BAY VIEW CAPITAL CORP - 10-Q Quarterly Report

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

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 March 31, 2003


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

		OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to
Commission file number 001-14879

BAY VIEW CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)


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

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

Registrant’s telephone number, including area code (650) 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [X] No [ ]

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


Common Stock, Par Value $.01		Outstanding at April 30, 2003
(Title of Class)		63,647,590 shares

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		Consolidated Statements of Net Assets (Liquidation Basis)
		Consolidated Statement of Changes in Net Assets in Liquidation (Liquidation Basis)
		Consolidated Statement of Operations and Comprehensive Loss
		Consolidated Statement of Stockholders’ Equity (Going Concern Basis)
		Consolidated Statements of Cash Flows
		Notes to Consolidated Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II. OTHER INFORMATION
SIGNATURES
CERTIFICATIONS

FORM 10-Q
INDEX

BAY VIEW CAPITAL CORPORATION


		Page(s)

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Consolidated Statements of Net Assets (Liquidation Basis)	4
	Consolidated Statement of Changes in Net Assets in Liquidation (Liquidation Basis)	5
	Consolidated Statement of Operations and Comprehensive Loss	6-7
	Consolidated Statement of Stockholders’ Equity (Going Concern Basis)	8
	Consolidated Statements of Cash Flows	9-10
	Notes to Consolidated Financial Statements	11-18
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19-32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II. OTHER INFORMATION
	Other Information	34
	Signatures	35
	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	35

Forward-Looking Statements

This Form 10-Q contains forward-looking statements that describe the implementation and timing of the Plan of Dissolution and Stockholder Liquidity (the “Plan”) adopted by the stockholders of Bay View Capital Corporation (the “Company”) on October 3, 2002. These forward-looking statements are based on assumptions as of the date of this Form 10-Q and involve risks and uncertainties. Accordingly, the results of the Company’s dissolution and the timing and amounts of stockholder distributions may differ materially from those that the Company currently anticipates. The factors that may affect these forward-looking statements include the following:

• The distributions the Company proposes to make in the future to its stockholders are subject to a number of contingencies. The factors that could reduce the amounts ultimately distributed or that could cause a delay in making the distributions include the following:

• Until the dissolution of Bay View Bank, N.A. (the “Bank”) is completed later this year, a number of actions the Company and the Bank intend to take, including distributions to the Company’s stockholders, cannot be taken unless approvals are obtained from the Board of Governors of the Federal Reserve System (the “FRB”) in the case of the Company and the Office of the Comptroller of the Currency (the “OCC”) in the case of the Bank;

• Unforeseen delays in the disposition of the assets of the Company and the Bank and their formal dissolution may occur;

• The realization of the Company’s deferred tax assets could be less than the Company currently projects;

• The Company and the Bank may encounter difficulty in selling some of their assets, and certain assets may not be able to be sold for the prices the Company and the Bank currently anticipate;

• The Company and the Bank may not be able to discharge certain liabilities for the amounts the Company and the Bank currently estimate;

• The Company and the Bank may incur or discover presently unanticipated claims, liabilities or expenses;

• The Company’s ability to obtain commercial financing to fund the ongoing operations of our auto lending business, Bay View Acceptance Corporation (“BVAC”);

• The amounts the Bank is able to distribute to the Company and the amounts the Company is able to distribute to its stockholders could be adversely affected by the results of operations of the Company’s and the Bank’s remaining operations, particularly in the case of BVAC while the dissolution process is being implemented;

• These estimates of the distribution amounts include projections of future events and performance as distant as 2006 and, accordingly, are inherently subject to many uncertainties;

• The expenses of the disposition of assets and the dissolution proceeds may exceed the amounts currently estimated; and

• Court proceedings could restrict or delay distributions to stockholders if claimants or creditors satisfy the court that the amounts to be distributed by the Bank or the Company to stockholders are needed to provide for the payment of expenses and liabilities of the Company or the Bank; or, if the amounts ultimately required to discharge the expenses and liabilities of the Company or the Bank in full exceeds the value of the remaining assets of the Company or the Bank, respectively.

