:                                                  |                                                                                                                                                                                         |   |         |                           |  |          |          |        
|                                                                   | Interest on deposits                                                                                                                                                                    |   |         | 28,531                    |  |          |          | 83,374  |  
|                                                                   | Interest on borrowings                                                                                                                                                                  |   |         | 3,624                     |  |          |          | 25,522  |  
|                                                                   | Interest on Subordinated Notes                                                                                                                                                          |   |         | 7,430                     |  |          |          | 7,430   |  
|                                                                   |                                                                                                                                                                                         |   |         |                           |  |          |          |        
|                                                                   |                                                                                                                                                                                         |   | 39,585  |                           |  |          | 116,326  |        
|Net interest income                                                |                                                                                                                                                                                         |   | 66,591  |                           |  |          | 62,228   |        
|Provision for losses on loans and leases                           |                                                                                                                                                                                         |   | 8,500   |                           |  |          | 59,733   |        
|                                                                   |                                                                                                                                                                                         |   |         |                           |  |          |          |        
|Net interest income after provision for losses on loans and leases |                                                                                                                                                                                         |   | 58,091  |                           |  |          | 2,495    |        
|Noninterest income:                                                |                                                                                                                                                                                         |   |         |                           |  |          |          |        
|                                                                   | Leasing income                                                                                                                                                                          |   |         | 39,302                    |  |          |          | 48,007  |  
|                                                                   | Loan fees and charges                                                                                                                                                                   |   |         | 2,486                     |  |          |          | 3,089   |  
|                                                                   | Loan servicing income                                                                                                                                                                   |   |         | 413                       |  |          |          | 3,365   |  
|                                                                   | Account fees                                                                                                                                                                            |   |         | 3,919                     |  |          |          | 3,922   |  
|                                                                   | Sales commissions                                                                                                                                                                       |   |         | 3,784                     |  |          |          | 2,798   |  
|                                                                   | Gain (loss) on sale of assets and liabilities, net                                                                                                                                      |   |         | 535                       |  |          |          | (12,096 | )
|                                                                   | Other, net                                                                                                                                                                              |   |         | 1,143                     |  |          |          | 1,073   |  
|                                                                   |                                                                                                                                                                                         |   |         |                           |  |          |          |        
|                                                                   |                                                                                                                                                                                         |   | 51,582  |                           |  |          | 50,158   |        
|Noninterest expense:                                               |                                                                                                                                                                                         |   |         |                           |  |          |          |        
|                                                                   | General and administrative                                                                                                                                                              |   |         | 61,328                    |  |          |          | 80,123  |  
|                                                                   | Litigation settlement expense                                                                                                                                                           |   |         | 13,100                    |  |          |          |        |  
|                                                                   | Restructuring expenses                                                                                                                                                                  |   |         |                          |  |          |          | 10,026  |  
|                                                                   | Revaluation of franchise-related assets                                                                                                                                                 |   |         |                          |  |          |          | 70,028  |  
|                                                                   | Leasing expenses                                                                                                                                                                        |   |         | 31,073                    |  |          |          | 45,043  |  
|                                                                   | Dividend expense on Capital Securities                                                                                                                                                  |   |         | 5,199                     |  |          |          | 4,575   |  
|                                                                   | Real estate owned operations, net                                                                                                                                                       |   |         | 868                       |  |          |          | (9      | )
|                                                                   | Provision for losses on real estate owned                                                                                                                                               |   |         | 204                       |  |          |          |        |  
|                                                                   | Amortization of intangible assets                                                                                                                                                       |   |         | 662                       |  |          |          | 5,672   |  
|                                                                   |                                                                                                                                                                                         |   |         |                           |  |          |          |        
|                                                                   |                                                                                                                                                                                         |   | 112,434 |                           |  |          | 215,458  |        
|Loss before income tax benefit                                     |                                                                                                                                                                                         |   | (2,761  | )                         |  |          | (162,805 | )      
|Income tax benefit                                                 |                                                                                                                                                                                         |   | (5,593  | )                         |  |          | (59,489  | )      
|                                                                   |                                                                                                                                                                                         |   |         |                           |  |          |          |        
|Net income (loss)                                                  |                                                                                                                                                                                         | $ | 2,832   |                           |  | $        | (103,316 | )      
|                                                                   |                                                                                                                                                                                         |   |         |                           |  |          |          |        
|Basic earnings (loss) per share                                    |                                                                                                                                                                                         | $ | 0.05    |                           |  | $        | (2.65    | )      
|                                                                   |                                                                                                                                                                                         |   |         |                           |  |          |          |        
|Diluted earnings (loss) per share                                  |                                                                                                                                                                                         | $ | 0.04    |                           |  | $        | (2.65    | )      
|                                                                   |                                                                                                                                                                                         |   |         |                           |  |          |          |        
|Weighted-average basic shares outstanding                          |                                                                                                                                                                                         |   | 62,697  |                           |  |          | 38,938   |        
|                                                                   |                                                                                                                                                                                         |   |         |                           |  |          |          |        
|Weighted-average diluted shares outstanding                        |                                                                                                                                                                                         |   | 63,216  |                           |  |          | 38,938   |        
|                                                                   |                                                                                                                                                                                         |   |         |                           |  |          |          |        
|Net income (loss)                                                  |                                                                                                                                                                                         | $ | 2,832   |                           |  | $        | (103,316 | )      
|Other comprehensive income (loss), net of tax:                     |                                                                                                                                                                                         |   |         |                           |  |          |          |        
|                                                                   | Change in unrealized gain (loss) on securities
available-for-sale, net of tax expense (benefit) of $4 and
($628) for the six months ended June 30, 2002 and June 30,
2001, respectively |   |         | 5                         |  |          |          | (891    | )
|                                                                   |                                                                                                                                                                                         |   |         |                           |  |          |          |        
|Other comprehensive income (loss)                                  |                                                                                                                                                                                         |   | 5       |                           |  |          | (891     | )      
|                                                                   |                                                                                                                                                                                         |   |         |                           |  |          |          |        
|Comprehensive income (loss)                                        |                                                                                                                                                                                         | $ | 2,837   |                           |  | $        | (104,207 | )      
|                                                                   |                                                                                                                                                                                         |   |         |                           |  |          |          |        

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

6



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##### Table of Contents






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

|                                                                                               |  |                        |        |        |  |           |     |         |  |             |     |            |  |                     |         |             |  |           |          |               |  |            |        |           |  |            |     |         |  |          |      |   |  |   |        |   |  |   |          |  
|---------------------------------------------------------------------------------------------- |  | ---------------------- | ------ | ------ |  | --------- | --- | ------- |  | ----------- | --- | ---------- |  | ------------------- | ------- | ----------- |  | --------- | -------- | ------------- |  | ---------- | ------ | --------- |  | ---------- | --- | ------- |  | -------- | ---- | - |  | - | ------ | - |  | - | -------- | -
|                                                                                               |  |                        |        |        |  |           |     |         |  |             |     |            |  |                     |         |             |  |           |          |               |  |            |        |           |  | Unrealized |     | Minimum |  | Debt of  |      |   |  |  
|                                                                                               |  |                        |        |        |  |           |     |         |  |             |     |            |  |                     |         |             |  |           |          |               |  |            |        |           |  | Gain on    |     | Pension |  | Employee |      |   |  |  
|                                                                                               |  | Number                 |        |        |  |           |     |         |  |             |     | Additional |  |                     |         |             |  |           |          |               |  | Securities |        | Liability |  | Stock      |     | Total  
|                                                                                               |  | of Shares              |        | Common |  | Preferred |     | Paid-in |  | Accumulated |     | Treasury   |  | Available-for-Sale, |         | Adjustment, |  | Ownership |          | Stockholders'
|                                                                                               |  | Issued                 |        | Stock  |  | Stock     |     | Capital |  | Deficit     |     | Stock      |  | Net of Tax          |         | Net of Tax  |  | Plan      |          | Equity       
|                                                                                               |  |                        |        |        |  |           |     |         |  |             |     |            |  |                     |         |             |  |           |          |              
|                                                                                               |  | (Amounts in thousands)
|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                                              |  |                        | 85     |        |  |           | 1   |         |  |             |    |            |  |                     | 417     |             |  |           |         |               |  |            |       |           |  |            |    |         |  |          |     |   |  |   |       |   |  |   | 418      |  
|Distribution of directors retirement plan shares                                              |  |                        | 24     |        |  |           |    |         |  |             |    |            |  |                     | 45      |             |  |           |         |               |  |            |       |           |  |            |    |         |  |          |     |   |  |   |       |   |  |   | 45       |  
|Exercise of stock warrants                                                                     |  |                        | 10     |        |  |           |    |         |  |             |    |            |  |                     | 165     |             |  |           |         |               |  |            |       |           |  |            |    |         |  |          |     |   |  |   |       |   |  |   | 165      |  
|Expense recognized on stock options with below
market strike price                             |  |                        |       |        |  |           |    |         |  |             |    |            |  |                     | 1,343   |             |  |           |         |               |  |            |       |           |  |            |    |         |  |          |     |   |  |   |       |   |  |   | 1,343    |  
|Unrealized gain on securities available-for-sale,
net of tax                                   |  |                        |       |        |  |           |    |         |  |             |    |            |  |                     |        |             |  |           |         |               |  |            |       |           |  |            | 5   |         |  |          |     |   |  |   |       |   |  |   | 5        |  
|Change in debt of ESOP                                                                         |  |                        |       |        |  |           |    |         |  |             |    |            |  |                     |        |             |  |           |         |               |  |            |       |           |  |            |    |         |  |          |     |   |  |   | 1,071  |   |  |   | 1,071    |  
|Net income                                                                                     |  |                        |       |        |  |           |    |         |  |             |    |            |  |                     |        |             |  |           | 2,832    |               |  |            |       |           |  |            |    |         |  |          |     |   |  |   |       |   |  |   | 2,832    |  
|Other                                                                                          |  |                        |       |        |  |           |    |         |  |             |    |            |  |                     |        |             |  |           | 5        |               |  |            |       |           |  |            |    |         |  |          |     |   |  |   |       |   |  |   | 5        |  
|                                                                                               |  |                        |        |        |  |           |     |         |  |             |     |            |  |                     |         |             |  |           |          |               |  |            |        |           |  |            |     |         |  |          |      |   |  |   |        |   |  |   |          |  
|Balance at June 30, 2002                                                                       |  |                        | 62,747 |        |  | $         | 627 |         |  | $           |    |            |  | $                   | 597,228 |             |  | $         | (255,210 | )             |  | $          | (808   | )         |  | $          | 528 |         |  | $        | (294 | ) |  | $ |       |   |  | $ | 342,071  |  
|                                                                                               |  |                        |        |        |  |           |     |         |  |             |     |            |  |                     |         |             |  |           |          |               |  |            |        |           |  |            |     |         |  |          |      |   |  |   |        |   |  |   |          |  

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

7



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##### Table of Contents






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

|                                                                                          |                                                                       |   |                          |         |          |   |          |         |  
|----------------------------------------------------------------------------------------- | --------------------------------------------------------------------- | - | ------------------------ | ------- | -------- | - | -------- | ------- | -
|                                                                                          |                                                                       |   | For the Six Months Ended
|                                                                                          |                                                                       |   |                         
|                                                                                          |                                                                       |   | June 30,                 |         | June 30,
|                                                                                          |                                                                       |   | 2002                     |         | 2001    
|                                                                                          |                                                                       |   |                          |         |         
|                                                                                          |                                                                       |   | (Dollars in thousands)  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                      |                                                                       |   |                          |         |          |   |          |        
|Net income (loss)                                                                         |                                                                       | $ | 2,832                    |         |          | $ | (103,316 | )      
|Adjustments to reconcile net income (loss) to net cash
used in operating activities:      |                                                                       |   |                          |         |          |   |          |        
|                                                                                          | Amortization of intangible assets                                     |   |                          | 662     |          |   |          | 5,672   |  
|                                                                                          | Provision for losses on loans and leases and real estate owned        |   |                          | 8,704   |          |   |          | 59,733  |  
|                                                                                          | Depreciation and amortization of premises and equipment               |   |                          | 1,844   |          |   |          | 2,596   |  
|                                                                                          | Depreciation and amortization of investment in operating lease assets |   |                          | 24,581  |          |   |          | 29,607  |  
|                                                                                          | Amortization of premiums, net of discount accretion                   |   |                          | 5,674   |          |   |          | 4,127   |  
|                                                                                          | Revaluation of franchise-related assets                               |   |                          |        |          |   |          | 70,028  |  
|                                                                                          | (Gain) loss on sale of assets and liabilities, net                    |   |                          | (535    | )        |   |          | 12,096  |  
|                                                                                          | Increase in other assets                                              |   |                          | (34,093 | )        |   |          | (67,482 | )
|                                                                                          | Decrease in other liabilities                                         |   |                          | (24,057 | )        |   |          | (23,559 | )
|                                                                                          | Other, net                                                            |   |                          | 3,490   |          |   |          | 4,036   |  
|                                                                                          |                                                                       |   |                          |         |          |   |          |        
|Net cash used in operating activities                                                     |                                                                       |   | (10,898                  | )       |          |   | (6,462   | )      
|                                                                                          |                                                                       |   |                          |         |          |   |          |        
|CASH FLOWS FROM INVESTING ACTIVITIES                                                      |                                                                       |   |                          |         |          |   |          |        
|Net decrease in loans and leases resulting from
originations, net of repayments           |                                                                       |   | 52,733                   |         |          |   | 129,076  |        
|Purchases of loans and leases, net                                                        |                                                                       |   |                         |         |          |   | (12,933  | )      
|Purchases of mortgage-backed securities                                                   |                                                                       |   | (59,984                  | )       |          |   | (83,215  | )      
|Purchases of investment securities                                                        |                                                                       |   | (54,930                  | )       |          |   | (45,742  | )      
|Principal payments on mortgage-backed securities                                          |                                                                       |   | 88,040                   |         |          |   | 120,559  |        
|Principal payments on investment securities                                               |                                                                       |   | 28,118                   |         |          |   |         |        
|Proceeds from securitizations and/or sales of loans and leases held-for-sale              |                                                                       |   | 37,859                   |         |          |   | 275,933  |        
|Proceeds from sale of mortgage-backed securities available-for-sale                       |                                                                       |   | 92,633                   |         |          |   | 294,067  |        
|Proceeds from sale of investment securities available-for-sale                            |                                                                       |   |                         |         |          |   | 6,456    |        
|Proceeds from sale of real estate owned                                                   |                                                                       |   | 4,302                    |         |          |   | 1,037    |        
|Additions to premises and equipment                                                       |                                                                       |   | (116                     | )       |          |   | (177     | )      
|Decrease (increase) in investment in stock of the Federal Home Loan Bank
of San Francisco |                                                                       |   | 8,545                    |         |          |   | (1,618   | )      
|(Increase) decrease in investment in stock of the Federal Reserve Bank                    |                                                                       |   | (1,438                   | )       |          |   | 7,724    |        
|Other, net                                                                                |                                                                       |   | (12                      | )       |          |   |         |        
|                                                                                          |                                                                       |   |                          |         |          |   |          |        
|Net cash provided by investing activities                                                 |                                                                       |   | 195,750                  |         |          |   | 691,167  |        
|                                                                                          |                                                                       |   |                          |         |          |   |          |        

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##### Table of Contents






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

|                                                                        |                                                                    |                                       |            |                          |          |          |          |         |          |  
|----------------------------------------------------------------------- | ------------------------------------------------------------------ | ------------------------------------- | ---------- | ------------------------ | -------- | -------- | -------- | ------- | -------- | -
|                                                                        |                                                                    |                                       |            | For the Six Months Ended
|                                                                        |                                                                    |                                       |            |                         
|                                                                        |                                                                    |                                       |            | June 30,                 |          | June 30,
|                                                                        |                                                                    |                                       |            | 2002                     |          | 2001    
|                                                                        |                                                                    |                                       |            |                          |          |         
|                                                                        |                                                                    |                                       |            | (Dollars in thousands)  
|CASH FLOWS FROM FINANCING ACTIVITIES                                    |                                                                    |                                       |            |                          |          |          |          |        
|Net decrease in deposits                                                |                                                                    | $                                     | (202,126   | )                        |          | $        | (296,662 | )      
|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 | )                        |          |          | (783,600 | )      
|Repayment of reverse repurchase agreements                              |                                                                    |                                       |           |                          |          |          | (103,241 | )      
|Net decrease in warehouse lines outstanding                             |                                                                    |                                       |           |                          |          |          | (44,743  | )      
|Net decrease in other borrowings                                        |                                                                    |                                       | (41,543    | )                        |          |          | (593     | )      
|Proceeds from issuance of common stock                                  |                                                                    |                                       | 628        |                          |          |          | 108,073  |        
|Proceeds from issuance of preferred stock                               |                                                                    |                                       |            |                          |          |          | 26,400   |        
|                                                                        |                                                                    |                                       |            |                          |          |          |          |        
|                                                                        |                                                                    | Net cash used in financing activities |            |                          | (243,041 | )        |          |         | (889,366 | )
|                                                                        |                                                                    |                                       |            |                          |          |          |          |        
|Net decrease in cash and cash equivalents                               |                                                                    |                                       | (58,189    | )                        |          |          | (204,661 | )      
|Cash and cash equivalents at beginning of period                        |                                                                    |                                       | 521,388    |                          |          |          | 694,934  |        
|                                                                        |                                                                    |                                       |            |                          |          |          |          |        
|Cash and cash equivalents at end of period                              |                                                                    | $                                     | 463,199    |                          |          | $        | 490,273  |        
|                                                                        |                                                                    |                                       |            |                          |          |          |          |        
|Cash paid during the year for:                                          |                                                                    |                                       |            |                          |          |          |          |        
|                                                                        | Interest                                                           |                                       | $          | 39,979                   |          |          | $        | 130,056 |         
|                                                                        | Income taxes                                                       |                                       | $          | 854                      |          |          | $        | 83      |         
|Supplemental non-cash investing and financing activities:               |                                                                    |                                       |            |                          |          |          |          |        
|                                                                        | Loans transferred to real estate owned                             |                                       | $          |                         |          |          | $        | 11,714  |         
|                                                                        | Loans transferred from held-for-investment to held-for-sale        |                                       | $          | 24,255                   |          |          | $        | 227,120 |         
|                                                                        | Securities transferred from held-to-maturity to available-for-sale |                                       | $          |                         |          |          | $        | 631,663 |         
|                                                                        | Conversion of preferred stock to common stock                      |                                       | $          |                         |          |          | $        | 26,400  |         

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

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##### Table of Contents






Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
June 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. On September 11, 2000, we announced the
restructuring of FMACs franchise lending operations. The shutdown of this
division was effective as of September 30, 2000 and involved the termination of
all related production and marketing personnel. Effective February 28, 2001,
substantially all of the assets and liabilities of FMAC Insurance Services were
sold. On June 22, 2001, we completed the stock sale by Bay View Bank of the
legal entity Bay View Franchise Mortgage Acceptance Company (BVFMAC) and its
related servicing platform. 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.

The information provided in these interim financial statements reflects
all adjustments which are, in the opinion of management, necessary for a fair
presentation of our financial condition as of June 30, 2002 and December 31,
2001, the results of our operations for the three- and six-month periods ended
June 30, 2002 and 2001, and our cash flows for the six-month periods ended June
30, 2002 and 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 generally accepted accounting
principles.

The information included in Managements Discussion and Analysis of
Financial Condition and Results of Operations was written assuming that you
have read or have access to our 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. Accordingly, only certain changes in financial condition and
results of

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

operations are discussed in this Form 10-Q. Furthermore, the interim financial
results for the three- and six-month periods ended June 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. 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-month periods ended June 30, 2002 and 2001
and the six-month period ended June 30, 2001, average dilutive potential common
shares of 585,273, 112,419 and 94,591 shares, respectively, related to shares
issuable upon the exercise of options were not included in the computation
because they were anti-dilutive.

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 Six Months Ended,
|                                                     |  |                                                  |        |                          
|                                                     |  | June 30,                                         |        | June 30,                  |  | June 30, |         | June 30,
|                                                     |  | 2002                                             |        | 2001                      |  | 2002     |         | 2001    
|                                                     |  |                                                  |        |                           |  |          |         |         
|                                                     |  | (Amounts in thousands, except per share amounts)
|Net earnings (loss) available to common
stockholders |  | $                                                | (4,082 | )                         |  | $        | (95,350 | )        |  | $ | 2,832  |  |  | $ | (103,316 | )
|Weighted-average basic shares outstanding            |  |                                                  | 62,715 |                           |  |          | 45,170  |          |  |   | 62,697 |  |  |   | 38,938   |  
|Add: Dilutive potential common shares                |  |                                                  |       |                           |  |          |        |          |  |   | 519    |  |  |   |         |  
|                                                     |  |                                                  |        |                           |  |          |         |          |  |   |        |  |  |   |          |  
|Weighted-average diluted shares outstanding          |  |                                                  | 62,715 |                           |  |          | 45,170  |          |  |   | 63,216 |  |  |   | 38,938   |  
|                                                     |  |                                                  |        |                           |  |          |         |          |  |   |        |  |  |   |          |  
|Basic earnings (loss) per share                      |  | $                                                | (0.07  | )                         |  | $        | (2.11   | )        |  | $ | 0.05   |  |  | $ | (2.65    | )
|                                                     |  |                                                  |        |                           |  |          |         |          |  |   |        |  |  |   |          |  
|Diluted earnings (loss) per share                    |  | $                                                | (0.07  | )                         |  | $        | (2.11   | )        |  | $ | 0.04   |  |  | $ | (2.65    | )
|                                                     |  |                                                  |        |                           |  |          |         |          |  |   |        |  |  |   |          |  

Note 3. Stock Options

As of June 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.

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

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

|                             |  |                 |            |                 |  |              |            |   |  |  |             |  
|---------------------------- |  | --------------- | ---------- | --------------- |  | ------------ | ---------- | - |  |  | ----------- | -
|                             |  |                 |            |                 |  | Non-Employee |            |   |  | 
|                             |  | Employee Stock  |            | Director Stock  |  |              |            |  
|                             |  | Option and      |            | Option 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                    |  |                 | 2,479,329  |                 |  |              | 152,000    |   |  |  | 2,631,329   |  
|Expired                      |  |                 | (408,688   | )               |  |              | (102,000   | ) |  |  | (510,688    | )
|                             |  |                 |            |                 |  |              |            |   |  |  |             |  
|Total available for grant    |  |                 | 960,755    |                 |  |              | 163,000    |   |  |  | 1,123,755   |  
|                             |  |                 |            |                 |  |              |            |   |  |  |             |  

At June 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                        |  |               | (85,252   | )              |  |                  | 4.59-5.41  |  |  |   | 4.73  | 
|Forfeited                        |  |               | (538,011  | )              |  |                  | 4.59-31.56 |  |  |   | 15.43 | 
|                                 |  |               |           |                |  |                  |            |  |  |   |       | 
|Outstanding at June 30, 2002     |  |               | 5,692,534 |                |  | $                | 4.59-34.41 |  |  | $ | 8.67  | 
|                                 |  |               |           |                |  |                  |            |  |  |   |       | 
|Exercisable at June 30, 2002     |  |               | 4,109,517 |                |  | $                | 4.59-34.41 |  |  | $ | 9.84  | 
|                                 |  |               |           |                |  |                  |            |  |  |   |       | 

During the first six months of 2002, we recognized a total of $1.3 million
in expenses related to the issuance of stock options with below market strike
prices. We will amortize an additional $2.7 million of compensation expense
over the next thirteen months.




Note 4. Merger and Acquisition-Related Activity

Franchise Mortgage Acceptance Company

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

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

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

Note 5. Agreements with Regulatory Agencies

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

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

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

At June 30, 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 June 30, 2002
and December 31, 2001.

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. The
restructuring involved the termination of approximately 146 related production
and marketing personnel, of which 116 were terminated as of September 30, 2000.
Restructuring charges for the division totaled $9.2 million as of December 31,
2000, and consisted primarily of $4.1 million of severance and other
involuntary termination benefits, $1.3 million of occupancy-related charges and
$3.8 million of other facility and ancillary costs. Accrued restructuring
liabilities at December 31, 2000 were $4.3 million, consisting of $2.7 million
related to accrued severance and $1.6 million related to accrued facilities
charges.

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

As part of the Companys ongoing efforts to focus on its core banking
operations, a total of $6.9 million in restructuring charges were recorded
during 2001 primarily related to the reduction in our workforce. The
restructuring charges originally consisted of $6.7 million of severance and
$3.3 million of facilities charges that were recorded in the second quarter.
During the third and fourth quarters, we recorded a $2.1 million net reversal
of an accrual related to severance payments which were disallowed by our
primary regulator and a $1.0 million reversal of accruals related to closed
facilities which were subleased earlier than projected. As previously
announced, the reduction in our workforce will affect about 100 employees
primarily from business lines that we are exiting, such as franchise
operations, and other non-core and redundant operations.

During 2000, 2001 and through June 30, 2002, $5.5 million in severance
payments have been made to 119 employees impacted by the restructurings.
Additionally, $2.5 million in facilities payments have been made as of June 30,
2002. Accrued restructuring liabilities at June 30, 2002 were $3.2 million,
consisting of $1.8 million related to accrued severance and $1.4 million
related to accrued facilities charges.

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 second quarter of
2002 were $16.1 million as compared to $27.3 million for the second quarter of
2001. Leasing expenses were $31.1 million for the first six months of 2002 as
compared to $45.0 million for the first six 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. We ceased purchasing auto leases in June 2000.
Leasing expenses for the three- and six-month periods ended June 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

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

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. At June 30, 2002 and December 31, 2001, the Company had net
impairment and additional monthly charges against its automobile operating
leases outstanding on those dates of $31.2 million and $32.7 million,
respectively.

Note 8. Income Taxes

The Company recorded tax benefits of $3.7 million and $5.6 million for the
second quarter and the first six months of 2002, respectively. The tax benefit
for the first six months of 2002 included a tax benefit of $1.6 million on a
pre-tax loss of $2.8 million and a tax benefit of $4.0 million related to the
loss incurred on the 2001 stock sale by Bay View Bank of the legal entity Bay
View Franchise Mortgage Acceptance Company. The Company recorded no tax
benefit for this loss in its 2001 financial statements. The $4.0 million tax
benefit was a result of a change in federal tax regulation that occurred in the
first quarter of 2002 allowing the Company to deduct a portion of the loss
associated with the sale of BVFMAC. The effective tax rate used in computing
the $1.6 million tax benefit for the first six months of 2002 was 57.7%. This
effective tax rate differs from the statutory rate primarily due to the
realization of nondeductible goodwill upon the anticipated execution of the
Companys tax planning strategy in the second half of the year. For the second
quarter and the first six months of 2001, the Company recorded a $59.5 million
tax benefit at a 36.5% effective tax rate. For the first quarter of 2001, the
Company recorded no tax benefit on the pre-tax loss of $8.0 million because, at
that time, management could not determine that it was more likely than not that
the Company would realize benefits in the amount of these additional deferred
tax assets.

The Company believes it will be able to fully utilize its $178.7 million
of net deferred tax assets at June 30, 2002. In order to fully utilize its net
operating loss carryforwards prior to their expiration dates, however, the
Company will be required to execute certain tax planning strategies identified
in 2001, primarily the sale of a portion of the Banks retail branches, as discussed
elsewhere herein, during the second half of 2002.

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

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

Companys ability to generate future taxable income is 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. As a result, the Company eliminated the $26.0 million
valuation allowance against its gross deferred tax assets during 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.

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, we do not intend to hold any securities as
held-to-maturity in the foreseeable future. Proceeds from sales of
mortgage-backed securities during the first six months of 2002 were $92.6
million. Gross gains of $1.2 million were realized on these sales.

Note 10. Allowance for Loan and Lease Losses

The allowance for loan and lease losses is established through a provision
charged to expense and is maintained at a level that we believe is sufficient
to cover estimated probable losses in the portfolio. In determining the level
of the allowance for loan and lease losses, we evaluate 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 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
ongoing evaluations. Discontinued lending operations receive the same scrutiny
as ongoing operations but do not have the additional risk inherent in accepting
new business. Our methodology provides for three allowance components. The
first component represents allowance for loans and leases that are individually
evaluated. The second component represents allowance for groups of homogeneous
loans and leases that currently exhibit no identifiable weaknesses and are
collectively evaluated. We determine 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 is based on factors that are not necessarily associated with a
specific credit, group of loans or leases or loan or lease category. These
factors include 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 reflects our efforts to ensure that the overall allowance
appropriately reflects the probable losses inherent in the loan and lease
portfolio.

The allowance for losses on loans and leases at June 30, 2002 was $38.9
million as compared to $49.8 million at December 31, 2001. The decrease in the
allowance for loan and lease losses at June 30, 2002, as compared to December
31, 2001, was primarily related to net charge-offs in excess of loan loss
provision expense during the three- and six-month periods ended June 30, 2002.
During 2001 and the first six months of 2002, the allowance for

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

loan and lease losses decreased as we transferred and subsequently sold loans
from our held-for-investment portfolio to our held-for-sale portfolio. During
2001, the transfer of loans from held-for-investment to held-for-sale resulted
in a $53.6 million reduction to the allowance for loan and lease losses 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 six months of 2002, the transfer of
loans from held-for-investment to held-for-sale resulted in a $1.8 million
reduction in the allowance for loan and lease losses related to the sale and
payoff of franchise and other commercial loans.

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

|                                                         |                                                                                 |   |                        |        |            |   |              |         |   |   |         |         |  
|-------------------------------------------------------- | ------------------------------------------------------------------------------- | - | ---------------------- | ------ | ---------- | - | ------------ | ------- | - | - | ------- | ------- | -
|                                                         |                                                                                 |   | Three Months           |        | Six Months |   | Year        
|                                                         |                                                                                 |   | Ended                  |        | Ended      |   | Ended       
|                                                         |                                                                                 |   | June 30,               |        | June 30,   |   | December 31,
|                                                         |                                                                                 |   | 2002                   |        | 2002       |   | 2001        
|                                                         |                                                                                 |   |                        |        |            |   |             
|                                                         |                                                                                 |   | (Dollars in thousands)
|Beginning balance                                        |                                                                                 | $ | 46,151                 |        |            | $ | 49,791       |         |   | $ | 73,738  |        
|Transfers of loans to held-for-sale                      |                                                                                 |   | (1,836                 | )      |            |   | (1,836       | )       |   |   | (53,606 | )      
|Charge-offs:                                             |                                                                                 |   |                        |        |            |   |              |         |   |   |         |        
|                                                         | Mortgage                                                                        |   |                        |       |            |   |              |        |   |   |         | (1,488  | )
|                                                         | Home equity loans and lines of credit                                           |   |                        | (265   | )          |   |              | (836    | ) |   |         | (10,296 | )
|                                                         | Auto                                                                            |   |                        | (1,300 | )          |   |              | (2,372  | ) |   |         | (3,809  | )
|                                                         | Asset-based loans, syndicated loans, factored
receivables and commercial leases |   |                        | (4,567 | )          |   |              | (6,150  | ) |   |         | (9,397  | )
|                                                         | Franchise                                                                       |   |                        | (3,824 | )          |   |              | (10,063 | ) |   |         | (24,197 | )
|                                                         | Business                                                                        |   |                        | (53    | )          |   |              | (66     | ) |   |         | (2,509  | )
|                                                         |                                                                                 |   |                        |        |            |   |              |         |   |   |         |        
|                                                         |                                                                                 |   | (10,009                | )      |            |   | (19,487      | )       |   |   | (51,696 | )      
|Recoveries:                                              |                                                                                 |   |                        |        |            |   |              |         |   |   |         |        
|                                                         | Mortgage                                                                        |   |                        |       |            |   |              |        |   |   |         | 283     |  
|                                                         | Home equity loans and lines of credit                                           |   |                        | 143    |            |   |              | 325     |   |   |         | 4,602   |  
|                                                         | Auto                                                                            |   |                        | 558    |            |   |              | 857     |   |   |         | 1,526   |  
|                                                         | Asset-based loans, syndicated loans, factored receivables and commercial leases |   |                        | 289    |            |   |              | 715     |   |   |         | 2,479   |  
|                                                         | Franchise                                                                       |   |                        | 48     |            |   |              | 48      |   |   |         | 196     |  
|                                                         | Business                                                                        |   |                        | 1      |            |   |              | 32      |   |   |         | 379     |  
|                                                         |                                                                                 |   |                        |        |            |   |              |         |   |   |         |        
|                                                         |                                                                                 |   | 1,039                  |        |            |   | 1,977        |         |   |   | 9,465   |        
|Net charge-offs                                          |                                                                                 |   | (8,970                 | )      |            |   | (17,510      | )       |   |   | (42,231 | )      
|Provision for losses on loans and leases                 |                                                                                 |   | 3,600                  |        |            |   | 8,500        |         |   |   | 71,890  |        
|                                                         |                                                                                 |   |                        |        |            |   |              |         |   |   |         |        
|Ending balance                                           |                                                                                 | $ | 38,945                 |        |            | $ | 38,945       |         |   | $ | 49,791  |        
|                                                         |                                                                                 |   |                        |        |            |   |              |         |   |   |         |        
|Net charge-offs to average loans and leases (annualized) |                                                                                 |   | 1.47                   | %      |            |   | 1.44         | %       |   |   | 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.

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Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
June 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 Six Months Ended,
|                                           |  |                                                  |        |                          
|                                           |  | June 30,                                         |        | June 30,                  |  | June 30, |         | June 30,
|                                           |  | 2002                                             |        | 2001                      |  | 2002     |         | 2001    
|                                           |  |                                                  |        |                           |  |          |         |         
|                                           |  | (Amounts in thousands, except per share amounts)
|Reported net earnings (loss)               |  | $                                                | (4,082 | )                         |  | $        | (95,350 | )        |  | $ | 2,832 |  |  | $ | (103,316 | )
|Goodwill amortization, net of tax          |  |                                                  |       |                           |  |          | 1,539   |          |  |   |      |  |  |   | 3,172    |  
|                                           |  |                                                  |        |                           |  |          |         |          |  |   |       |  |  |   |          |  
|Adjusted net earnings (loss)               |  | $                                                | (4,082 | )                         |  | $        | (93,811 | )        |  | $ | 2,832 |  |  | $ | (100,144 | )
|                                           |  |                                                  |        |                           |  |          |         |          |  |   |       |  |  |   |          |  
|                                           |  |                                                  |        |                           |  |          |         |          |  |   |       |  |  |   |          |  
|Reported basic earnings (loss) per share   |  | $                                                | (0.07  | )                         |  | $        | (2.11   | )        |  | $ | 0.05  |  |  | $ | (2.65    | )
|Goodwill amortization                      |  |                                                  |       |                           |  |          | 0.03    |          |  |   |      |  |  |   | 0.08     |  
|                                           |  |                                                  |        |                           |  |          |         |          |  |   |       |  |  |   |          |  
|Adjusted basic earnings (loss) per share   |  | $                                                | (0.07  | )                         |  | $        | (2.08   | )        |  | $ | 0.05  |  |  | $ | (2.57    | )
|                                           |  |                                                  |        |                           |  |          |         |          |  |   |       |  |  |   |          |  
|Reported diluted earnings (loss) per share |  | $                                                | (0.07  | )                         |  | $        | (2.11   | )        |  | $ | 0.04  |  |  | $ | (2.65    | )
|Goodwill amortization                      |  |                                                  |       |                           |  |          | 0.03    |          |  |   |      |  |  |   | 0.08     |  
|                                           |  |                                                  |        |                           |  |          |         |          |  |   |       |  |  |   |          |  
|Adjusted diluted earnings (loss) per share |  | $                                                | (0.07  | )                         |  | $        | (2.08   | )        |  | $ | 0.04  |  |  | $ | (2.57    | )
|                                           |  |                                                  |        |                           |  |          |         |          |  |   |       |  |  |   |          |  

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

For the six-month period ending June 30, 2002, no goodwill or intangible
assets were acquired, impaired, and/or written off. 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.

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. According to Statement No. 142, any impairment
determined by completing the second step of the test would be recorded
effective January 1, 2002 as an effect of a change in accounting principle.

Amortization expense related to intangible assets with definite useful
lives, core-deposit intangibles, was $0.3 million for the second quarter of
2002. At June 30, 2002, the core-deposit intangibles gross carrying value,
accumulated amortization, and net carrying value was $12.4 million, $8.0
million and $4.4 million, respectively. Amortization expense related to the
carrying amount of core-deposit intangibles at June 30, 2002 is approximately
$0.7 million for the remainder of the year ending December 31, 2002, $0.8
million annually for the years ending December 31, 2003 through 2006, and $0.6
million for the year ending December 31, 2007.

Note 13. Segment and Related Information

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

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

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

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

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

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, is allocated to each platform on a pro-rata basis
determined by the relative amount of average interest-bearing liabilities,
excluding warehouse lines, that are required to fund the platforms
interest-earning assets.