• The Company’s stockholders could be liable to the extent they receive distributions in the event the Company does not make adequate provision for all of its expenses and liabilities, including its contingent liabilities, as part of its dissolution.

As a result of the foregoing factors, there can be no assurance that the anticipated stockholder distributions from the implementation of the Plan will be consistent with those described in any forward-looking statements. Accordingly, no stockholder should place undue reliance on any forward-looking statements. The Company does not undertake, and specifically disclaims, any obligation to update any forward-looking statements and all forward-looking statements speak only as of the date made.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Bay View Capital Corporation and Subsidiaries

Consolidated Statements of Net Assets (Liquidation Basis)
(Unaudited)


		March 31, 2003		December 31, 2002

		(Dollars in thousands)
ASSETS
Cash and cash equivalents:
	Cash and due from depository institutions	$	30,847	$	71,611
	Short-term investments		50,083		151,684

			80,930		223,295
Securities available-for-sale:
	Investment securities		33,160		38,137
	Mortgage-backed securities		28,063		32,516
Loans and leases held-for-sale			231,495		311,014
Investment in operating lease assets, net			153,983		191,005
Investment in stock of the Federal Home Loan Bank of San Francisco			339		16,075
Investment in stock of the Federal Reserve Bank			13,659		13,659
Real estate owned, net			3,104		2,402
Premises and equipment, net			1,124		1,327
Repossessed vehicles			209		502
Income taxes, net			5,244		—
Other assets			43,893		45,613

Total assets		$	595,203	$	875,545

LIABILITIES
Deposits:
	Brokered certificates of deposit		—		224,189

			—		224,189
Other borrowings			46,261		61,969
Income taxes, net			—		8,646
Deferred gain			12,817		12,817
Other liabilities			14,737		23,907
Reserve for estimated costs during the period of liquidation			20,424		43,953

Total liabilities			94,239		375,481

Guaranteed Preferred Beneficial Interest in the Company’s Junior Subordinated Debentures (“Capital Securities”)			90,000		90,000

Net assets in liquidation		$	410,964	$	410,064

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

Bay View Capital Corporation and Subsidiaries

Consolidated Statement of Changes in Net Assets in Liquidation (Liquidation Basis)
(Unaudited)


	For the Three
	Months Ended
	March 31, 2003

	(Dollars in thousands)
Net assets in liquidation, December 31, 2002	$	410,064
Pre-tax income from operations		1,415
Changes in estimated values of assets and liabilities		(1,664	)
Income tax benefit		802

Change in net income from operations		553
Dividends on Capital Securities		(2,251	)
Other changes in net assets in liquidation		2,598

Net assets in liquidation, March 31, 2003	$	410,964

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

Bay View Capital Corporation and Subsidiaries

Consolidated Statement of Operations and Comprehensive Loss
(Unaudited)


		For the Three Months
		Ended
		March 31, 2002

		Going Concern Basis

		(Amounts in
		thousands, except per
		share amounts)
Interest income:
	Interest on loans and leases	$	46,471
	Interest on mortgage-backed securities		3,551
	Interest and dividends on investment securities		3,671

			53,693
Interest expense:
	Interest on deposits		15,002
	Interest on borrowings		1,832
	Interest on Subordinated Notes		3,715

			20,549
Net interest income			33,144
Provision for losses on loans and leases			4,900

Net interest income after provision for losses on loans and leases			28,244
Noninterest income:
	Leasing income		20,349
	Loan fees and charges		1,293
	Loan servicing income		205
	Account fees		1,936
	Sales commissions		1,840
	Gain on sale of assets and liabilities, net		332
	Other, net		227

			26,182
Noninterest expense:
	General and administrative		30,792
	Leasing expenses		15,007
	Real estate owned operations, net		540
	Provision for losses on real estate owned		204
	Amortization of intangible assets		331