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

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

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

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

|                                                                 |  |                                          |           |            |  |       |           |   |  |   |           |  
|---------------------------------------------------------------- |  | ---------------------------------------- | --------- | ---------- |  | ----- | --------- | - |  | - | --------- | -
|                                                                 |  | For the Three Months Ended June 30, 2002
|                                                                 |  |                                         
|                                                                 |  | Retail                                   |           | Commercial |  | Total
|                                                                 |  |                                          |           |            |  |      
|                                                                 |  | (Dollars in thousands)                  
|Interest income                                                  |  | $                                        | 23,282    |            |  | $     | 29,201    |   |  | $ | 52,483    |  
|Interest expense                                                 |  |                                          | (11,729   | )          |  |       | (7,307    | ) |  |   | (19,036   | )
|Provision for losses on loans and leases                         |  |                                          | (494      | )          |  |       | (3,106    | ) |  |   | (3,600    | )
|Noninterest income                                               |  |                                          | 23,175    |            |  |       | 2,225     |   |  |   | 25,400    |  
|Direct general and administrative expenses                       |  |                                          | (22,504   | )          |  |       | (2,731    | ) |  |   | (25,235   | )
|Allocation of branch network general and administrative expenses |  |                                          | 7,204     |            |  |       | (7,204    | ) |  |   |          |  
|Litigation settlement expense                                    |  |                                          |          |            |  |       | (13,100   | ) |  |   | (13,100   | )
|Leasing expenses                                                 |  |                                          | (16,066   | )          |  |       |          |   |  |   | (16,066   | )
|Dividend expense on Capital Securities                           |  |                                          | (1,430    | )          |  |       | (1,196    | ) |  |   | (2,626    | )
|Real estate owned operations including provision for losses, net |  |                                          |          |            |  |       | (328      | ) |  |   | (328      | )
|Amortization of intangible assets                                |  |                                          | (331      | )          |  |       |          |   |  |   | (331      | )
|                                                                 |  |                                          |           |            |  |       |           |   |  |   |           |  
|Contribution by platform                                         |  | $                                        | 1,107     |            |  | $     | (3,546    | ) |  | $ | (2,439    | )
|                                                                 |  |                                          |           |            |  |       |           |   |  |   |           |  
|Indirect corporate overhead                                      |  |                                          |           |            |  |       | (5,301    | )
|Income tax benefit                                               |  |                                          |           |            |  |       | 3,658     |  
|                                                                 |  |                                          |           |            |  |       |           |   |  |   |           |  
|Net loss                                                         |  |                                          |           |            |  | $     | (4,082    | )
|                                                                 |  |                                          |           |            |  |       |           |   |  |   |           |  
|At June 30, 2002:                                                |  |                                          |           |            |  |       |           |   |  |   |           |  
|Interest-earning assets plus operating lease assets              |  | $                                        | 1,840,591 |            |  | $     | 1,503,585 |   |  | $ | 3,344,176 |  
|                                                                 |  |                                          |           |            |  |       |           |   |  |   |           |  
|Noninterest-earning assets                                       |  |                                          |           |            |  |       |           |   |  |   | 408,119   |  
|                                                                 |  |                                          |           |            |  |       |           |   |  |   |           |  
|Total assets                                                     |  |                                          |           |            |  |       |           |   |  | $ | 3,752,295 |  
|                                                                 |  |                                          |           |            |  |       |           |   |  |   |           |  

|                                                                 |  |                                          |           |            |  |       |           |   |  |   |           |  
|---------------------------------------------------------------- |  | ---------------------------------------- | --------- | ---------- |  | ----- | --------- | - |  | - | --------- | -
|                                                                 |  | For the Three Months Ended June 30, 2001
|                                                                 |  |                                         
|                                                                 |  | Retail                                   |           | Commercial |  | Total
|                                                                 |  |                                          |           |            |  |      
|                                                                 |  | (Dollars in thousands)                  
|Interest income                                                  |  | $                                        | 40,244    |            |  | $     | 43,851    |   |  | $ | 84,095    |  
|Interest expense                                                 |  |                                          | (31,761   | )          |  |       | (22,590   | ) |  |   | (54,351   | )
|Provision for losses on loans and leases                         |  |                                          | (1,600    | )          |  |       | (50,833   | ) |  |   | (52,433   | )
|Noninterest income (expense)                                     |  |                                          | 28,708    |            |  |       | (20,657   | ) |  |   | 8,051     |  
|Direct general and administrative expenses                       |  |                                          | (27,238   | )          |  |       | (7,406    | ) |  |   | (34,644   | )
|Allocation of branch network general and administrative expenses |  |                                          | 6,879     |            |  |       | (6,879    | ) |  |   |          |  
|Restructuring expenses                                           |  |                                          | (4,998    | )          |  |       | (5,028    | ) |  |   | (10,026   | )
|Revaluation of franchise-related assets                          |  |                                          | (2,733    | )          |  |       | (50,350   | ) |  |   | (53,083   | )
|Leasing expenses                                                 |  |                                          | (27,286   | )          |  |       |          |   |  |   | (27,286   | )
|Dividend expense on Capital Securities                           |  |                                          | (1,325    | )          |  |       | (962      | ) |  |   | (2,287    | )
|Real estate owned operations including provision for losses, net |  |                                          | (9        | )          |  |       |          |   |  |   | (9        | )
|Amortization of intangible assets                                |  |                                          | (2,076    | )          |  |       | (728      | ) |  |   | (2,804    | )
|                                                                 |  |                                          |           |            |  |       |           |   |  |   |           |  
|Contribution by platform                                         |  | $                                        | (23,195   | )          |  | $     | (121,582  | ) |  | $ | (144,777  | )
|                                                                 |  |                                          |           |            |  |       |           |   |  |   |           |  
|Indirect corporate overhead                                      |  |                                          |           |            |  |       | (10,062   | )
|Income tax benefit                                               |  |                                          |           |            |  |       |           |   |  |   | 59,489    |  
|                                                                 |  |                                          |           |            |  |       |           |   |  |   |           |  
|Net loss                                                         |  |                                          |           |            |  | $     | (95,350   | )
|                                                                 |  |                                          |           |            |  |       |           |   |  |   |           |  
|At June 30, 2001:                                                |  |                                          |           |            |  |       |           |   |  |   |           |  
|Interest-earning assets plus operating lease assets              |  | $                                        | 1,931,453 |            |  | $     | 1,833,502 |   |  | $ | 3,764,955 |  
|                                                                 |  |                                          |           |            |  |       |           |   |  |   |           |  
|Noninterest-earning assets                                       |  |                                          |           |            |  |       |           |   |  |   | 579,953   |  
|                                                                 |  |                                          |           |            |  |       |           |   |  |   |           |  
|Total assets                                                     |  |                                          |           |            |  |       |           |   |  | $ | 4,344,908 |  
|                                                                 |  |                                          |           |            |  |       |           |   |  |   |           |  

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

|                                                                 |  |                                        |         |            |  |       |          |   |  |   |          |  
|---------------------------------------------------------------- |  | -------------------------------------- | ------- | ---------- |  | ----- | -------- | - |  | - | -------- | -
|                                                                 |  | For the Six Months Ended June 30, 2002
|                                                                 |  |                                       
|                                                                 |  | Retail                                 |         | Commercial |  | Total
|                                                                 |  |                                        |         |            |  |      
|                                                                 |  | (Dollars in thousands)                
|Interest income                                                  |  | $                                      | 47,230  |            |  | $     | 58,946   |   |  | $ | 106,176  |  
|Interest expense                                                 |  |                                        | (24,302 | )          |  |       | (15,283  | ) |  |   | (39,585  | )
|Provision for losses on loans and leases                         |  |                                        | 53      |            |  |       | (8,553   | ) |  |   | (8,500   | )
|Noninterest income                                               |  |                                        | 47,975  |            |  |       | 3,607    |   |  |   | 51,582   |  
|Direct general and administrative expenses                       |  |                                        | (45,138 | )          |  |       | (5,765   | ) |  |   | (50,903  | )
|Allocation of branch network general and administrative expenses |  |                                        | 14,338  |            |  |       | (14,338  | ) |  |   |         |  
|Litigation settlement expense                                    |  |                                        |        |            |  |       | (13,100  | ) |  |   | (13,100  | )
|Leasing expenses                                                 |  |                                        | (31,073 | )          |  |       |         |   |  |   | (31,073  | )
|Dividend expense on Capital Securities                           |  |                                        | (2,838  | )          |  |       | (2,361   | ) |  |   | (5,199   | )
|Real estate owned operations including provision for losses, net |  |                                        |        |            |  |       | (1,072   | ) |  |   | (1,072   | )
|Amortization of intangible assets                                |  |                                        | (662    | )          |  |       |         |   |  |   | (662     | )
|                                                                 |  |                                        |         |            |  |       |          |   |  |   |          |  
|Contribution by platform                                         |  | $                                      | 5,583   |            |  | $     | 2,081    |   |  | $ | 7,664    |  
|                                                                 |  |                                        |         |            |  |       |          |   |  |   |          |  
|Indirect corporate overhead                                      |  |                                        |         |            |  |       | (10,425  | )
|Income tax benefit                                               |  |                                        |         |            |  |       | 5,593    |  
|                                                                 |  |                                        |         |            |  |       |          |   |  |   |          |  
|Net income                                                       |  |                                        |         |            |  | $     | 2,832    |  
|                                                                 |  |                                        |         |            |  |       |          |   |  |   |          |  
|                                                                
|                                                                 |  | For the Six Months Ended June 30, 2001
|                                                                 |  |                                       
|                                                                 |  | Retail                                 |         | Commercial |  | Total
|                                                                 |  |                                        |         |            |  |      
|                                                                 |  | (Dollars in thousands)                
|Interest income                                                  |  | $                                      | 83,761  |            |  | $     | 94,793   |   |  | $ | 178,554  |  
|Interest expense                                                 |  |                                        | (66,581 | )          |  |       | (49,745  | ) |  |   | (116,326 | )
|Provision for losses on loans and leases                         |  |                                        | (5,609  | )          |  |       | (54,124  | ) |  |   | (59,733  | )
|Noninterest income (expense)                                     |  |                                        | 60,661  |            |  |       | (10,503  | ) |  |   | 50,158   |  
|Direct general and administrative expenses                       |  |                                        | (50,034 | )          |  |       | (15,050  | ) |  |   | (65,084  | )
|Allocation of branch network general and administrative expenses |  |                                        | 14,027  |            |  |       | (14,027  | ) |  |   |         |  
|Restructuring expenses                                           |  |                                        | (4,998  | )          |  |       | (5,028   | ) |  |   | (10,026  | )
|Revaluation of franchise-related assets                          |  |                                        | (2,733  | )          |  |       | (67,295  | ) |  |   | (70,028  | )
|Leasing expenses                                                 |  |                                        | (45,043 | )          |  |       |         |   |  |   | (45,043  | )
|Dividend expense on Capital Securities                           |  |                                        | (2,609  | )          |  |       | (1,966   | ) |  |   | (4,575   | )
|Real estate owned operations including provision for losses, net |  |                                        | 9       |            |  |       |         |   |  |   | 9        |  
|Amortization of intangible assets                                |  |                                        | (4,214  | )          |  |       | (1,458   | ) |  |   | (5,672   | )
|                                                                 |  |                                        |         |            |  |       |          |   |  |   |          |  
|Contribution by platform                                         |  | $                                      | (23,363 | )          |  | $     | (124,403 | ) |  | $ | (147,766 | )
|                                                                 |  |                                        |         |            |  |       |          |   |  |   |          |  
|Indirect corporate overhead                                      |  |                                        |         |            |  |       | (15,039  | )
|Income tax benefit                                               |  |                                        |         |            |  |       | 59,489   |  
|                                                                 |  |                                        |         |            |  |       |          |   |  |   |          |  
|Net loss                                                         |  |                                        |         |            |  | $     | (103,316 | )
|                                                                 |  |                                        |         |            |  |       |          |   |  |   |          |  

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

Note 14. Subsequent Events

On July 22, 2002, Bay View Bank executed a definitive agreement with U.S.
Bank National Association, a wholly owned subsidiary of U.S. Bancorp, pursuant
to which U.S. Bank will purchase and assume 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. The Company is
guaranteeing all obligations of Bay View Bank under the agreement.

At closing of the transaction, U.S. Bank will pay Bay View Bank the sum
of: (i) a 14% deposit premium (based upon 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, (ii) the principal amount of the loans being
sold less a loan loss reserve of approximately
$2.3 million, (iii) the net book value of real property and personal property
utilized by the branches and improvements thereto and (iv) the face amount of
coins and currency. Bay View Bank will pay to U.S. Bank at closing an amount
equal to the deposits being assumed by U.S. Bank, net of the amounts payable by
U.S. Bank to Bay View Bank as described in the preceding sentence. The amounts
paid at closing will be subject to post-closing adjustments based upon a
balance sheet as of the closing date prepared after closing by U.S. Bank and
subject to Bay View Banks review and in the event of any breaches of the
representations and warranties of Bay View Bank.

Closing will occur on the first day of the next month following the date
on which all conditions to closing are satisfied or waived. Conditions to U.S.
Banks obligation to close include: (i) the continued accuracy of
representations and warranties of Bay View Bank, as well as their compliance
with their respective covenants, (ii) receipt of required approvals from
federal banking regulatory agencies, (iii) approval by the Companys
stockholders of the agreement and the Companys plan to convert the Companys
assets to cash and make distributions to stockholders, (iv) completion by Bay
View Bank of additional asset sales, or otherwise securing financing, in order
to fund U.S. Banks assumption of the deposits at closing, (v) there not having
occurred any event or condition that would have a material adverse effect on
Bay View Bank and (vi) delivery of specified opinions and third-party consents.

Bay View Bank also executed a definitive agreement with U.S. Bank pursuant
to which Bay View Bank will provide deposit operations, cash management and
loan accounting services with respect to the loans being sold from the closing
date until May 14, 2003, subject to possible extension until not later than
July 31, 2003.

On July 22, 2002, Bay View Bank also executed a definitive agreement with
Washington Mutual Bank, FA pursuant to which Washington Mutual will purchase
approximately $1.0 billion of multifamily and commercial real estate loans from
Bay View Bank.

At closing, Washington Mutual will pay to Bay View Bank the aggregate
principal amount of the loans plus 25 basis points. Bay View Bank is also
entitled to receive accrued interest for each loan from the date last paid
through the closing date plus the amount of outstanding reimbursable advances
as of the closing date. The purchase price will be reduced by any
environmental insurance policy premium payable by Washington Mutual for
environmental insurance coverage with respect to specified loans.

The agreement with Washington Mutual provides that the entire amount of
the purchase price will be paid at closing except for $25.0 million, which will
be held back and accrue interest at the three-month certificate of deposit rate
quoted by Washington Mutual on the closing date. This amount will be payable
to Bay View Bank as follows: (i) $10.0 million on September 4, 2002; (ii) $5.0
million on October 3, 2002; (iii) $3.0 million on November 5, 2002 and (iv)
$7.0 million on December 27, 2002. Each such payment is subject to the
condition that

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

there then exists no payment default or material non-payment default by Bay
View Bank under a related agreement between Washington Mutual and Bay View Bank
pursuant to which Bay View Bank will provide servicing functions for the loans
being sold from the closing date until an agreed upon date not later than 120
days subsequent to the closing date. A further condition to the final payment
of $7.0 million is Bay View Banks compliance with its obligation to correct
specified loan document deficiencies.

On August 6, 2002, our Board of Directors approved a plan of dissolution
and stockholder liquidity whereby in addition to the U.S. Bank and Washington
Mutual transactions, 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. Pursuant to our plan, we will
make one or more liquidating distributions to our stockholders, representing
the net proceeds of the dissolution.

We expect to hold a special meeting of our stockholders to approve the
purchase and assumption agreement with U.S. Bank and our plan of dissolution
and stockholder liquidity.

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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 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. The Company
initially considered a variety of transactions. However, through this evaluation process, determined that greater stockholder value could be obtained by adopting a plan of dissolution and selling selected assets of the Bank to more than one purchaser rather than by an alternative approach such as selling all of the Bank as a whole.
We believe this fact is largely the result of the mismatch between the character of the Banks and our 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
will 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 will purchase approximately $1.0 billion of multifamily and commercial
real estate loans from the Bank.

On August 6, 2002, our Board of Directors approved a plan of dissolution
and stockholder liquidity. Proposals to authorize this plan, and approve the
U.S. Bank transaction, will be submitted to our stockholders as
soon as practicable. 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.

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

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(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 amount of the
Banks deposits during the period prior to the closing of the transaction with
U.S. Bank transaction may be lower than we expect; 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.

Although we need to take a number of actions to implement our plan of
dissolution and stockholder liquidity, including obtaining the permission of
the FRB and OCC to make stockholder distributions while the regulatory
agreements remain in effect, we anticipate that a substantial portion of the
distributions will be made to our stockholders during 2003.

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 includes single-family real estate loans, home equity
loans and lines of credit, auto loans and leases, mortgage-backed securities
and other investments, and other consumer banking products and services.

The 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
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 includes 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 also 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.

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 the allowance for losses on loans and leases, investment in
operating lease assets and income taxes. 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.

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Results of Operations

Our net loss for the second quarter of 2002 was $4.1 million, or $0.07 per
diluted share, as compared to $95.4 million, or $2.11 per diluted share, for
the second quarter of 2001. Net income for the first six months of 2002 was
$2.8 million, or $0.04 per diluted share, as compared to a net loss of $103.3
million, or $2.65 per diluted share, for the first six months of 2001. Our
second quarter 2002 results include a special charge of $13.1 million 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, the Company entered into a settlement agreement
with JP Morgan Chase Bank relating to the complaint filed against Bay View
Franchise Mortgage Acceptance Company which the Company 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 $33.4 million for the second quarter of 2002 as
compared to $29.7 million for the second quarter of 2001. Net interest income
for the first six months of 2002 was $66.6 million as compared to $62.2 million
for the first six months of 2001. Net interest margin was 4.23% for the second
quarter of 2002 as compared to 2.83% for the second quarter of 2001. Net
interest margin was 4.19% for the first six months of 2002 as compared to 2.88%
for the first six 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
|                    |  |                           
|                    |  | June 30, 2002              |        | June 30, 2001
|                    |  |                            |        |              
|                    |  | Net                        |        | Net           |  | Net      |      | Net     
|                    |  | Interest                   |        | Interest      |  | Interest |      | Interest
|                    |  | Income                     |        | Margin        |  | Income   |      | Margin  
|                    |  |                            |        |               |  |          |      |         
|                    |  | (Dollars in thousands)    
|Retail Platform(1)  |  | $                          | 11,553 |               |  |          | 2.94 | %        |  | $ | 8,483  |  |  |  | 1.50 | %
|Commercial Platform |  |                            | 21,894 |               |  |          | 5.51 |          |  |   | 21,261 |  |  |  | 4.34 |  
|                    |  |                            |        |               |  |          |      |          |  |   |        |  |  |  |      |  
|Total               |  | $                          | 33,447 |               |  |          | 4.23 | %        |  | $ | 29,744 |  |  |  | 2.83 | %
|                    |  |                            |        |               |  |          |      |          |  |   |        |  |  |  |      |  

|                    |  |                          |        |               |  |          |      |          |  |   |        |  |  |  |      |  
|------------------- |  | ------------------------ | ------ | ------------- |  | -------- | ---- | -------- |  | - | ------ |  |  |  | ---- | -
|                    |  | For the Six Months Ended
|                    |  |                         
|                    |  | June 30, 2002            |        | June 30, 2001
|                    |  |                          |        |              
|                    |  | Net                      |        | Net           |  | Net      |      | Net     
|                    |  | Interest                 |        | Interest      |  | Interest |      | Interest
|                    |  | Income                   |        | Margin        |  | Income   |      | Margin  
|                    |  |                          |        |               |  |          |      |         
|                    |  | (Dollars in thousands)  
|Retail Platform(1)  |  | $                        | 22,928 |               |  |          | 2.90 | %        |  | $ | 17,180 |  |  |  | 1.50 | %
|Commercial Platform |  |                          | 43,663 |               |  |          | 5.47 |          |  |   | 45,048 |  |  |  | 4.39 |  
|                    |  |                          |        |               |  |          |      |          |  |   |        |  |  |  |      |  
|Total               |  | $                        | 66,591 |               |  |          | 4.19 | %        |  | $ | 62,228 |  |  |  | 2.88 | %
|                    |  |                          |        |               |  |          |      |          |  |   |        |  |  |  |      |  



---

|(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.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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The increases in net interest income for the second quarter of 2002, as
compared to the second quarter of 2001, and for the first six months of 2002,
as compared to the first six months of 2001, were primarily due to increases in
net interest margin partially offset by decreases in average interest-earning
assets. The increases in our 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.
This was partially offset by lower yields on assets, which were also impacted
by the lower interest rate environment, and sales of higher-yielding loans and
mortgage-backed securities during 2001 and 2002. The decreases in average
interest-earning assets were primarily due to asset sales, including franchise
and home equity loans, factored receivables, mortgage-backed securities and
other investment securities, as well as payoffs throughout 2001 and 2002.

Our net interest margin, calculated in accordance with generally accepted
accounting principles (GAAP), excludes the revenue impact of our auto leasing
activities, but includes the associated funding costs. Because 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. For a discussion of
normalized net interest income and net interest margin, including the revenue
impact of our auto leasing activities, see Non-GAAP Performance Measures 
Normalized Net Interest Income and Net Interest Margin.

Net interest income and net interest margin by platform reflect our
strategy to sell off our higher-risk assets, specifically high loan-to-value
home equity loans and franchise loans. The increases in the Retail Platforms
net interest margin reflect the impact of lower overall cost of funds, as
previously disclosed or as discussed elsewhere herein, partially offset by the
sale of higher-yielding loans and mortgage-backed securities during
2001 and 2002. The increases in the Commercial
Platforms net interest margin were primarily due to lower cost of funds. For
more detail, see discussion of Interest Income and Interest Expense.

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

|                    |  |                          |           |          |  |   |           | 
|------------------- |  | ------------------------ | --------- | -------- |  | - | --------- | 
|                    |  | Average Balances for the
|                    |  | Three Months Ended      
|                    |  |                         
|                    |  | June 30,                 |           | June 30,
|                    |  | 2002                     |           | 2001    
|                    |  |                          |           |         
|                    |  | (Dollars in thousands)  
|Retail Platform     |  | $                        | 1,575,884 |          |  | $ | 2,230,780 | 
|Commercial Platform |  |                          | 1,587,735 |          |  |   | 1,948,223 | 
|                    |  |                          |           |          |  |   |           | 
|Total               |  | $                        | 3,163,619 |          |  | $ | 4,179,003 | 
|                    |  |                          |           |          |  |   |           | 
|                    |  |                          |           |          |  |   |           | 
|                    |  | Average Balances for the
|                    |  | Six Months Ended        
|                    |  |                         
|                    |  | June 30,                 |           | June 30,
|                    |  | 2002                     |           | 2001    
|                    |  |                          |           |         
|                    |  | (Dollars in thousands)  
|Retail Platform     |  | $                        | 1,580,728 |          |  | $ | 2,241,031 | 
|Commercial Platform |  |                          | 1,598,844 |          |  |   | 2,041,634 | 
|                    |  |                          |           |          |  |   |           | 
|Total               |  | $                        | 3,179,572 |          |  | $ | 4,282,665 | 
|                    |  |                          |           |          |  |   |           | 

The decreases in the Retail Platforms average interest-earning assets,
which exclude our auto-related operating lease assets, reflect the impact of
the sales of home equity loans during 2001 and the sale of mortgage-backed and
other investment securities during 2001 and 2002 partially offset by purchases
of mortgage-backed and investment securities as previously disclosed or as
discussed elsewhere herein. The decreases in the Commercial Platforms average
interest-earning assets reflect the impact of the sales of franchise loans and
factored receivables during 2001 and 2002 as well as the impact of the
writedowns related to the revaluation of our franchise-related assets during
2001.

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

|                    |  |                        |           |              |  |          |           |  |  |   |           | 
|------------------- |  | ---------------------- | --------- | ------------ |  | -------- | --------- |  |  | - | --------- | 
|                    |  | At                     |           | At           |  | At      
|                    |  | June 30,               |           | December 31, |  | June 30,
|                    |  | 2002                   |           | 2001         |  | 2001    
|                    |  |                        |           |              |  |         
|                    |  | (Dollars in thousands)
|Retail Platform     |  | $                      | 1,573,855 |              |  | $        | 1,454,150 |  |  | $ | 1,520,200 | 
|Commercial Platform |  |                        | 1,503,585 |              |  |          | 1,541,310 |  |  |   | 1,833,502 | 
|                    |  |                        |           |              |  |          |           |  |  |   |           | 
|Total               |  | $                      | 3,077,440 |              |  | $        | 2,995,460 |  |  | $ | 3,353,702 | 
|                    |  |                        |           |              |  |          |           |  |  |   |           | 

The increase in the Retail Platforms interest-earning assets, excluding
our auto-related operating lease assets, at June 30, 2002, as compared to
December 31, 2001, was primarily due to the redeployment of non
interest-earning cash at December 31, 2001 into interest-earning short-term
investments during the first quarter of 2002 combined with purchases of
approximately $60.0 million of mortgage-backed securities and $54.9 million of
other investment securities during the first six months of 2002. These were
partially offset by the sale of $91.4 million of mortgage-backed securities
during the same period. The decrease in the Commercial Platforms
interest-earning assets was primarily due to the sale of Bay View Funding and
its factored receivables and the franchise loan sales and payoffs.

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.

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|                                           |                               |   |                                    |           |                            |  |            |        |         |   |           |      |            |   |           |           |         |  |        |        |  |  |      |      |  
|------------------------------------------ | ----------------------------- | - | ---------------------------------- | --------- | -------------------------- |  | ---------- | ------ | ------- | - | --------- | ---- | ---------- | - | --------- | --------- | ------- |  | ------ | ------ |  |  | ---- | ---- | -
|                                           |                               |   | AVERAGE BALANCES, YIELDS AND RATES
|                                           |                               |   |                                   
|                                           |                               |   | For the Three Months Ended         |           | For the Three Months Ended
|                                           |                               |   | June 30, 2002                      |           | June 30, 2001             
|                                           |                               |   |                                    |           |                           
|                                           |                               |   | Average                            |           |                            |  |            |        | Average |   | Average   |      |            |   |           |           | Average
|                                           |                               |   | Balance                            |           | Interest                   |  | Yield/Rate |        | Balance |   | Interest  |      | Yield/Rate
|                                           |                               |   |                                    |           |                            |  |            |        |         |   |           |      |           
|                                           |                               |   | (Dollars in thousands)            
|Assets                                     |                               |   |                                    |           |                            |  |            |        |         |   |           |      |            |   |           |           |         |  |        |        |  |  |      |     
|Interest-earning assets:                   |                               |   |                                    |           |                            |  |            |        |         |   |           |      |            |   |           |           |         |  |        |        |  |  |      |     
|                                           | Loans and leases              |   | $                                  | 2,432,969 |                            |  | $          | 45,563 |         |   |           | 7.50 | %          |   | $         | 2,938,419 |         |  | $      | 65,192 |  |  |      | 8.87 | %
|                                           | Mortgage-backed securities(1) |   |                                    | 256,972   |                            |  |            | 3,014  |         |   |           | 4.69 |            |   |           | 634,370   |         |  |        | 11,406 |  |  |      | 7.19 |  
|                                           | Investments(1)                |   |                                    | 473,678   |                            |  |            | 3,906  |         |   |           | 3.29 |            |   |           | 606,214   |         |  |        | 7,497  |  |  |      | 4.91 |  
|                                           |                               |   |                                    |           |                            |  |            |        |         |   |           |      |            |   |           |           |         |  |        |        |  |  |      |     
|Total interest-earning assets              |                               |   | 3,163,619                          |           |                            |  | 52,483     |        |         |   | 6.64      | %    |            |   | 4,179,003 |           |         |  | 84,095 |        |  |  | 8.04 | %   
|                                           |                               |   |                                    |           |                            |  |            |        |         |   |           |      |            |   |           |           |         |  |        |        |  |  |      |     
|Other assets                               |                               |   | 634,271                            |           |                            |  |            |        |         |   | 686,203   |      |            |   |           |          
|                                           |                               |   |                                    |           |                            |  |            |        |         |   |           |      |            |   |           |           |         |  |        |        |  |  |      |     
|Total assets                               |                               | $ | 3,797,890                          |           |                            |  |            |        |         | $ | 4,865,206 |      |            |   |           |          
|                                           |                               |   |                                    |           |                            |  |            |        |         |   |           |      |            |   |           |           |         |  |        |        |  |  |      |     
|Liabilities and Stockholders Equity       |                               |   |                                    |           |                            |  |            |        |         |   |           |      |            |   |           |           |         |  |        |        |  |  |      |     
|Interest-bearing liabilities:              |                               |   |                                    |           |                            |  |            |        |         |   |           |      |            |   |           |           |         | 
|                                           | Deposits                      |   | $                                  | 3,029,865 |                            |  | $          | 13,529 |         |   |           | 1.79 | %          |   | $         | 3,561,939 |         |  | $      | 39,453 |  |  |      | 4.44 | %
|                                           | Borrowings(2)                 |   |                                    | 294,156   |                            |  |            | 5,507  |         |   |           | 7.49 |            |   |           | 882,642   |         |  |        | 14,898 |  |  |      | 6.76 |  
|                                           |                               |   |                                    |           |                            |  |            |        |         |   |           |      |            |   |           |           |         |  |        |        |  |  |      |     
|Total interest-bearing liabilities         |                               |   | 3,324,021                          |           |                            |  | 19,036     |        |         |   | 2.30      | %    |            |   | 4,444,581 |           |         |  | 54,351 |        |  |  | 4.90 | %   
|                                           |                               |   |                                    |           |                            |  |            |        |         |   |           |      |            |   |           |           |         |  |        |        |  |  |      |     
|Other liabilities                          |                               |   | 127,651                            |           |                            |  |            |        |         |   |           |      | 79,115     |   |           |           |         | 
|                                           |                               |   |                                    |           |                            |  |            |        |         |   |           |      |            |   |           |           |         |  |        |        |  |  |      |     
|Total liabilities                          |                               |   | 3,451,672                          |           |                            |  |            |        |         |   |           |      | 4,523,696  |   |           |           |         | 
|Stockholders equity                       |                               |   | 346,218                            |           |                            |  |            |        |         |   |           |      | 341,510    |   |           |           |         | 
|                                           |                               |   |                                    |           |                            |  |            |        |         |   |           |      |            |   |           |           |         |  |        |        |  |  |      |     
|Total liabilities and stockholders equity |                               | $ | 3,797,890                          |           |                            |  |            |        |         |   |           | $    | 4,865,206  |   |           |           |         | 
|                                           |                               |   |                                    |           |                            |  |            |        |         |   |           |      |            |   |           |           |         |  |        |        |  |  |      |     
|Net interest income/net interest spread    |                               |   |                                    | $         | 33,447                     |  |            |        | 4.34    | % |           |      |            | $ | 29,744    |           |         |  | 3.14   | %     
|                                           |                               |   |                                    |           |                            |  |            |        |         |   |           |      |            |   |           |           |         |  |        |        |  |  |      |     
|Net interest-bearing liabilities           |                               | $ | (160,402                           | )         |                            |  |            |        |         | $ | (265,578  | )    |            |   |           |          
|                                           |                               |   |                                    |           |                            |  |            |        |         |   |           |      |            |   |           |           |         |  |        |        |  |  |      |     
|Net interest margin (3)                    |                               |   |                                    |           |                            |  | 4.23       | %      |         |   |           |      |            |   | 2.83      | %        
|                                           |                               |   |                                    |           |                            |  |            |        |         |   |           |      |            |   |           |           |         |  |        |        |  |  |      |     



---

|(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.                                                               

30



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##### Table of Contents



|                                           |                               |   |                                    |           |                          |  |            |        |         |   |           |      |            |   |           |           |         |  |         |         |  |  |      |      |  
|------------------------------------------ | ----------------------------- | - | ---------------------------------- | --------- | ------------------------ |  | ---------- | ------ | ------- | - | --------- | ---- | ---------- | - | --------- | --------- | ------- |  | ------- | ------- |  |  | ---- | ---- | -
|                                           |                               |   | AVERAGE BALANCES, YIELDS AND RATES
|                                           |                               |   |                                   
|                                           |                               |   | For the Six Months Ended           |           | For the Six Months Ended
|                                           |                               |   | June 30, 2002                      |           | June 30, 2001           
|                                           |                               |   |                                    |           |                         
|                                           |                               |   | Average                            |           |                          |  |            |        | Average |   | Average   |      |            |   |           |           | Average
|                                           |                               |   | Balance                            |           | Interest                 |  | Yield/Rate |        | Balance |   | Interest  |      | Yield/Rate
|                                           |                               |   |                                    |           |                          |  |            |        |         |   |           |      |           
|                                           |                               |   | (Dollars in thousands)            
|Assets                                     |                               |   |                                    |           |                          |  |            |        |         |   |           |      |            |   |           |           |         |  |         |         |  |  |      |     
|Interest-earning assets:                   |                               |   |                                    |           |                          |  |            |        |         |   |           |      |            |   |           |           |         |  |         |         |  |  |      |     
|                                           | Loans and leases              |   | $                                  | 2,428,918 |                          |  | $          | 92,034 |         |   |           | 7.61 | %          |   | $         | 3,035,765 |         |  | $       | 137,542 |  |  |      | 9.08 | %
|                                           | Mortgage-backed securities(1) |   |                                    | 270,338   |                          |  |            | 6,565  |         |   |           | 4.85 |            |   |           | 643,899   |         |  |         | 23,621  |  |  |      | 7.34 |  
|                                           | Investments(1)                |   |                                    | 480,316   |                          |  |            | 7,577  |         |   |           | 3.15 |            |   |           | 603,001   |         |  |         | 17,391  |  |  |      | 5.76 |  
|                                           |                               |   |                                    |           |                          |  |            |        |         |   |           |      |            |   |           |           |         |  |         |         |  |  |      |     
|Total interest-earning assets              |                               |   | 3,179,572                          |           |                          |  | 106,176    |        |         |   | 6.70      | %    |            |   | 4,282,665 |           |         |  | 178,554 |         |  |  | 8.35 | %   
|                                           |                               |   |                                    |           |                          |  |            |        |         |   |           |      |            |   |           |           |         |  |         |         |  |  |      |     
|Other assets                               |                               |   | 656,476                            |           |                          |  |            |        |         |   | 733,811   |      |            |   |           |          
|                                           |                               |   |                                    |           |                          |  |            |        |         |   |           |      |            |   |           |           |         |  |         |         |  |  |      |     
|Total assets                               |                               | $ | 3,836,048                          |           |                          |  |            |        |         | $ | 5,016,476 |      |            |   |           |          
|                                           |                               |   |                                    |           |                          |  |            |        |         |   |           |      |            |   |           |           |         |  |         |         |  |  |      |     
|Liabilities and Stockholders Equity       |                               |   |                                    |           |                          |  |            |        |         |   |           |      |            |   |           |           |         |  |         |         |  |  |      |     
|Interest-bearing liabilities:              |                               |   |                                    |           |                          |  |            |        |         |   |           |      |            |   |           |           |         |  |         |         |  |  |      |     
|                                           | Deposits                      |   | $                                  | 3,078,326 |                          |  | $          | 28,531 |         |   |           | 1.87 | %          |   | $         | 3,622,590 |         |  | $       | 83,374  |  |  |      | 4.64 | %
|                                           | Borrowings(2)                 |   |                                    | 286,830   |                          |  |            | 11,054 |         |   |           | 7.73 |            |   |           | 961,391   |         |  |         | 32,952  |  |  |      | 6.89 |  
|                                           |                               |   |                                    |           |                          |  |            |        |         |   |           |      |            |   |           |           |         |  |         |         |  |  |      |     
|Total interest-bearing liabilities         |                               |   | 3,365,156                          |           |                          |  | 39,585     |        |         |   | 2.37      | %    |            |   | 4,583,981 |           |         |  | 116,326 |         |  |  | 5.11 | %   
|                                           |                               |   |                                    |           |                          |  |            |        |         |   |           |      |            |   |           |           |         |  |         |         |  |  |      |     
|Other liabilities                          |                               |   | 128,061                            |           |                          |  |            |        |         |   | 111,729   |      |            |   |           |          
|                                           |                               |   |                                    |           |                          |  |            |        |         |   |           |      |            |   |           |           |         |  |         |         |  |  |      |     
|Total liabilities                          |                               |   | 3,493,217                          |           |                          |  |            |        |         |   | 4,695,710 |      |            |   |           |          
|Stockholders equity                       |                               |   | 342,831                            |           |                          |  |            |        |         |   | 320,766   |      |            |   |           |          
|                                           |                               |   |                                    |           |                          |  |            |        |         |   |           |      |            |   |           |           |         |  |         |         |  |  |      |     
|Total liabilities and stockholders equity |                               | $ | 3,836,048                          |           |                          |  |            |        |         | $ | 5,016,476 |      |            |   |           |          
|                                           |                               |   |                                    |           |                          |  |            |        |         |   |           |      |            |   |           |           |         |  |         |         |  |  |      |     
|Net interest income/net interest spread    |                               |   |                                    | $         | 66,591                   |  |            |        | 4.33    | % |           |      |            | $ | 62,228    |           |         |  | 3.24    | %      
|                                           |                               |   |                                    |           |                          |  |            |        |         |   |           |      |            |   |           |           |         |  |         |         |  |  |      |     
|Net interest-bearing liabilities           |                               | $ | (185,584                           | )         |                          |  |            |        |         | $ | (301,316  | )    |            |   |           |          
|                                           |                               |   |                                    |           |                          |  |            |        |         |   |           |      |            |   |           |           |         |  |         |         |  |  |      |     
|Net interest margin(3)                     |                               |   |                                    |           |                          |  | 4.19       | %      |         |   |           |      |            |   | 2.88      | %        
|                                           |                               |   |                                    |           |                          |  |            |        |         |   |           |      |            |   |           |           |         |  |         |         |  |  |      |     



---

|(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.                                                               

31



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##### Table of Contents



Interest Income

Interest income was $52.5 million for the second quarter of 2002 as
compared to $84.1 million for the second quarter of 2001. Interest income was
$106.2 million for the first six months of 2002 as compared to $178.6 million
for the first six months of 2001. The average yield on interest-earning assets
was 6.64% for the second quarter of 2002 as compared to 8.04% for the second
quarter of 2001. The average yield on interest-earning assets was 6.70% for
the first six months of 2002 as compared to 8.35% for the first six months of
2001. The following tables illustrate interest income, by platform, for the
periods indicated:

|                           |  |                            |           |               |  |         |         |         |  |          |       |         |  |   |           |  |  |   |         |  |  |  |       |  
|-------------------------- |  | -------------------------- | --------- | ------------- |  | ------- | ------- | ------- |  | -------- | ----- | ------- |  | - | --------- |  |  | - | ------- |  |  |  | ----- | -
|                           |  | For the Three Months Ended
|                           |  |                           
|                           |  | June 30, 2002              |           | June 30, 2001
|                           |  |                            |           |              
|                           |  | Average                    |           | Interest      |  | Average |         | Average |  | Interest |       | Average
|                           |  | Balance                    |           | Income        |  | Yield   |         | Balance |  | Income   |       | Yield  
|                           |  |                            |           |               |  |         |         |         |  |          |       |        
|                           |  | (Dollars in thousands)    
|Retail Platform:           |  |                            |           |               |  |         |         |         |  |          |       |         |  |   |           |  |  |   |         |  |  |  |       |  
|Loans                      |  | $                          | 851,221   |               |  | $       | 16,448  |         |  |          | 7.75  | %       |  | $ | 1,005,259 |  |  | $ | 21,564  |  |  |  | 8.59  | %
|Mortgage-backed securities |  |                            | 256,972   |               |  |         | 3,014   |         |  |          | 4.69  |         |  |   | 634,370   |  |  |   | 11,406  |  |  |  | 7.19  |  
|Investments                |  |                            | 467,691   |               |  |         | 3,820   |         |  |          | 3.25  |         |  |   | 591,151   |  |  |   | 7,274   |  |  |  | 4.88  |  
|                           |  |                            |           |               |  |         |         |         |  |          |       |         |  |   |           |  |  |   |         |  |  |  |       |  
|Total Retail Platform      |  |                            | 1,575,884 |               |  |         | 23,282  |         |  |          | 5.92  |         |  |   | 2,230,780 |  |  |   | 40,244  |  |  |  | 7.21  |  
|                           |  |                            |           |               |  |         |         |         |  |          |       |         |  |   |           |  |  |   |         |  |  |  |       |  
|Commercial Platform:       |  |                            |           |               |  |         |         |         |  |          |       |         |  |   |           |  |  |   |         |  |  |  |       |  
|Loans and leases           |  |                            | 1,581,748 |               |  |         | 29,115  |         |  |          | 7.36  |         |  |   | 1,933,160 |  |  |   | 43,627  |  |  |  | 9.01  |  
|Investments                |  |                            | 5,987     |               |  |         | 86      |         |  |          | 5.79  |         |  |   | 15,063    |  |  |   | 224     |  |  |  | 5.97  |  
|                           |  |                            |           |               |  |         |         |         |  |          |       |         |  |   |           |  |  |   |         |  |  |  |       |  
|Total Commercial Platform  |  |                            | 1,587,735 |               |  |         | 29,201  |         |  |          | 7.36  |         |  |   | 1,948,223 |  |  |   | 43,851  |  |  |  | 8.98  |  
|                           |  |                            |           |               |  |         |         |         |  |          |       |         |  |   |           |  |  |   |         |  |  |  |       |  
|Total                      |  | $                          | 3,163,619 |               |  | $       | 52,483  |         |  |          | 6.64  | %       |  | $ | 4,179,003 |  |  | $ | 84,095  |  |  |  | 8.04  | %
|                           |  |                            |           |               |  |         |         |         |  |          |       |         |  |   |           |  |  |   |         |  |  |  |       |  
|                           |  |                           
|                           |  | For the Six Months Ended  
|                           |  |                           
|                           |  | June 30, 2002              |           | June 30, 2001
|                           |  |                            |           |              
|                           |  | Average                    |           | Interest      |  | Average |         | Average |  | Interest |       | Average
|                           |  | Balance                    |           | Income        |  | Yield   |         | Balance |  | Income   |       | Yield  
|                           |  |                            |           |               |  |         |         |         |  |          |       |        
|                           |  | (Dollars in thousands)    
|Retail Platform:           |  |                            |           |               |  |         |         |         |  |          |       |         |  |   |           |  |  |   |         |  |  |  |       |  
|Loans                      |  | $                          | 835,999   |               |  | $       | 33,420  |         |  |          | 8.03  | %       |  | $ | 1,010,931 |  |  | $ | 43,892  |  |  |  | 8.72  | %
|Mortgage-backed securities |  |                            | 270,338   |               |  |         | 6,565   |         |  |          | 4.85  |         |  |   | 643,899   |  |  |   | 23,621  |  |  |  | 7.34  |  
|Investments                |  |                            | 474,391   |               |  |         | 7,245   |         |  |          | 3.05  |         |  |   | 586,201   |  |  |   | 16,248  |  |  |  | 5.53  |  
|                           |  |                            |           |               |  |         |         |         |  |          |       |         |  |   |           |  |  |   |         |  |  |  |       |  
|Total Retail Platform      |  |                            | 1,580,728 |               |  |         | 47,230  |         |  |          | 6.00  |         |  |   | 2,241,031 |  |  |   | 83,761  |  |  |  | 7.49  |  
|                           |  |                            |           |               |  |         |         |         |  |          |       |         |  |   |           |  |  |   |         |  |  |  |       |  
|Commercial Platform:       |  |                            |           |               |  |         |         |         |  |          |       |         |  |   |           |  |  |   |         |  |  |  |       |  
|Loans and leases           |  |                            | 1,592,919 |               |  |         | 58,614  |         |  |          | 7.38  |         |  |   | 2,024,834 |  |  |   | 93,649  |  |  |  | 9.26  |  
|Investments                |  |                            | 5,925     |               |  |         | 332     |         |  |          | 11.29 |         |  |   | 16,800    |  |  |   | 1,144   |  |  |  | 13.77 |  
|                           |  |                            |           |               |  |         |         |         |  |          |       |         |  |   |           |  |  |   |         |  |  |  |       |  
|Total Commercial Platform  |  |                            | 1,598,844 |               |  |         | 58,946  |         |  |          | 7.40  |         |  |   | 2,041,634 |  |  |   | 94,793  |  |  |  | 9.30  |  
|                           |  |                            |           |               |  |         |         |         |  |          |       |         |  |   |           |  |  |   |         |  |  |  |       |  
|Total                      |  | $                          | 3,179,572 |               |  | $       | 106,176 |         |  |          | 6.70  | %       |  | $ | 4,282,665 |  |  | $ | 178,554 |  |  |  | 8.35  | %
|                           |  |                            |           |               |  |         |         |         |  |          |       |         |  |   |           |  |  |   |         |  |  |  |       |  