			46,874
Income from operations			7,552
Income tax benefit			(1,935	)
Dividends on Capital Securities			2,573

Net income before cumulative effect of change in accounting principle			6,914
Cumulative effect of change in accounting principle, net of applicable taxes of $2.3 million			(18,920	)

Net loss		$	(12,006	)

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


		For the Three Months
		Ended
		March 31, 2002

		Going Concern Basis

		(Amounts in
		thousands, except per
		share amounts)
Basic earnings per share before cumulative effect of change in accounting principle		$	0.11
Cumulative effect of change in accounting principle, net			(0.30	)

Net basic loss per share		$	(0.19	)

Diluted earnings per share before cumulative effect of change in accounting principle		$	0.11
Cumulative effect of change in accounting principle, net			(0.30	)

Net diluted loss per share		$	(0.19	)

Weighted-average basic shares outstanding			62,668

Weighted-average diluted shares outstanding			63,124

Net loss		$	(12,006	)
Other comprehensive loss, net of tax:
	Change in unrealized gain on securities available-for-sale, net of tax benefit of $209 thousand		(297	)

Other comprehensive loss			(297	)

Total comprehensive loss		$	(12,303	)

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

Bay View Capital Corporation and Subsidiaries

Consolidated Statement of Stockholders’ Equity (Going Concern Basis)
(Unaudited)


	Number				Additional
	of Shares		Common		Paid-in		Accumulated			Treasury
	Issued		Stock		Capital		Deficit			Stock

	(Amounts in thousands, except per share amounts)
Balance at December 31, 2001		62,628	$	626	$	595,258	$	(258,047	)	$	(808	)
Exercise of stock options, including tax benefits		62		1		291		—			—
Distribution of director’s retirement plan shares		1		—		5		—			—
Exercise of stock warrants		1		—		4		—			—
Expense recognized on stock options with below market strike price		—		—		671		—			—
Change in unrealized gain on securities available-for-sale, net of tax		—		—		—		—			—
Change in debt of ESOP		—		—		—		—			—
Net income		—		—		—		6,914			—

Balance at March 31, 2002		62,692	$	627	$	596,229	$	(251,133	)	$	(808	)

[Additional columns below]

[Continued from above table, first column(s) repeated]

Unrealized

Gain on Minimum Debt of

Securities Pension Employee

Available-for- Liability Stock Total

Sale, Adjustment, Ownership Stockholders’

Net of Tax Net of Tax Plan Equity

(Amounts in thousands, except per share amounts)

Balance at December 31, 2001
$ 523 $ (294 ) $ (1,071 ) $ 336,187

Exercise of stock options, including tax benefits
— — — 292

Distribution of director’s retirement plan shares
— — — 5

Exercise of stock warrants
— — — 4

Expense recognized on stock options with below market strike price
— — — 671

Change in unrealized gain on securities available-for-sale, net of tax
(297 ) — — (297 )

Change in debt of ESOP
— — 1,071 1,071

Net income
— — — 6,914

Balance at March 31, 2002
$ 226 $ (294 ) $ — $ 344,847

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

Bay View Capital Corporation and Subsidiaries

Consolidated Statements of Cash Flows
(Unaudited)


		For the Three Months Ended

		March 31,			March 31,
		2003			2002

		(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) and certain changes in net assets in liquidation		$	(1,698	)	$	6,914
Adjustments to reconcile net income (loss) and certain changes in net assets in liquidation to net cash provided by operating activities:
	Amortization of intangible assets		—			331
	Net increase in loans and leases held-for-sale resulting from originations, net of repayments		(34,953	)		—
	Proceeds from sales of loans and leases held-for-sale		115,466			—
	Provision for losses on loans and leases and real estate owned		—			5,104
	Depreciation and amortization of premises and equipment		170			945
	Depreciation and amortization of investment in operating lease assets		8,055			12,716
	Accretion of retained interests in securitizations		(726	)		—
	Amortization of premiums, net of discount accretion		(1,540	)		2,793
	Gain on sale of assets and liabilities, net		(53	)		(332	)
	Increase in other assets		(3,317	)		(3,438	)
	Decrease in other liabilities		(17,816	)		(3,308	)
	Decrease in reserve for estimated costs during the period of liquidation		(22,529	)		—
	Adjustment for liquidation basis		1,664			—
	Other, net		384			2,692