Retail Platform

Interest income for the Retail Platform was $23.3 million for the second
quarter of 2002 as compared to $40.2 million for the second quarter of 2001.
Interest income for the Retail Platform was $47.2 million for the first six
months of 2002 as compared to $83.8 million for the first six months of 2001.
The average yield on interest-earning assets for the Retail Platform was 5.92%
for the second quarter of 2002 as compared to 7.21% for the second quarter of
2001. The average yield on interest-earning assets for the Retail Platform was
6.00% for the first six months of 2002 as compared to 7.49% for the first six
months of 2001.

32



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##### Table of Contents



The Retail Platforms interest income on loans was $16.5 million for the
second quarter of 2002 as compared to $21.5 million for the second quarter of
2001. The Retail Platforms interest income on loans was $33.4 million for the
first six months of 2002 as compared to $43.9 million for the first six
months of 2001. The Retail Platforms average loan yield was 7.75% for the
second quarter of 2002 as compared to 8.59% for the second quarter of 2001.
The Retail Platforms average loan yield was 8.03% for the first six months of
2002 as compared to 8.72% for the first six months of 2001. The decreases in
interest income on loans for the second quarter of 2002, as compared to the
second quarter of 2001, and for the first six months of 2002, as compared to
the first six 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 2001 and 2002.

The Retail Platforms interest income on mortgage-backed securities was
$3.0 million for the second quarter of 2002 as compared to $11.4 million for
the second quarter of 2001. The Retail Platforms interest income on
mortgage-backed securities was $6.6 million for the first six months of 2002 as
compared to $23.6 million for the first six months of 2001. The Retail
Platforms average yield on mortgage-backed securities was 4.69% for the second
quarter of 2002 as compared to 7.19% for the second quarter of 2001. The
Retail Platforms average yield on mortgage-backed securities was 4.85% for the
first six months of 2002 as compared to 7.34% for the first six months of 2001.
The decreases in interest income on mortgage-backed securities for the second
quarter of 2002, as compared to the second quarter of 2001, and for the first
six months of 2002, as compared to the first six 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 2001 and 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 2001 and 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 $3.8
million for the second quarter of 2002 as compared to $7.3 million for the
second quarter of 2001. The Retail Platforms interest income on investment
securities was $7.2 million for the first six months of 2002 as compared to
$16.2 million for the first six months of 2001. The Retail Platforms average
yield on investment securities was 3.25% for the second quarter of 2002 as
compared to 4.88% for the second quarter of 2001. The Retail Platforms
average yield on investment securities was 3.05% for the first six months of
2002 as compared to 5.53% for the first six months of 2001. The decreases in
interest income on investments for the second quarter of 2002, as compared to
the second quarter of 2001, and for the first six months of 2002, as compared
to the first six months of 2001, were due to lower average yields resulting
from the prevailing lower interest rate environment combined with lower average
balances resulting from decreases in the average balances of our short-term
investments partially offset by increases in asset-backed and trust preferred
securities due to purchases throughout 2001 and 2002.

Commercial Platform

Interest income for the Commercial Platform was $29.2 million for the
second quarter of 2002 as compared to $43.9 million for the second quarter of
2001. Interest income for the Commercial Platform was $58.9 million for the
first six months of 2002 as compared to $94.8 million for the first six months
of 2001. The average yield on interest-earning assets for the Commercial
Platform was 7.36% for the second quarter of 2002 as compared to 8.98% for the
second quarter of 2001. The average yield on interest-earning assets for the
Commercial Platform was 7.40% for the first six months of 2002 as compared to
9.30% for the first six months of 2001.

The Commercial Platforms interest income on loans was $29.1 million for
the second quarter of 2002 as compared to $43.7 million for the second quarter
of 2001. The Commercial Platforms interest income on loans was $58.6 million
for the first six months of 2002 as compared to $93.7 million for the first six
months of 2001. The Commercial Platforms average loan and lease yield was
7.36% for the second quarter of 2002 as compared to 9.01% for the second
quarter of 2001. The Commercial Platforms average loan and lease yield was
7.38% for the first six months of 2002 as compared to 9.26% for the first six
months of 2001. The decreases in interest income on loans and leases for the
second

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quarter of 2002, as compared to the second quarter of 2001, and for the
first six months of 2002, as compared to the first six months of 2001, were due
to lower average loan and lease balances, resulting from the sales of franchise
loans and factored receivables during 2001 and 2002 and the writedowns related to the revaluation of
franchise loans during 2001, combined with
decreases in average yields.

The Commercial Platforms interest income on investment securities, which
consist of franchise asset-backed securities and residual interests in
franchise loan securitizations, was $86 thousand for the second quarter of 2002
as compared to $224 thousand for the second quarter of 2001. The Commercial
Platforms interest income on investment securities was $332 thousand for the
first six months of 2002 as compared to $1.1 million for the first six months
of 2001. The Commercial Platforms average yield on investment securities was
5.79% for the second quarter of 2002 as compared to 5.97% for the second
quarter of 2001. The Commercial Platforms average yield on investment
securities was 11.29% for the first six months of 2002 as compared to 13.77%
for the first six months of 2001. The decreases in interest income on
investment securities for the second quarter of 2002, as compared to the second
quarter of 2001, and for the first six months of 2002, as compared to the first
six months of 2001, were largely due to lower average balances resulting from
writedowns related to the revaluation of residual interests in franchise loan
securitizations during 2001.

Interest Expense

Deposits

Interest expense on our deposits was $13.5 million for the second quarter
of 2002 as compared to $39.5 million for the second quarter of 2001. Interest
expense on our deposits was $28.5 million for the first six months of 2002 as
compared to $83.4 million for the first six months of 2001. The average cost
of deposits was 1.79% for the second quarter of 2002 as compared to 4.44% for
the second quarter of 2001. The average cost of deposits was 1.87% for the
first six months of 2002 as compared to 4.64% for the first six months of 2001.

The decreases in interest expense on deposits for the second quarter of
2002, as compared to the second quarter of 2001, and for the first six months
of 2002, as compared to the first six 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, the
continued change in our deposit mix and the repricing of higher-cost retail
certificates of deposit at lower rates. The change in our deposit mix
consisted of a decrease in time deposits and an increase in transaction
accounts. Our transaction accounts, which are lower-cost deposits as opposed
to retail certificates of deposits, increased to 60.6% of total deposits at
June 30, 2002 from 53.2% at June 30, 2001. The decreases in average deposit
balances were 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.

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

|                                 |  |                            |           |              |  |                 |      |              |  |   |           |  |  |  |      |  
|-------------------------------- |  | -------------------------- | --------- | ------------ |  | --------------- | ---- | ------------ |  | - | --------- |  |  |  | ---- | -
|                                 |  | For the Three Months Ended
|                                 |  |                           
|                                 |  | June 30,                   |           | June 30,    
|                                 |  | 2002                       |           | 2001        
|                                 |  |                            |           |             
|                                 |  | Average Balance            |           | Average Rate |  | Average Balance |      | Average Rate
|                                 |  |                            |           |              |  |                 |      |             
|                                 |  | (Dollars in thousands)    
|Savings                          |  | $                          | 160,987   |              |  |                 | 0.62 | %            |  | $ | 140,436   |  |  |  | 1.47 | %
|Money Market                     |  |                            | 954,232   |              |  |                 | 1.64 |              |  |   | 1,186,504 |  |  |  | 4.29 |  
|Checking accounts                |  |                            | 780,850   |              |  |                 | 0.90 |              |  |   | 441,334   |  |  |  | 0.76 |  
|                                 |  |                            |           |              |  |                 |      |              |  |   |           |  |  |  |      |  
|Total transaction accounts       |  |                            | 1,896,069 |              |  |                 | 1.25 |              |  |   | 1,768,274 |  |  |  | 3.18 |  
|Retail certificates of deposit   |  |                            | 1,133,796 |              |  |                 | 2.70 |              |  |   | 1,680,276 |  |  |  | 5.58 |  
|Brokered certificates of deposit |  |                            |          |              |  |                 |     |              |  |   | 113,389   |  |  |  | 7.30 |  
|                                 |  |                            |           |              |  |                 |      |              |  |   |           |  |  |  |      |  
|Total deposits                   |  | $                          | 3,029,865 |              |  |                 | 1.79 | %            |  | $ | 3,561,939 |  |  |  | 4.44 | %
|                                 |  |                            |           |              |  |                 |      |              |  |   |           |  |  |  |      |  

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|                                 |  |                          |           |              |  |                 |      |              |  |   |           |  |  |  |      |  
|-------------------------------- |  | ------------------------ | --------- | ------------ |  | --------------- | ---- | ------------ |  | - | --------- |  |  |  | ---- | -
|                                 |  | For the Six Months Ended
|                                 |  |                         
|                                 |  | June 30,                 |           | June 30,    
|                                 |  | 2002                     |           | 2001        
|                                 |  |                          |           |             
|                                 |  | Average Balance          |           | Average Rate |  | Average Balance |      | Average Rate
|                                 |  |                          |           |              |  |                 |      |             
|                                 |  | (Dollars in thousands)  
|Savings                          |  | $                        | 161,352   |              |  |                 | 0.51 | %            |  | $ | 136,689   |  |  |  | 1.50 | %
|Money Market                     |  |                          | 1,030,169 |              |  |                 | 1.71 |              |  |   | 1,141,178 |  |  |  | 4.29 |  
|Checking accounts                |  |                          | 736,149   |              |  |                 | 0.85 |              |  |   | 437,279   |  |  |  | 1.13 |  
|                                 |  |                          |           |              |  |                 |      |              |  |   |           |  |  |  |      |  
|Total transaction accounts       |  |                          | 1,927,670 |              |  |                 | 1.28 |              |  |   | 1,715,146 |  |  |  | 3.26 |  
|Retail certificates of deposit   |  |                          | 1,150,656 |              |  |                 | 2.85 |              |  |   | 1,753,231 |  |  |  | 5.76 |  
|Brokered certificates of deposit |  |                          |          |              |  |                 |     |              |  |   | 154,213   |  |  |  | 7.24 |  
|                                 |  |                          |           |              |  |                 |      |              |  |   |           |  |  |  |      |  
|Total deposits                   |  | $                        | 3,078,326 |              |  |                 | 1.87 | %            |  | $ | 3,622,590 |  |  |  | 4.64 | %
|                                 |  |                          |           |              |  |                 |      |              |  |   |           |  |  |  |      |  

Borrowings

Interest expense on our borrowings was $5.5 million for the second quarter
of 2002 as compared to $14.9 million for the second quarter of 2001. Interest
expense on our borrowings was $11.1 million for the first six months of 2002 as
compared to $33.0 million for the first six months of 2001. The average cost
of borrowings was 7.49% for the second quarter of 2002 as compared to 6.76% for
the second quarter of 2001. The average cost of borrowings was 7.73% for the
first six months of 2002 as compared to 6.89% for the first six months of 2001.
In accordance with GAAP, these amounts exclude the expense associated with our
Capital Securities. The decreases in interest expense on borrowings for the
second quarter of 2002, as compared to the second quarter of 2001, and for the
first six months of 2002, as compared to the first six months of 2001, were
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 six months of 2002. The increases in
borrowing costs were primarily attributable to changes in our borrowings mix.

The following tables illustrate the changes in net interest income due to
changes in the rate and volume of our interest-earning assets and
interest-bearing liabilities for the three- and six-month periods ended June
30, 2002 as compared to the three- and six-month periods ended June 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 June 30, 2002 vs. 2001
|                    |                            |   |                                                  
|                    |                            |   | Rate                                              |         | Volume   |   | Total   
|                    |                            |   | Variance                                          |         | Variance |   | Variance
|                    |                            |   |                                                   |         |          |   |         
|                    |                            |   | (Dollars in thousands)                           
|Interest income:    |                            |   |                                                   |         |          |   |          |         |   |   |         |        
|                    | Loans and leases           |   | $                                                 | (9,287  | )        |   | $        | (10,342 | ) |   | $       | (19,629 | )
|                    | Mortgage-backed securities |   |                                                   | (3,096  | )        |   |          | (5,296  | ) |   |         | (8,392  | )
|                    | Investment securities      |   |                                                   | (2,160  | )        |   |          | (1,431  | ) |   |         | (3,591  | )
|                    |                            |   |                                                   |         |          |   |          |         |   |   |         |        
|                    |                            |   | (14,543                                           | )       |          |   | (17,069  | )       |   |   | (31,612 | )      
|                    |                            |   |                                                   |         |          |   |          |         |   |   |         |        
|Interest expense:   |                            |   |                                                   |         |          |   |          |         |   |   |         |        
|                    | Deposits                   |   |                                                   | (20,735 | )        |   |          | (5,189  | ) |   |         | (25,924 | )
|                    | Borrowings                 |   |                                                   | 1,815   |          |   |          | (11,206 | ) |   |         | (9,391  | )
|                    |                            |   |                                                   |         |          |   |          |         |   |   |         |        
|                    |                            |   | (18,920                                           | )       |          |   | (16,395  | )       |   |   | (35,315 | )      
|                    |                            |   |                                                   |         |          |   |          |         |   |   |         |        
|Net interest income |                            | $ | 4,377                                             |         |          | $ | (674     | )       |   | $ | 3,703   |        
|                    |                            |   |                                                   |         |          |   |          |         |   |   |         |        

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|                    |                            |   |                                                 |         |          |   |          |         |   |   |         |         |  
|------------------- | -------------------------- | - | ----------------------------------------------- | ------- | -------- | - | -------- | ------- | - | - | ------- | ------- | -
|                    |                            |   | For the Six Months Ended June 30, 2002 vs. 2001
|                    |                            |   |                                                
|                    |                            |   | Rate                                            |         | Volume   |   | Total   
|                    |                            |   | Variance                                        |         | Variance |   | Variance
|                    |                            |   |                                                 |         |          |   |         
|                    |                            |   | (Dollars in thousands)                         
|Interest income:    |                            |   |                                                 |         |          |   |          |         |   |   |         |        
|                    | Loans and leases           |   | $                                               | (20,364 | )        |   | $        | (25,144 | ) |   | $       | (45,508 | )
|                    | Mortgage-backed securities |   |                                                 | (6,293  | )        |   |          | (10,763 | ) |   |         | (17,056 | )
|                    | Investment securities      |   |                                                 | (6,774  | )        |   |          | (3,040  | ) |   |         | (9,814  | )
|                    |                            |   |                                                 |         |          |   |          |         |   |   |         |        
|                    |                            |   | (33,431                                         | )       |          |   | (38,947  | )       |   |   | (72,378 | )      
|                    |                            |   |                                                 |         |          |   |          |         |   |   |         |        
|Interest expense:   |                            |   |                                                 |         |          |   |          |         |   |   |         |        
|                    | Deposits                   |   |                                                 | (40,553 | )        |   |          | (14,290 | ) |   |         | (54,843 | )
|                    | Borrowings                 |   |                                                 | 4,605   |          |   |          | (26,503 | ) |   |         | (21,898 | )
|                    |                            |   |                                                 |         |          |   |          |         |   |   |         |        
|                    |                            |   | (35,948                                         | )       |          |   | (40,793  | )       |   |   | (76,741 | )      
|                    |                            |   |                                                 |         |          |   |          |         |   |   |         |        
|Net interest income |                            | $ | 2,517                                           |         |          | $ | 1,846    |         |   | $ | 4,363   |        
|                    |                            |   |                                                 |         |          |   |          |         |   |   |         |        

Provision for Losses on Loans and Leases

The provision for losses on loans and leases for the second quarter of
2002 was $3.6 million as compared to $52.4 million for the second quarter of
2001. The provision for losses on loans and leases for the first six months of
2002 was $8.5 million as compared to $59.7 million for the first six 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.

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

|                    |  |                            |       |          |  |   |        | 
|------------------- |  | -------------------------- | ----- | -------- |  | - | ------ | 
|                    |  | For the Three Months Ended
|                    |  |                           
|                    |  | June 30,                   |       | June 30,
|                    |  | 2002                       |       | 2001    
|                    |  |                            |       |         
|                    |  | (Dollars in thousands)    
|Retail Platform     |  | $                          | 494   |          |  | $ | 1,600  | 
|Commercial Platform |  |                            | 3,106 |          |  |   | 50,833 | 
|                    |  |                            |       |          |  |   |        | 
|Total               |  | $                          | 3,600 |          |  | $ | 52,433 | 
|                    |  |                            |       |          |  |   |        | 

|                    |  |                          |       |          |  |   |        | 
|------------------- |  | ------------------------ | ----- | -------- |  | - | ------ | 
|                    |  | For the Six Months Ended
|                    |  |                         
|                    |  | June 30,                 |       | June 30,
|                    |  | 2002                     |       | 2001    
|                    |  |                          |       |         
|                    |  | (Dollars in thousands)  
|Retail Platform     |  | $                        | (53   | )        |  | $ | 5,609  | 
|Commercial Platform |  |                          | 8,553 |          |  |   | 54,124 | 
|                    |  |                          |       |          |  |   |        | 
|Total               |  | $                        | 8,500 |          |  | $ | 59,733 | 
|                    |  |                          |       |          |  |   |        | 

Noninterest Income

Noninterest income for the second quarter of 2002 was $25.4 million as
compared to $8.1 million for the second quarter of 2001. Noninterest income
for the first six months of 2002 was $51.6 million as compared to $50.2 million
for the first six months of 2001. Excluding net gains or losses on sales of
assets and liabilities, noninterest income for the second quarter and the first
six months of 2002 were $25.2 million and $51.0 million, respectively, as
compared to $30.8 million and $62.3 million for the second quarter and first
six 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 and lower loan
servicing income in the Commercial Platform. The Commercial Platforms loan

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servicing income was primarily impacted by the sale of BVFMAC during 2001.
The following tables illustrate noninterest income (loss), by platform, for
the periods indicated:

|                    |  |                            |        |          |  |   |         |  
|------------------- |  | -------------------------- | ------ | -------- |  | - | ------- | -
|                    |  | For the Three Months Ended
|                    |  |                           
|                    |  | June 30,                   |        | June 30,
|                    |  | 2002                       |        | 2001    
|                    |  |                            |        |         
|                    |  | (Dollars in thousands)    
|Retail Platform     |  | $                          | 23,175 |          |  | $ | 28,708  |  
|Commercial Platform |  |                            | 2,225  |          |  |   | (20,657 | )
|                    |  |                            |        |          |  |   |         |  
|Total               |  | $                          | 25,400 |          |  | $ | 8,051   |  
|                    |  |                            |        |          |  |   |         |  

|                    |  |                          |        |          |  |   |         |  
|------------------- |  | ------------------------ | ------ | -------- |  | - | ------- | -
|                    |  | For the Six Months Ended
|                    |  |                         
|                    |  | June 30,                 |        | June 30,
|                    |  | 2002                     |        | 2001    
|                    |  |                          |        |         
|                    |  | (Dollars in thousands)  
|Retail Platform     |  | $                        | 47,975 |          |  | $ | 60,661  |  
|Commercial Platform |  |                          | 3,607  |          |  |   | (10,503 | )
|                    |  |                          |        |          |  |   |         |  
|Total               |  | $                        | 51,582 |          |  | $ | 50,158  |  
|                    |  |                          |        |          |  |   |         |  

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 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 second quarter of 2002 were
$30.5 million as compared to $44.7 million for the second quarter of 2001.
General and administrative expenses for the first six months of 2002 were $61.3
million as compared to $80.1 million for the first six months of 2001.
Excluding special mention items, as discussed below, the decreases in general
and administrative expenses for the second quarter of 2002, as compared to the
second quarter of 2001, and for the first six months of 2002, as compared to
the first six 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

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nonrecurring in nature. There were no special mention items included in
general and administrative expenses for the first six months of 2002.

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 prices, $2.4 million related to the prepayment of Federal
Home Loan Bank advances and $2.4 million in legal and professional fees related
to the implementation of a new strategic plan. There were no special mention
items included in general and administrative expenses for the first quarter of
2001.

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
|                               |  |                           
|                               |  | June 30,                   |        | June 30,
|                               |  | 2002                       |        | 2001    
|                               |  |                            |        |         
|                               |  | (Dollars in thousands)    
|Retail Platform                |  | $                          | 22,504 |          |  | $ | 27,238 | 
|Commercial Platform            |  |                            | 2,731  |          |  |   | 7,406  | 
|                               |  |                            |        |          |  |   |        | 
|Subtotal                       |  |                            | 25,235 |          |  |   | 34,644 | 
|Indirect
corporate overhead(1) |  |                            | 5,301  |          |  |   | 10,062 | 
|                               |  |                            |        |          |  |   |        | 
|Total                          |  | $                          | 30,536 |          |  | $ | 44,706 | 
|                               |  |                            |        |          |  |   |        | 

|                               |  |                          |        |          |  |   |        | 
|------------------------------ |  | ------------------------ | ------ | -------- |  | - | ------ | 
|                               |  | For the Six Months Ended
|                               |  |                         
|                               |  | June 30,                 |        | June 30,
|                               |  | 2002                     |        | 2001    
|                               |  |                          |        |         
|                               |  | (Dollars in thousands)  
|Retail Platform                |  | $                        | 45,138 |          |  | $ | 50,034 | 
|Commercial Platform            |  |                          | 5,765  |          |  |   | 15,050 | 
|                               |  |                          |        |          |  |   |        | 
|Subtotal                       |  |                          | 50,903 |          |  |   | 65,084 | 
|Indirect corporate overhead(1) |  |                          | 10,425 |          |  |   | 15,039 | 
|                               |  |                          |        |          |  |   |        | 
|Total                          |  | $                        | 61,328 |          |  | $ | 80,123 | 
|                               |  |                          |        |          |  |   |        | 



---

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

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

|                                                                                                                  |  |                            |           |          |  |   |           |  
|----------------------------------------------------------------------------------------------------------------- |  | -------------------------- | --------- | -------- |  | - | --------- | -
|                                                                                                                  |  | For the Three Months Ended
|                                                                                                                  |  |                           
|                                                                                                                  |  | June 30,                   |           | June 30,
|                                                                                                                  |  | 2002                       |           | 2001    
|                                                                                                                  |  |                            |           |         
|                                                                                                                  |  | (Dollars in thousands)    
|General and administrative expenses                                                                               |  | $                          | 30,536    |          |  | $ | 44,706    |  
|Average total assets, including auto-related
securitized assets                                                   |  | $                          | 3,955,434 |          |  | $ | 5,022,054 |  
|                                                                                                                  |  |                            |           |          |  |   |           |  
|Annualized general and administrative expenses to
average total assets, including auto-related
securitized assets |  |                            | 3.09      | %        |  |   | 3.56      | %
|                                                                                                                  |  |                            |           |          |  |   |           |  

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|                                                                                                                  |  |                          |           |          |  |   |           |  
|----------------------------------------------------------------------------------------------------------------- |  | ------------------------ | --------- | -------- |  | - | --------- | -
|                                                                                                                  |  | For the Six Months Ended
|                                                                                                                  |  |                         
|                                                                                                                  |  | June 30,                 |           | June 30,
|                                                                                                                  |  | 2002                     |           | 2001    
|                                                                                                                  |  |                          |           |         
|                                                                                                                  |  | (Dollars in thousands)  
|General and administrative expenses                                                                               |  | $                        | 61,328    |          |  | $ | 80,123    |  
|Average total assets, including auto-related
securitized assets                                                   |  | $                        | 4,010,205 |          |  | $ | 5,185,124 |  
|                                                                                                                  |  |                          |           |          |  |   |           |  
|Annualized general and administrative expenses
to average total assets, including auto-related
securitized assets |  |                          | 3.06      | %        |  |   | 3.09      | %
|                                                                                                                  |  |                          |           |          |  |   |           |  

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

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

|                                    |  |                            |        |          |  |   |         |  
|----------------------------------- |  | -------------------------- | ------ | -------- |  | - | ------- | -
|                                    |  | For the Three Months Ended
|                                    |  |                           
|                                    |  | June 30,                   |        | June 30,
|                                    |  | 2002                       |        | 2001    
|                                    |  |                            |        |         
|                                    |  | (Dollars in thousands)    
|General and administrative
expenses |  | $                          | 30,536 |          |  | $ | 44,706  |  
|Operating revenues, as defined      |  | $                          | 44,355 |          |  | $ | 43,820  |  
|                                    |  |                            |        |          |  |   |         |  
|Efficiency ratio                    |  |                            | 68.8   | %        |  |   | 102.0   | %
|                                    |  |                            |        |          |  |   |         |  
|                                    |  |                            |        |          |  |   |         |  
|                                    |  | For the Six Months Ended  
|                                    |  |                           
|                                    |  | June 30,                   |        | June 30,
|                                    |  | 2002                       |        | 2001    
|                                    |  |                            |        |         
|                                    |  | (Dollars in thousands)    
|General and administrative
expenses |  | $                          | 61,328 |          |  | $ | 80,123  |  
|Operating revenues, as defined      |  | $                          | 88,393 |          |  | $ | 101,130 |  
|                                    |  |                            |        |          |  |   |         |  
|Efficiency ratio                    |  |                            | 69.4   | %        |  |   | 79.2    | %
|                                    |  |                            |        |          |  |   |         |  

Revaluation of Franchise-Related Assets

There was no revaluation of franchise-related assets during the first six
months of 2002. The revaluation of certain franchise-related assets resulted
in a $70.0 million pre-tax adjustment for the first six months of 2001. The
revaluation included a $31.7 million adjustment related to the sale of loans as
well as writedowns to other franchise-related assets. The writedowns included
$15.5 million in adjustments to servicing assets, $11.1 million in adjustments
to residual interests on securitizations, reflecting increasing delinquencies
and loss assumptions, and $5.0 million in adjustments to equity investments.

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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 second quarter of
2002 were $16.1 million as compared to $27.3 million for the second quarter of
2001. Leasing expenses were $31.1 million for the first six months of 2002 as
compared to $45.0 million for the first six 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 payment made to
Lendco Financial Services related to certain residual and credit incentives
pursuant to our purchase contract with Lendco. We ceased purchasing auto
leases in June 2000. Leasing expenses for the three- and six-month periods
ended June 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. At June 30, 2002 and December 31, 2001, the Company had net
impairment and additional monthly charges against its automobile operating
leases outstanding on those dates of $31.2 million and $32.7 million,
respectively.

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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 1,772 additional vehicles of
its 14,986 vehicles would be considered impaired at June 30, 2002 and therefore
subject to a possible impairment charge. At June 30, 2002, a total of 7,541
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 $2.6
million for the second quarter of 2002 as compared to $2.3 million for the
second quarter of 2001. Dividend expense on the Capital Securities was $5.2
million for the first six months of 2002 as compared to $4.6 million for the
first six 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 have not received approval to disburse the quarterly
dividends. As a result, pursuant to the terms of the Capital Securities, we
have deferred distributions until such time as approval can be obtained. We
fully intend to continue to seek such approval; however, we cannot predict when
approval may be obtained. During this deferral period, distributions to which
holders are entitled will continue to accrue at an annual rate of 9.76% of the
liquidation amount of $25 per Capital Security, plus accumulated additional
distributions at the same rate, compounded quarterly, on any unpaid
distributions (to the extent permitted by law). Holders of the Capital
Securities at the time the distribution of dividends is resumed will receive
the cumulative deferred distributions plus the cumulative interest thereon.
Deferred dividends and interest, which were fully accrued, were $19.2 million
at June 30, 2002 as compared to $14.1 million at December 31, 2001.

Real Estate Owned

The net expense related to our real estate owned was $0.3 million for the
second quarter of 2002 as compared to $9,000 for the second quarter of 2001.
Net expense related to our real estate owned was $0.9 million for the first six
months of 2002 as compared to net income of $9,000 for the first six months of
2001. Additionally, we recorded $204,000 of provision for losses on real
estate owned during the first quarter of 2002. The increases in expenses and
provision related to real estate owned, as compared to the respective prior
periods, were primarily due to increases in real estate owned activity,
primarily representing foreclosed franchise properties.

Income Taxes

The Company recorded tax benefits of $3.7 million and $5.6 million for the
second quarter and the first six months of 2002, respectively. The tax benefit
for the first six months of 2002 included a tax benefit of $1.6 million on a
pre-tax loss of $2.8 million and a tax benefit of $4.0 million related to the
loss incurred on the 2001 stock sale by Bay View Bank of the legal entity Bay
View Franchise Mortgage Acceptance Company. The Company recorded no tax
benefit for this loss in its 2001 financial statements. The $4.0 million tax
benefit was a result of a change in federal tax regulation that occurred in the
first quarter of 2002 allowing the Company to deduct a portion of the loss
associated with the sale of BVFMAC. The effective tax rate used in computing
the $1.6 million tax benefit for the first six months of 2002 was 57.7%. This
effective tax rate differs from the statutory rate primarily due to the
realization of nondeductible goodwill upon the anticipated execution of the
Companys tax planning strategy in the second half of the year. For the second

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quarter and the first six months of 2001, the Company recorded a $59.5 million
tax benefit at a 36.5% effective tax rate.
For the first quarter of 2001, the Company recorded no tax benefit on the
pre-tax loss of $8.0 million because, at that time, management could not
determine that it was more likely than not that the Company would realize
benefits in the amount of these additional deferred tax assets.

The Company believes it will be able to fully utilize its $178.7 million
of net deferred tax assets at June 30, 2002. In order to fully utilize its net
operating loss carryforwards prior to their expiration dates, however, the
Company will be required to execute certain tax planning strategies identified
in 2001, primarily the sale of a portion of the Banks retail branches, as discussed
elsewhere herein, during the second half of 2002.

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 is 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. As a result, the Company eliminated the $26.0
million valuation allowance against its gross deferred tax assets during 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.

There are significant assumptions underlying the valuation of the
Companys net deferred tax assets that are susceptible to possible change in
the near term. In the event the Company cannot implement the tax planning
strategies contemplated above, the Company may not be able to utilize its net
operating loss carryforwards prior to their expiration date. In addition, 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 establish a valuation allowance against that
portion of its net deferred tax assets estimated not to be realizable.

Non-GAAP Performance Measures

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

Normalized Net Interest Income and Net Interest Margin

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

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expenses, including depreciation expense and impairment charges, are
reflected as noninterest expenses, in accordance with GAAP.

Normalized net interest income for second quarter of 2002 was $37.9
million as compared to $36.5 million for the second quarter of 2001.
Normalized net interest income for the first six months of 2002 was $76.1
million as compared to $76.0 million for the first six months of 2001.
Normalized net interest margin for the second quarter of 2002 was 4.35% as
compared to 3.13% for the second quarter of 2001. Normalized net interest
margin for the first six months of 2002 was 4.33% as compared to 3.17% for the
first six months of 2001. The following tables illustrate normalized net
interest income and net interest margin, by platform, for the periods
indicated:

|                    |  |                            |        |               |  |                        |      |            |  |   |        |  |  |  |      |  
|------------------- |  | -------------------------- | ------ | ------------- |  | ---------------------- | ---- | ---------- |  | - | ------ |  |  |  | ---- | -
|                    |  | For the Three Months Ended
|                    |  |                           
|                    |  | June 30, 2002              |        | June 30, 2001
|                    |  |                            |        |              
|                    |  | Normalized                 |        | Normalized    |  | Normalized             |      | Normalized
|                    |  | Net                        |        | Net           |  | Net                    |      | Net       
|                    |  | Interest                   |        | Interest      |  | Interest               |      | Interest  
|                    |  | Income                     |        | Margin        |  | Income                 |      | Margin    
|                    |  |                            |        |               |  |                        |      |           
|                    |  |                            |        |               |  | (Dollars in thousands) |      |            |  |  
|Retail Platform     |  | $                          | 17,211 |               |  |                        | 3.63 | %          |  | $ | 16,168 |  |  |  | 2.40 | %
|Commercial Platform |  |                            | 20,698 |               |  |                        | 5.21 |            |  |   | 20,299 |  |  |  | 4.14 |  
|                    |  |                            |        |               |  |                        |      |            |  |   |        |  |  |  |      |  
|Total               |  | $                          | 37,909 |               |  |                        | 4.35 | %          |  | $ | 36,467 |  |  |  | 3.13 | %
|                    |  |                            |        |               |  |                        |      |            |  |   |        |  |  |  |      |  

|                    |  |                          |        |               |  |                        |      |            |  |   |        |  |  |  |      |  
|------------------- |  | ------------------------ | ------ | ------------- |  | ---------------------- | ---- | ---------- |  | - | ------ |  |  |  | ---- | -
|                    |  | For the Six Months Ended
|                    |  |                         
|                    |  | June 30, 2002            |        | June 30, 2001
|                    |  |                          |        |              
|                    |  | Normalized               |        | Normalized    |  | Normalized             |      | Normalized
|                    |  | Net                      |        | Net           |  | Net                    |      | Net       
|                    |  | Interest                 |        | Interest      |  | Interest               |      | Interest  
|                    |  | Income                   |        | Margin        |  | Income                 |      | Margin    
|                    |  |                          |        |               |  |                        |      |           
|                    |  |                          |        |               |  | (Dollars in thousands) |      |            |  |  
|Retail Platform     |  | $                        | 34,811 |               |  |                        | 3.63 | %          |  | $ | 32,934 |  |  |  | 2.41 | %
|Commercial
Platform |  |                          | 41,302 |               |  |                        | 5.17 |            |  |   | 43,082 |  |  |  | 4.19 |  
|                    |  |                          |        |               |  |                        |      |            |  |   |        |  |  |  |      |  
|Total               |  | $                        | 76,113 |               |  |                        | 4.33 | %          |  | $ | 76,016 |  |  |  | 3.17 | %
|                    |  |                          |        |               |  |                        |      |            |  |   |        |  |  |  |      |  

The increases in normalized net interest income for the second quarter of
2002, as compared to the second quarter of 2001, and for the first six months
of 2002, as compared to the first six months of 2001, were largely due to
higher normalized net interest margin partially offset by lower average
interest-earning asset balances. The increases in normalized net interest
margin continue to be attributable to lower overall funding costs, including
lower deposit costs and funding costs associated with the declining balance of
our auto-related operating lease assets, partially offset by lower asset
yields. The decreases in average interest-earning assets were primarily due to
asset sales and payoffs throughout 2001 and 2002, as previously discussed,
combined with the declining balance of our auto-related operating lease assets.
The following tables illustrate average interest-earning assets, including our
auto-related operating lease assets, by platform, for the periods indicated:

|                    |  |                                   |           |          |  |   |           | 
|------------------- |  | --------------------------------- | --------- | -------- |  | - | --------- | 
|                    |  | Average Interest-Earning         
|                    |  | Assets for the Three Months Ended
|                    |  |                                  
|                    |  | June 30,                          |           | June 30,
|                    |  | 2002                              |           | 2001    
|                    |  |                                   |           |         
|                    |  | (Dollars in thousands)           
|Retail Platform     |  | $                                 | 1,898,106 |          |  | $ | 2,682,723 | 
|Commercial Platform |  |                                   | 1,587,735 |          |  |   | 1,948,223 | 
|                    |  |                                   |           |          |  |   |           | 
|Total               |  | $                                 | 3,485,841 |          |  | $ | 4,630,946 | 
|                    |  |                                   |           |          |  |   |           | 

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|                    |  |                                 |           |          |  |   |           | 
|------------------- |  | ------------------------------- | --------- | -------- |  | - | --------- | 
|                    |  | Average Interest-Earning       
|                    |  | Assets for the Six Months Ended
|                    |  |                                
|                    |  | June 30,                        |           | June 30,
|                    |  | 2002                            |           | 2001    
|                    |  |                                 |           |         
|                    |  | (Dollars in thousands)         
|Retail Platform     |  | $                               | 1,921,013 |          |  | $ | 2,706,616 | 
|Commercial Platform |  |                                 | 1,598,844 |          |  |   | 2,041,634 | 
|                    |  |                                 |           |          |  |   |           | 
|Total               |  | $                               | 3,519,857 |          |  | $ | 4,748,250 | 
|                    |  |                                 |           |          |  |   |           | 

The decreases in the Retail Platforms average interest-earning assets,
including our auto-related operating lease assets, reflects the impact of the
sales of loans, mortgage-backed and other investment securities
during 2001 and 2002 as well as the declining balance of our
auto-related operating lease assets, as previously disclosed or discussed
elsewhere herein. The decreases in the Commercial Platforms average
interest-earning assets reflects franchise loan and factored receivables sales
during 2001 and 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, including our auto-related operating lease assets, by
platform, as of the dates indicated:

|                    |  |                        |           |              |  |          |           |  |  |   |           | 
|------------------- |  | ---------------------- | --------- | ------------ |  | -------- | --------- |  |  | - | --------- | 
|                    |  | At                     |           | At           |  | At      
|                    |  | June 30,               |           | December 31, |  | June 30,
|                    |  | 2002                   |           | 2001         |  | 2001    
|                    |  |                        |           |              |  |         
|                    |  | (Dollars in thousands)
|Retail Platform     |  | $                      | 1,840,591 |              |  | $        | 1,793,499 |  |  | $ | 1,931,453 | 
|Commercial Platform |  |                        | 1,503,585 |              |  |          | 1,541,310 |  |  |   | 1,833,502 | 
|                    |  |                        |           |              |  |          |           |  |  |   |           | 
|Total               |  | $                      | 3,344,176 |              |  | $        | 3,334,809 |  |  | $ | 3,764,955 | 
|                    |  |                        |           |              |  |          |           |  |  |   |           | 

The increase in the Retail Platforms interest-earning assets, including
our auto-related operating lease assets, at June 30, 2002, as compared to
December 31, 2001, was primarily due to the redeployment of non
interest-earning cash at December 31, 2001 into interest-earning short-term
investments during the first quarter of 2002 combined with purchases of
investment securities during the first six months of 2002. These were
partially offset by the sale of our mortgage-backed securities and the
declining balance of our auto-related operating lease assets, as previously
discussed. The decrease in the Commercial Platforms interest-earning assets
was primarily due to the sale of Bay View Funding and its factored receivables
and the franchise loan sales and payoffs.