Net cash provided by operating activities			43,107			24,417

CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans and leases held-for-investment resulting from originations, net of repayments			24,891			(13,660	)
Purchases of mortgage-backed securities			—			(39,201	)
Purchases of investment securities			—			(40,531	)
Principal payments on mortgage-backed securities			4,263			44,047
Principal payments on investment securities			2,797			5,642
Proceeds from sale of mortgage-backed securities available-for-sale			130			29,404
Proceeds from sale of investment securities available-for-sale			2,735			—
Proceeds from sale of real estate owned			—			2,493
Additions to premises and equipment			(25	)		(57	)
Decrease (increase) in investment in stock of the Federal Home Loan Bank of San Francisco			15,736			(363	)
Other, net			—			83

Net cash provided by (used in) investing activities			50,527			(12,143	)

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


			For the Three Months Ended

			March 31,			March 31,
			2003			2002

			(Dollars in thousands)
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in deposits			$	(224,189	)	$	(168,227	)
Repayment of other borrowings				(14,408	)		(21,811	)
Proceeds from issuance of common stock				2,598			301

		Net cash used in financing activities		(235,999	)		(189,737	)

Net decrease in cash and cash equivalents				(142,365	)		(177,463	)
Cash and cash equivalents at beginning of period				223,295			521,388

Cash and cash equivalents at end of period			$	80,930		$	343,925

Cash paid during the period for:
	Interest		$	4,857		$	23,092
	Income taxes		$	13,087		$	21
Supplemental non-cash investing and financing activities:
	Loans transferred to real estate owned		$	1,086		$	—

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

Bay View Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements
March 31, 2003
(Unaudited)

Note 1. Basis of Presentation

The information provided in the consolidated financial statements as of and for the three months ended March 31, 2003 reflects our adoption of liquidation basis accounting effective September 30, 2002 in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Liquidation basis accounting requires us to value our assets at their estimated net realizable values and our liabilities to include accruals for estimated costs associated with carrying out the Plan of Dissolution and Stockholder Liquidity (the “Plan”). The consolidated statement of operations and comprehensive loss for the three months ended March 31, 2002, the consolidated statement of stockholders’ equity for the three months ended March 31, 2002, and the consolidated statement of cash flows for the three months ended March 31, 2002 have been prepared using the historical cost (going concern) basis of accounting on which the Company had previously reported its financial position and results of operations.

The 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 (“BVAC”), a Nevada corporation; Bay View Commercial Finance Group, a California corporation; XBVBKRS, Inc., 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.

Through BVAC, the Bank continues to operate its auto finance business in 20 states. In 2003, we intend to transfer BVAC from the Bank to the Company, subject to regulatory approval. The Company believes this will allow for a full liquidation of the Bank while BVAC continues to originate new loans and expand geographically throughout the liquidation period ending September 2005. The Company intends to spin off BVAC to stockholders or sell it at the end of the liquidation period.

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 net assets in liquidation as of March 31, 2003, the changes in net assets in liquidation for the three-month period ended March 31, 2003, the results of our operations for the three-month period ended March 31, 2002, and cash flows for the three-month periods ended March 31, 2003 and 2002. These adjustments are primarily liquidation basis mark-to-market adjustments and expense accruals. 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 position and results of operations. These interim financial statements have been prepared in accordance with the instructions to Form 10-Q, and therefore do not include all of the necessary information and footnotes for a presentation in conformity with GAAP.