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Balance Sheet Analysis

Our total assets were $3.8 billion at June 30, 2002, as compared to $4.0
billion at December 31, 2001. The slight decrease in total assets was
primarily due to a decline in cash and short-term investments, resulting from
our strategy to reduce higher-cost certificates of deposit, loan sales and
paydowns, sales of investment securities and the run-off of our operating lease
assets. These were partially offset by loan originations and purchases of
investment securities during the first six months of 2002.

Securities

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

|                                            |                                          |   |               |         |                   |   |                        |         |       |   |         |         |  |   |         |         | 
|------------------------------------------- | ---------------------------------------- | - | ------------- | ------- | ----------------- | - | ---------------------- | ------- | ----- | - | ------- | ------- |  | - | ------- | ------- | 
|                                            |                                          |   | June 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           |         |                   | $ | 706                    |         |       | $ | 580     |         |  | $ | 761     |        
|Federal Home Loan Bank callable notes       |                                          |   |              |         |                   |   |                       |         |       |   | 10,000  |         |  |   | 9,988   |        
|Asset-backed securities                     |                                          |   | 33,805        |         |                   |   | 33,847                 |         |       |   | 14,129  |         |  |   | 14,096  |        
|Trust preferred securities                  |                                          |   | 49,747        |         |                   |   | 49,575                 |         |       |   | 48,082  |         |  |   | 47,907  |        
|Other investment securities                 |                                          |   | 13,540        |         |                   |   | 13,598                 |         |       |   | 12,287  |         |  |   | 12,354  |        
|Retained interests in securitizations       |                                          |   | 14,599        |         |                   |   | 14,599                 |         |       |   | 13,874  |         |  |   | 13,874  |        
|                                            |                                          |   |               |         |                   |   |                        |         |       |   |         |         |  |   |         |        
|Total investment securities                 |                                          |   | 112,271       |         |                   |   | 112,325                |         |       |   | 98,952  |         |  |   | 98,980  |        
|                                            |                                          |   |               |         |                   |   |                        |         |       |   |         |         |  |   |         |        
|Mortgage-backed securities:                 |                                          |   |               |         |                   |   |                        |         |       |   |         |         |  |   |         |        
|                                            | Fannie Mae                               |   |               | 25,375  |                   |   |                        | 25,983  |       |   |         | 89,083  |  |   |         | 90,256  | 
|                                            | Freddie Mac                              |   |               | 40,131  |                   |   |                        | 40,372  |       |   |         | 73,850  |  |   |         | 73,670  | 
|                                            | Government National Mortgage Association |   |               | 2,432   |                   |   |                        | 2,422   |       |   |         | 2,837   |  |   |         | 2,835   | 
|                                            | Collateralized mortgage obligations      |   |               | 102,548 |                   |   |                        | 102,565 |       |   |         | 112,247 |  |   |         | 112,130 | 
|                                            |                                          |   |               |         |                   |   |                        |         |       |   |         |         |  |   |         |        
|Total mortgage-backed securities            |                                          |   | 170,486       |         |                   |   | 171,342                |         |       |   | 278,017 |         |  |   | 278,891 |        
|                                            |                                          |   |               |         |                   |   |                        |         |       |   |         |         |  |   |         |        
|Total securities available-for-sale         |                                          | $ | 282,757       |         |                   | $ | 283,667                |         |       | $ | 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, we do not intend to hold any
securities as held-to-maturity in the foreseeable future.

We sold $91.4 million of mortgage-backed securities during the first six
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 six 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 maturity of

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

Loans and Leases

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

|                                                        |                                   |                                                                                 |           |                        |         |              |           |           |         | 
|------------------------------------------------------- | --------------------------------- | ------------------------------------------------------------------------------- | --------- | ---------------------- | ------- | ------------ | --------- | --------- | ------- | 
|                                                        |                                   |                                                                                 |           | June 30,               |         | December 31,
|                                                        |                                   |                                                                                 |           | 2002                   |         | 2001        
|                                                        |                                   |                                                                                 |           |                        |         |             
|                                                        |                                   |                                                                                 |           | (Dollars in thousands)
|Loans and leases receivable:                            |                                   |                                                                                 |           |                        |         |              |           |          
|                                                        | Retail Platform:                  |                                                                                 |           |                        |         |              |           |           |        
|                                                        |                                   | Single-family mortgage loans                                                    |           | $                      | 174,776 |              |           | $         | 277,288 | 
|                                                        |                                   | High loan-to-value home equity loans and lines of credit                        |           |                        | 12,288  |              |           |           | 13,835  | 
|                                                        |                                   | Other home equity loans and lines of credit                                     |           |                        | 149,254 |              |           |           | 130,784 | 
|                                                        |                                   | Auto loans(1)                                                                   |           |                        | 502,016 |              |           |           | 444,607 | 
|                                                        |                                   |                                                                                 |           |                        |         |              |           |          
|                                                        | Total retail loans                |                                                                                 |           | 838,334                |         |              |           | 866,514   |        
|                                                        | Commercial Platform:              |                                                                                 |           |                        |         |              |           |           |        
|                                                        |                                   | Multi-family mortgage loans                                                     |           |                        | 847,136 |              |           |           | 697,339 | 
|                                                        |                                   | Commercial mortgage loans                                                       |           |                        | 230,857 |              |           |           | 289,093 | 
|                                                        |                                   | Franchise loans                                                                 |           |                        | 83,007  |              |           |           | 119,464 | 
|                                                        |                                   | Asset-based loans, syndicated loans, factored receivables
and commercial leases |           |                        | 223,239 |              |           |           | 310,070 | 
|                                                        |                                   | Business loans                                                                  |           |                        | 85,249  |              |           |           | 79,883  | 
|                                                        |                                   |                                                                                 |           |                        |         |              |           |          
|                                                        | Total commercial loans and leases |                                                                                 |           | 1,469,488              |         |              |           | 1,495,849 |        
|Premiums and discounts and deferred fees and costs, net |                                   |                                                                                 | 17,990    |                        |         |              | 14,215    |          
|                                                        |                                   |                                                                                 |           |                        |         |              |           |          
|Gross loans and leases held-for-investment              |                                   |                                                                                 | 2,325,812 |                        |         |              | 2,376,578 |          
|Allowance for loan and lease losses                     |                                   |                                                                                 | (38,945   | )                      |         |              | (49,791   | )        
|                                                        |                                   |                                                                                 |           |                        |         |              |           |          
|Loans and leases held-for-investment, net               |                                   |                                                                                 | 2,286,867 |                        |         |              | 2,326,787 |          
|Loans and leases held-for-sale(2)                       |                                   |                                                                                 | 30,478    |                        |         |              | 40,608    |          
|                                                        |                                   |                                                                                 |           |                        |         |              |           |          
|Loans and leases receivable                             |                                   | $                                                                               | 2,317,345 |                        |         | $            | 2,367,395 |          
|                                                        |                                   |                                                                                 |           |                        |         |              |           |          



---

|(1) |  | Amounts exclude auto-related operating lease assets reported separately
from loans and leases totaling $266.7 million at
June 30, 2002 and $339.3 million at December 31, 2001.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Includes loans with an unpaid principal balance of $37.3 million at June
30, 2002 and $48.5 million at December 31, 2001.                                                      

The decrease in loans and leases receivable at June 30, 2002, as compared
to December 31, 2001, was primarily due to the sale of $25.3 million in
factored receivables related to the sale of Bay View Funding, the sale of $6.7
million in franchise loans, 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 six months of 2002. These were offset by strong multi-family mortgage
and consumer loan originations.

Our exposure to higher-risk franchise assets was further reduced during
the quarter as the unpaid principal balance of our franchise loan portfolio
decreased to $125 million at June 30, 2002 from $174 million at December 31,
2001. Net of mark-to-market valuation adjustments, the net book value of our
franchise loan portfolio was $113.5 million at June 30, 2002 as compared to
$160.1 million at December 31, 2001. Loans held-for-sale totaled $30.5 million
as of June 30, 2002, all of which represented franchise loans held-for-sale.

46



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

|                             |                    |                                                                                 |   |                            |        |          |   |         |        | 
|---------------------------- | ------------------ | ------------------------------------------------------------------------------- | - | -------------------------- | ------ | -------- | - | ------- | ------ | 
|                             |                    |                                                                                 |   | For the Three Months Ended
|                             |                    |                                                                                 |   |                           
|                             |                    |                                                                                 |   | June 30,                   |        | June 30,
|                             |                    |                                                                                 |   | 2002                       |        | 2001    
|                             |                    |                                                                                 |   |                            |        |         
|                             |                    |                                                                                 |   | (Dollars in thousands)    
|Loan and lease originations: |                    |                                                                                 |   |                            |        |          |   |        
|                             |                    | Home equity loans and lines of credit                                           |   | $                          | 30,582 |          |   | $       | 21,464 | 
|                             |                    | Auto loans                                                                      |   |                            | 86,635 |          |   |         | 80,041 | 
|                             |                    | Multi-family and commercial mortgage loans                                      |   |                            | 77,504 |          |   |         | 74,542 | 
|                             |                    | Asset-based loans, syndicated loans, factored receivables and
commercial leases |   |                            | 8,539  |          |   |         | 33,894 | 
|                             |                    | Business loans                                                                  |   |                            | 15,753 |          |   |         | 14,457 | 
|                             |                    |                                                                                 |   |                            |        |          |   |         |        | 
|                             | Total originations |                                                                                 | $ | 219,013                    |        |          | $ | 224,398 |       
|                             |                    |                                                                                 |   |                            |        |          |   |        

|                             |                    |                                                                                 |   |                          |         |          |   |         |         | 
|---------------------------- | ------------------ | ------------------------------------------------------------------------------- | - | ------------------------ | ------- | -------- | - | ------- | ------- | 
|                             |                    |                                                                                 |   | For the Six Months Ended
|                             |                    |                                                                                 |   |                         
|                             |                    |                                                                                 |   | June 30,                 |         | June 30,
|                             |                    |                                                                                 |   | 2002                     |         | 2001    
|                             |                    |                                                                                 |   |                          |         |         
|                             |                    |                                                                                 |   | (Dollars in thousands)  
|Loan and lease originations: |                    |                                                                                 |   |                          |         |          |   |        
|                             |                    | Home equity loans and lines of credit                                           |   | $                        | 54,460  |          |   | $       | 37,902  | 
|                             |                    | Auto loans                                                                      |   |                          | 169,037 |          |   |         | 153,164 | 
|                             |                    | Multi-family and commercial mortgage loans                                      |   |                          | 190,683 |          |   |         | 95,732  | 
|                             |                    | Asset-based loans, syndicated loans, factored receivables and
commercial leases |   |                          | 16,791  |          |   |         | 48,182  | 
|                             |                    | Business loans                                                                  |   |                          | 22,584  |          |   |         | 25,264  | 
|                             |                    |                                                                                 |   |                          |         |          |   |         |         | 
|                             | Total originations |                                                                                 | $ | 453,555                  |         |          | $ | 360,244 |        
|                             |                    |                                                                                 |   |                          |         |          |   |        

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:

|                            |  |                        |        |              |  |   |        | 
|--------------------------- |  | ---------------------- | ------ | ------------ |  | - | ------ | 
|                            |  | June 30,               |        | December 31,
|                            |  | 2002                   |        | 2001        
|                            |  |                        |        |             
|                            |  | (Dollars in thousands)
|Nonaccrual loans and leases |  | $                      | 55,021 |              |  | $ | 79,722 | 
|Real estate owned           |  |                        | 4,611  |              |  |   | 9,462  | 
|Other repossessed assets    |  |                        | 741    |              |  |   | 633    | 
|                            |  |                        |        |              |  |   |        | 
|Nonperforming assets        |  | $                      | 60,373 |              |  | $ | 89,817 | 
|                            |  |                        |        |              |  |   |        | 

The decrease in total nonperforming assets at June 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 and a
decrease in nonaccruing franchise loans. Nonperforming

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assets excluding
franchise-related assets were $25.1 million at June 30, 2002, as compared to
$20.2 million at December 31, 2001, while non-franchise nonaccrual loans and leases were $26.6
million at June 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
|                          |                                                                                 |   |                                             
|                          |                                                                                 |   | June 30, 2002                                |        | December 31, 2001
|                          |                                                                                 |   |                                              |        |                  
|                          |                                                                                 |   |                                              |        |                   |  | (Dollars in thousands) |      |   |   |       
|Retail Platform:          |                                                                                 |   |                                              |        |                   |  |                        |      |   |   |        |        |  |  |      |     
|                          | Single-family mortgage loans                                                    |   | $                                            | 3,016  |                   |  |                        | 0.08 | % |   | $      | 2,455  |  |  |      | 0.06 | %
|                          | Home equity loans and lines of credit                                           |   |                                              | 335    |                   |  |                        | 0.01 |   |   |        | 470    |  |  |      | 0.01 |  
|                          | Auto loans                                                                      |   |                                              | 825    |                   |  |                        | 0.02 |   |   |        | 1,034  |  |  |      | 0.03 |  
|                          |                                                                                 |   |                                              |        |                   |  |                        |      |   |   |        |        |  |  |      |     
|Total retail platform     |                                                                                 |   | 4,176                                        |        |                   |  | 0.11                   |      |   |   | 3,959  |        |  |  | 0.10 |     
|                          |                                                                                 |   |                                              |        |                   |  |                        |      |   |   |        |        |  |  |      |      |  
|Commercial Platform:      |                                                                                 |   |                                              |        |                   |  |                        |      |   |   |        |        |  |  |      |     
|                          | Multi-family mortgage loans                                                     |   |                                              | 78     |                   |  |                        |     |   |   |        | 67     |  |  |      |     |  
|                          | Commercial real estate loans                                                    |   |                                              | 5,739  |                   |  |                        | 0.15 |   |   |        | 7,822  |  |  |      | 0.19 |  
|                          | Franchise loans                                                                 |   |                                              | 35,323 |                   |  |                        | 0.94 |   |   |        | 69,583 |  |  |      | 1.74 |  
|                          | Asset-based loans, syndicated loans,
factored receivables
and commercial leases |   |                                              | 14,447 |                   |  |                        | 0.39 |   |   |        | 8,003  |  |  |      | 0.20 |  
|                          | Business loans                                                                  |   |                                              | 610    |                   |  |                        | 0.02 |   |   |        | 383    |  |  |      | 0.01 |  
|                          |                                                                                 |   |                                              |        |                   |  |                        |      |   |   |        |        |  |  |      |     
|Total commercial platform |                                                                                 |   | 56,197                                       |        |                   |  | 1.50                   |      |   |   | 85,858 |        |  |  | 2.14 |     
|                          |                                                                                 |   |                                              |        |                   |  |                        |      |   |   |        |        |  |  |      |     
|Total                     |                                                                                 | $ | 60,373                                       |        |                   |  | 1.61                   | %    |   | $ | 89,817 |        |  |  | 2.24 | %   
|                          |                                                                                 |   |                                              |        |                   |  |                        |      |   |   |        |        |  |  |      |     

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

|                    |  |                                             |        |                   |  |                        |      |   |  |   |        |  |  |  |      |  
|------------------- |  | ------------------------------------------- | ------ | ----------------- |  | ---------------------- | ---- | - |  | - | ------ |  |  |  | ---- | -
|                    |  | Loans and Leases Delinquent 60 Days or More
|                    |  | as a Percentage of Gross Loans and Leases  
|                    |  |                                            
|                    |  | June 30, 2002                               |        | December 31, 2001
|                    |  |                                             |        |                  
|                    |  |                                             |        |                   |  | (Dollars in thousands) |      |   |  |  
|Retail Platform     |  | $                                           | 5,815  |                   |  |                        | 0.25 | % |  | $ | 7,802  |  |  |  | 0.32 | %
|Commercial Platform |  |                                             | 54,321 |                   |  |                        | 2.30 |   |  |   | 62,221 |  |  |  | 2.58 |  
|                    |  |                                             |        |                   |  |                        |      |   |  |   |        |  |  |  |      |  
|Total               |  | $                                           | 60,136 |                   |  |                        | 2.55 | % |  | $ | 70,023 |  |  |  | 2.90 | %
|                    |  |                                             |        |                   |  |                        |      |   |  |   |        |  |  |  |      |  

Allowance for Loan and Lease Losses (ALLL)

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 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.

48



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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 June 30, 2002 was $38.9 million
as compared to $49.8 million at December 31, 2001. The decrease in the
allowance for losses on loans and leases was primarily related to net
charge-offs in excess of loan loss provision expense during the three- and
six-month periods ended June 30, 2002.

The allowance for loan and lease losses at June 30, 2002 represents 1.67%
of gross loans and leases held-for-investment. Within this allowance, $10.7
million is specifically allocated to the total franchise portfolio and
represents 12.86% of that portfolio. As such, this particular segment of our
total loan portfolio, while relatively small, contains the most exposure to
potential credit loss. This is a discontinued lending operation and the size
of this portfolio declined significantly since December 31, 2000. The balance
of the allowance of $28.2 million, including $2.7 million of unallocated
reserves, represents 1.26% of the remaining loan portfolio. In addition,
within the held-for-investment portfolio of franchise loans is another $4.3
million of mark-to-market valuation adjustments on loans transferred from
held-for-sale to held-for-investment which is available to absorb losses on
these loans.

49



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The allowance for loan and lease losses is maintained at a level that we
believe is appropriate based on our estimate of probable losses in the
portfolio of loans and leases held-for-investment. This assessment is based on
many factors including prevailing economic conditions, identified losses within the
portfolio, historical loss experience, asset concentrations, levels and trends
in classified assets, loan and lease delinquencies and industry data.

The following table illustrates the allowance for loan and lease losses as
a percentage of nonperforming assets and gross loans and leases, excluding
loans and leases held-for-sale:

|                                           |  |                                          |           |                   |  |        |      |         |  |   |           |  |  |  |      |  
|------------------------------------------ |  | ---------------------------------------- | --------- | ----------------- |  | ------ | ---- | ------- |  | - | --------- |  |  |  | ---- | -
|                                           |  | Allowance for Loan and Lease Losses as a
|                                           |  | Percentage of Specified Assets          
|                                           |  |                                         
|                                           |  | June 30, 2002                            |           | December 31, 2001
|                                           |  |                                          |           |                  
|                                           |  | (Dollars in thousands)                  
|                                           |  | Assets                                   |           | Percent           |  | Assets |      | Percent
|                                           |  |                                          |           |                   |  |        |      |        
|Nonperforming assets                       |  | $                                        | 60,373    |                   |  |        | 65   | %       |  | $ | 89,817    |  |  |  | 55   | %
|Gross loans and leases held-for-investment |  | $                                        | 2,325,812 |                   |  |        | 1.67 | %       |  | $ | 2,376,578 |  |  |  | 2.10 | %

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

|                                                         |                                                                                 |   |                        |        |            |   |              |         |   |   |         |         |  
|-------------------------------------------------------- | ------------------------------------------------------------------------------- | - | ---------------------- | ------ | ---------- | - | ------------ | ------- | - | - | ------- | ------- | -
|                                                         |                                                                                 |   | Three Months           |        | Six Months |   | Year        
|                                                         |                                                                                 |   | Ended                  |        | Ended      |   | Ended       
|                                                         |                                                                                 |   | June 30,               |        | June 30,   |   | December 31,
|                                                         |                                                                                 |   | 2002                   |        | 2002       |   | 2001        
|                                                         |                                                                                 |   |                        |        |            |   |             
|                                                         |                                                                                 |   | (Dollars in thousands)
|Beginning balance                                        |                                                                                 | $ | 46,151                 |        |            | $ | 49,791       |         |   | $ | 73,738  |        
|Transfers of loans to held-for-sale                      |                                                                                 |   | (1,836                 | )      |            |   | (1,836       | )       |   |   | (53,606 | )      
|Charge-offs:                                             |                                                                                 |   |                        |        |            |   |              |         |   |   |         |        
|                                                         | Mortgage                                                                        |   |                        |       |            |   |              |        |   |   |         | (1,488  | )
|                                                         | Home equity loans and lines of credit                                           |   |                        | (265   | )          |   |              | (836    | ) |   |         | (10,296 | )
|                                                         | Auto                                                                            |   |                        | (1,300 | )          |   |              | (2,372  | ) |   |         | (3,809  | )
|                                                         | Asset-based loans, syndicated loans, factored
receivables and commercial leases |   |                        | (4,567 | )          |   |              | (6,150  | ) |   |         | (9,397  | )
|                                                         | Franchise                                                                       |   |                        | (3,824 | )          |   |              | (10,063 | ) |   |         | (24,197 | )
|                                                         | Business                                                                        |   |                        | (53    | )          |   |              | (66     | ) |   |         | (2,509  | )
|                                                         |                                                                                 |   |                        |        |            |   |              |         |   |   |         |        
|                                                         |                                                                                 |   | (10,009                | )      |            |   | (19,487      | )       |   |   | (51,696 | )      
|Recoveries:                                              |                                                                                 |   |                        |        |            |   |              |         |   |   |         |        
|                                                         | Mortgage                                                                        |   |                        |       |            |   |              |        |   |   |         | 283     |  
|                                                         | Home equity loans and lines of credit                                           |   |                        | 143    |            |   |              | 325     |   |   |         | 4,602   |  
|                                                         | Auto                                                                            |   |                        | 558    |            |   |              | 857     |   |   |         | 1,526   |  
|                                                         | Asset-based loans, syndicated loans, factored
receivables and commercial leases |   |                        | 289    |            |   |              | 715     |   |   |         | 2,479   |  
|                                                         | Franchise                                                                       |   |                        | 48     |            |   |              | 48      |   |   |         | 196     |  
|                                                         | Business                                                                        |   |                        | 1      |            |   |              | 32      |   |   |         | 379     |  
|                                                         |                                                                                 |   |                        |        |            |   |              |         |   |   |         |        
|                                                         |                                                                                 |   | 1,039                  |        |            |   | 1,977        |         |   |   | 9,465   |        
|Net charge-offs                                          |                                                                                 |   | (8,970                 | )      |            |   | (17,510      | )       |   |   | (42,231 | )      
|Provision for losses on loans and leases                 |                                                                                 |   | 3,600                  |        |            |   | 8,500        |         |   |   | 71,890  |        
|                                                         |                                                                                 |   |                        |        |            |   |              |         |   |   |         |        
|Ending balance                                           |                                                                                 | $ | 38,945                 |        |            | $ | 38,945       |         |   | $ | 49,791  |        
|                                                         |                                                                                 |   |                        |        |            |   |              |         |   |   |         |        
|Net charge-offs to average loans and leases (annualized) |                                                                                 |   | 1.47                   | %      |            |   | 1.44         | %       |   |   | 1.51    | %      
|                                                         |                                                                                 |   |                        |        |            |   |              |         |   |   |         |        

During 2001 and the first six months of 2002, the allowance for loan and
lease losses decreased as we transferred and subsequently sold loans from our
held-for-investment portfolio to our held-for-sale portfolio. During 2001, the
transfer of loans from held-for-investment to held-for-sale resulted in a $53.6
million reduction to the allowance for loan and

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lease losses 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 six months of 2002, the transfer
of loans from held-for-investment to held-for-sale resulted in a $1.8
million reduction in the allowance for loan and lease losses related to the
sale and payoff of franchise and other commercial loans.

Deposits

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

|                                                       |  |                        |           |                   |      |        |      |       |  |   |           |   |  |  |      |  
|------------------------------------------------------ |  | ---------------------- | --------- | ----------------- | ---- | ------ | ---- | ----- |  | - | --------- | - |  |  | ---- | -
|                                                       |  | June 30, 2002          |           | December 31, 2001
|                                                       |  |                        |           |                  
|                                                       |  | Amount                 |           | Rates             |      | Amount |      | Rates
|                                                       |  |                        |           |                   |      |        |      |      
|                                                       |  | (Dollars in thousands)
|Transaction accounts                                   |  | $                      | 1,837,291 |                   |      |        | 1.29 | %     |  | $ | 1,950,699 |   |  |  | 1.48 | %
|Retail certificates of deposit                         |  |                        | 1,195,510 |                   |      |        | 2.70 |       |  |   | 1,284,228 |   |  |  | 3.53 |  
|                                                       |  |                        |           |                   |      |        |      |       |  |   |           |   |  |  |      |  
|Total                                                  |  | $                      | 3,032,801 |                   |      |        | 1.85 | %     |  | $ | 3,234,927 |   |  |  | 2.29 | %
|                                                       |  |                        |           |                   |      |        |      |       |  |   |           |   |  |  |      |  
|Transaction accounts as a
percentage of total deposits |  |                        |           |                   | 60.6 | %      |      |       |  |   | 60.3      | %
|                                                       |  |                        |           |                   |      |        |      |       |  |   |           |   |  |  |      |  

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 June
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:

|                        |  |                        |         |                   |  |   |         | 
|----------------------- |  | ---------------------- | ------- | ----------------- |  | - | ------- | 
|                        |  | June 30, 2002          |         | December 31, 2001
|                        |  |                        |         |                  
|                        |  | (Dollars in thousands)
|Subordinated Notes, net |  | $                      | 149,664 |                   |  | $ | 149,632 | 
|Other borrowings        |  |                        | 95,993  |                   |  |   | 137,536 | 
|Capital Securities      |  |                        | 90,000  |                   |  |   | 90,000  | 
|                        |  |                        |         |                   |  |   |         | 
|Total                   |  | $                      | 335,657 |                   |  | $ | 377,168 | 
|                        |  |                        |         |                   |  |   |         | 

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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. We have not received approval to disburse the quarterly
dividend since the third quarter of 2000. Pursuant to the terms of the Capital
Securities, we have deferred distributions on the debentures. During this
deferral period, distributions to which holders are entitled will continue to
accrue at an annual rate of 9.76% of the liquidation amount of $25 per Capital
Security, plus accumulated additional distributions at the same rate,
compounded quarterly, on any unpaid distributions (to the extent permitted by
law). We fully intend to continue to seek approval to distribute the dividend
at the earliest available opportunity as the interest on these unpaid dividends
is one of our highest borrowing costs.

At June 30, 2002, we had liquidity levels with cash and cash equivalents
in excess of $463 million, representing approximately 15% of total deposits.

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. Stockholders equity
totaled $342.1 million at June 30, 2002 as compared to $336.2 million at
December 31, 2001. This increase was largely due to our earnings during the
first six months of 2002. Tangible stockholders equity, which excludes
intangible assets, was $225.6 million at June 30, 2002 as compared to $212.6
million at December 31, 2001. This increase was primarily due to earnings for
the first six months of 2002 and the conversion of $6.5 million of goodwill to
tangible equity related to the sale of Bay View Funding.

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

|                              |  |                           |          |              |  |   |          |  
|----------------------------- |  | ------------------------- | -------- | ------------ |  | - | -------- | -
|                              |  | At                        |          | At          
|                              |  | June 30,                  |          | December 31,
|                              |  | 2002                      |          | 2001        
|                              |  |                           |          |             
|                              |  | (Dollars in thousands,   
|                              |  | except per share amounts)
|Stockholders equity          |  | $                         | 342,071  |              |  | $ | 336,187  |  
|Intangible assets             |  |                           | (116,426 | )            |  |   | (123,573 | )
|                              |  |                           |          |              |  |   |          |  
|Tangible stockholders equity |  | $                         | 225,645  |              |  | $ | 212,614  |  
|                              |  |                           |          |              |  |   |          |  
|Book value per share          |  | $                         | 5.46     |              |  | $ | 5.37     |  
|                              |  |                           |          |              |  |   |          |  
|Tangible book value per share |  | $                         | 3.60     |              |  | $ | 3.40     |  
|                              |  |                           |          |              |  |   |          |  

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

|                                                                                                              |  |                        |         |              |  |   |          |  
|------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | ------------ |  | - | -------- | -
|                                                                                                              |  | Six Months             |         | Year        
|                                                                                                              |  | Ended                  |         | Ended       
|                                                                                                              |  | June 30,               |         | December 31,
|                                                                                                              |  | 2002                   |         | 2001        
|                                                                                                              |  |                        |         |             
|                                                                                                              |  | (Dollars in thousands)
|Beginning tangible stockholders equity                                                                       |  | $                      | 212,614 |              |  | $ | 162,913  |  
|Net income (loss)                                                                                             |  |                        | 2,832   |              |  |   | (101,170 | )
|Net proceeds from issuance of common stock                                                                    |  |                        |        |              |  |   | 108,000  |  
|Net proceeds from issuance of preferred stock                                                                 |  |                        |        |              |  |   | 26,400   |  
|Monetization of goodwill related to sale of Bay View Funding                                                  |  |                        | 6,484   |              |  |   |         |  
|Expense realized on stock options with below market
exercise price                                            |  |                        | 1,343   |              |  |   | 5,219    |  
|Amortization of intangible assets                                                                             |  |                        | 662     |              |  |   | 11,280   |  
|Exercise of stock options, conversion of stock warrants and
distribution of directors retirement plan shares |  |                        | 628     |              |  |   | 166      |  
|Change in debt of ESOP                                                                                        |  |                        | 1,071   |              |  |   |          |  
|Other                                                                                                         |  |                        | 11      |              |  |   | (194     | )
|                                                                                                              |  |                        |         |              |  |   |          |  
|Ending tangible stockholders equity                                                                          |  | $                      | 225,645 |              |  | $ | 212,614  |  
|                                                                                                              |  |                        |         |              |  |   |          |  

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

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

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

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Bay View Banks regulatory capital levels at June 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   |  | $                      | 238,478 |             |  |             | 6.86  | %     |  | $       | 139,147 |                  |  |  | 4.00 | % |  | $ | 173,934 |  |  |  | 5.00  | %
|Tier 1 risk-based |  | $                      | 238,478 |             |  |             | 8.33  | %     |  | $       | 114,577 |                  |  |  | 4.00 | % |  | $ | 171,866 |  |  |  | 6.00  | %
|Total risk-based  |  | $                      | 324,367 |             |  |             | 11.32 | %     |  | $       | 229,155 |                  |  |  | 8.00 | % |  | $ | 286,443 |  |  |  | 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 minimum ratio of qualifying
total risk-based capital to risk-adjusted assets of 8% and a minimum ratio of
Tier 1 capital to risk-adjusted assets of 4%. In addition to the risk-based
guidelines, federal banking regulators require banking organizations to
maintain a minimum amount of Tier 1 capital to total average assets, referred
to as the leverage ratio. For a banking organization rated in the highest of
the five categories used by regulators to rate banking organizations, the
minimum leverage ratio of Tier 1 capital to total average assets is 3%. For
organizations not rated in the highest of the five categories, the regulations
advise an additional cushion of at least 100 basis points. In addition to
these uniform risk-based capital guidelines and leverage ratios that apply
across the industry, the regulators have the discretion to set individual
minimum capital requirements for specific institutions at rates significantly
above the minimum guidelines and ratios.

At June 30, 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   |  | $                      | 156,863 |             |  |        | 4.46 | %     |  | $       | 140,647 |  |  |  | 4.00 | %
|Tier 1 risk-based |  | $                      | 156,863 |             |  |        | 5.05 | %     |  | $       | 124,298 |  |  |  | 4.00 | %
|Total risk-based  |  | $                      | 274,195 |             |  |        | 8.82 | %     |  | $       | 248,596 |  |  |  | 8.00 | %

Share Repurchase Program

Our outstanding shares of common stock were 62,697,831 at June 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 six
months of 2002. In November 1999, all of our treasury shares were reissued in
conjunction with the acquisition of FMAC. At June 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.

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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 June 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. We have not prescribed any value to our interest rate caps at
June 30, 2002. The fair value of our interest rate caps was $5,000 at December
31, 2001.

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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.

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The following table illustrates our combined asset and liability repricing as
of June 30, 2002:

|                                                   |                                |   |                  |           |             |   |                        |         |       |   |         |       |  |   |          |     |  |   |           |           | 
|-------------------------------------------------- | ------------------------------ | - | ---------------- | --------- | ----------- | - | ---------------------- | ------- | ----- | - | ------- | ----- |  | - | -------- | --- |  | - | --------- | --------- | 
|                                                   |                                |   | 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                               |                                | $ | 471,395          |           |             | $ | 50,317                 |         |       | $ | 11,989  |       |  | $ | 16,107   |     |  | $ | 549,808   |          
|Mortgage-backed
securities and loans and leases(1) |                                |   | 2,038,274        |           |             |   | 521,463                |         |       |   | 177,682 |       |  |   | 56,949   |     |  |   | 2,794,368 |          
|                                                   |                                |   |                  |           |             |   |                        |         |       |   |         |       |  |   |          |     |  |   |           |          
|Total interest rate sensitive assets               |                                | $ | 2,509,669        |           |             | $ | 571,780                |         |       | $ | 189,671 |       |  | $ | 73,056   |     |  | $ | 3,344,176 |          
|                                                   |                                |   |                  |           |             |   |                        |         |       |   |         |       |  |   |          |     |  |   |           |          
|Liabilities:                                       |                                |   |                  |           |             |   |                        |         |       |   |         |       |  |   |          |     |  |   |           |          
|Deposits:                                          |                                |   |                  |           |             |   |                        |         |       |   |         |       |  |   |          |     |  |   |           |          
|                                                   | Transaction accounts(2)        |   | $                | 1,101,007 |             |   | $                      | 736,284 |       |   | $       |      |  |   | $        |    |  |   | $         | 1,837,291 | 
|                                                   | Retail certificates of deposit |   |                  | 1,058,815 |             |   |                        | 133,485 |       |   |         | 2,646 |  |   |          | 564 |  |   |           | 1,195,510 | 
|Borrowings(3)                                      |                                |   | 24,752           |           |             |   | 54,178                 |         |       |   | 17,063  |       |  |   | 239,664  |     |  |   | 335,657   |          
|                                                   |                                |   |                  |           |             |   |                        |         |       |   |         |       |  |   |          |     |  |   |           |          
|Total interest rate sensitive liabilities          |                                | $ | 2,184,574        |           |             | $ | 923,947                |         |       | $ | 19,709  |       |  | $ | 240,228  |     |  | $ | 3,368,458 |          
|                                                   |                                |   |                  |           |             |   |                        |         |       |   |         |       |  |   |          |     |  |   |           |          
|Repricing gap-positive (negative)                  |                                | $ | 325,095          |           |             | $ | (352,167               | )       |       | $ | 169,962 |       |  | $ | (167,172 | )   |  | $ | (24,282   | )        
|                                                   |                                |   |                  |           |             |   |                        |         |       |   |         |       |  |   |          |     |  |   |           |          
|Cumulative repricing gap-positive (negative)       |                                | $ | 325,095          |           |             | $ | (27,072                | )       |       | $ | 142,890 |       |  | $ | (24,282  | )   |  |  
|                                                   |                                |   |                  |           |             |   |                        |         |       |   |         |       |  |   |          |     |  |   |           |          



---

|(1) |  | Based on assumed annual prepayment and amortization rates, which
approximate our historical experience.                    
|--- |  | ---------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | We estimate transaction accounts repricing based on historical trends and
the nature and types of our transaction accounts.
|   
|   
|   
|   
|(3) |  | Includes Capital Securities.                                                                                               

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The simulation model discussed above also provides our Risk Management
Committee with the ability to simulate our net interest income. In order to
measure, at June 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 June 30, 2002, our net interest
income was within our policy guidelines given a hypothetical increase in market
interest rates, while falling outside our policy guidelines given a
hypothetical decrease in market rates. Actions taken by the Federal Reserve to
lower the fed funds rate during the past year have reduced market interest
rates to unusually low levels, and allowed us to reduce rates paid on our
deposits to below 2% and, for certain transaction accounts, below 1%. From
these interest rate levels, further hypothetical decreases in market interest
rates continue to reduce yields on our interest-earning assets, while further
declines in the cost of our deposits are limited by their very low existing
rates. This causes our net interest income to decline more rapidly under the
hypothetical decreases in market interest rates. 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                                 |  | $                   | 123,132 |         |  | $       | 128,590 |         |  | $       | 140,335 |    |  | $ | 140,268 |    |  | $ | 141,337 |   
|% Increase (decrease) from
base net interest income |  |                     | (10.04  | )%      |  |         | (6.06   | )%      |  |         | 2.52    | %  |  |   | 2.47    | %  |  |   | 3.25    | % 
|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. Actual amounts may differ from those projections set forth above should
market conditions vary from the underlying assumptions used.

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##### Table of Contents






PART II. OTHER INFORMATION

Item 1. Legal Proceedings



| |  |  | On June 25, 2002, Bay View Capital Corporation and Bay View 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
(BVFMAC).                                                                                                                                                                                                                                                                                                     
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Throughout 1999, the former Franchise Mortgage Acceptance Company
(FMAC) 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.                                                                                                                                                                                                                                                                                                                                       

Item 2. Changes in Securities



| |  |  | None
| |  |  | ----

Item 3. Defaults Upon Senior Securities



| |  |  | None
| |  |  | ----

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



| |    |  | At the annual meeting of our stockholders, held April 25, 2002, the
stockholders considered the following proposals:
| | -- |  | --------------------------------------------------------------------------------------------------------------------
|
| | I. |  | The election of two directors of Bay View Capital
Corporation:                                                      
|
| |    |  | The following were re-elected:
John R. McKean
Roger K. Easley                                                       

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

|                |  |     |            |                     |  |  |         | 
|--------------- |  | --- | ---------- | ------------------- |  |  | ------- | 
|                |  | For |            | Withheld or Against
|                |  |     |            |                    
|John R. McKean  |  |     | 56,067,014 |                     |  |  | 705,298 | 
|Roger K. Easley |  |     | 56,080,994 |                     |  |  | 691,318 | 

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 June 26,
2002 during the three months ended June 30, 2002:                                                                                                                                                                    
|       |  |                                                                                                                                                                                                                                                                                           
|       |  | The Registrant and its wholly-owned subsidiary, Bay View Bank, entered
into a settlement with JP Morgan Chase Bank 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.
|       |  |                                                                                                                                                                                                                                                                                           
|b(ii)  |  | The Registrant filed the following report on Form 8-K dated
June 14, 2002 during the three months ended June 30, 2002:                                                                                                                                                                    
|       |  |                                                                                                                                                                                                                                                                                           
|       |  | On June 12, 2002, the Registrant engaged Deloitte & Touche LLP as the
Companys principal accountants for the fiscal year ending December
31, 2002.                                                                                                                                       
|       |  |                                                                                                                                                                                                                                                                                           
|b(iii) |  | The Registrant filed the following report on Form 8-K dated May 31,
2002 during the three months ended June 30, 2002:                                                                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                                           
|       |  | On May 23, 2002, the Registrant terminated Arthur Andersen LLP as the
Companys principal accountants and was evaluating alternatives for
its principal accountants for the fiscal year ending December 31,
2002.                                                                         

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|                     |  |                                         |                                                                                                 | 
|-------------------- |  | --------------------------------------- | ----------------------------------------------------------------------------------------------- | 
|                     |  | BAY VIEW CAPITAL CORPORATION
Registrant
|DATE: August 7, 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 June
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: August 7, 2002

61