The information included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” was written assuming that you have read or have access to our 2002 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, 2002 and 2001 and Results of Operations for the years ended December 31, 2002, 2001 and 2000. Accordingly, only certain changes in financial condition and results of operations are discussed in this Form 10-Q. Furthermore, the interim financial results for the three-month period ended March 31, 2003 are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.

Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2003
(Unaudited)

Note 2. Plan of Dissolution and Stockholder Liquidity

On October 3, 2002, a special meeting of Bay View Capital Corporation’s stockholders was held to vote on the Company’s proposed Plan and the sale of the Bank’s retail banking assets to U.S. Bank, N.A. (“U.S. Bank”). Both of these proposals were approved by a majority of the common stockholders. As a result of these approvals and the close of the U.S. Bank transaction on November 1, 2002, we adopted liquidation basis accounting effective September 30, 2002 in accordance with GAAP. Accordingly, assets have been valued at their estimated net realizable values and liabilities include accruals for estimated costs associated with carrying out the Plan. In accordance with liquidation basis accounting, our stockholders’ equity was transferred to net assets in liquidation. Our net assets in liquidation totaled $411.0 million at March 31, 2003 or $6.41 in net assets in liquidation per outstanding share based on 64,120,863 diluted common shares in liquidation.

The Plan outlines the steps necessary to fully liquidate the Company. We completed the sale of the Bank’s retail banking assets to U.S. Bank on November 1, 2002. Our remaining assets are to be sold in an orderly manner and the liabilities and expenses are to be paid, including our outstanding debt and the outstanding debt of the Bank and the Capital Securities. Once these transactions have been completed, we intend to distribute the net proceeds of the asset sales to our stockholders.

For the quarter ended March 31, 2003, we recorded $1.6 million of net charges for additional liquidation valuation adjustments.

Under liquidation basis accounting, we have estimated future liabilities associated with carrying out the Plan. We have not reflected any future revenues and expenses of an operating nature, as such revenues and expenses will be recognized when realized.

Note 3. Earnings Per Share

Basic earnings per share are calculated by dividing net earnings or loss for the period by the weighted-average common shares outstanding for that period. There is no adjustment to the number of outstanding shares for potential dilutive instruments, such as stock options. Diluted earnings per share takes into account the potential dilutive impact of such instruments and uses the average share price for the period in determining the number of incremental shares to add to the weighted-average number of shares outstanding.

During the third quarter of 2002, we recorded $18.9 million in goodwill impairment charges, net of taxes, which was recognized as the cumulative effect of a change in accounting principle as of January 1, 2002. Accordingly, the results for the first quarter of 2002 were restated to reflect the adjustment.

Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2003
(Unaudited)

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


	For the Three
	Months Ended
	March 31, 2002

	(Amounts in
	thousands, except
	per share amounts)
Net income before cumulative effect of change in accounting principle	$	6,914
Cumulative effect of change in accounting principle, net of taxes of $2.3 million		(18,920	)

Net loss	$	(12,006	)

Weighted-average basic shares outstanding		62,668
Add: Dilutive potential common shares		456

Weighted-average diluted shares outstanding		63,124

Basic earnings per share before cumulative effect of change in accounting principle	$	0.11
Cumulative effect of change in accounting principle, net		(0.30	)

Net basic loss per share	$	(0.19	)

Diluted earnings per share before cumulative effect of change in accounting principle	$	0.11
Cumulative effect of change in accounting principle, net		(0.30	)

Net diluted loss per share	$	(0.19	)

Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2003
(Unaudited)

Note 4. Stock Options

As of March 31, 2003, we had five employee stock option plans and three non-employee director stock option plans. The employee stock option plans were as follows: the “Amended and Restated 1986 Stock Option and Incentive Plan,” the “Amended and Restated 1995 Stock Option and Incentive Plan,” the “1998-2000 Performance Stock Plan,” the “1999 FMAC Stock Option, Deferred Stock and Restricted Stock Plan,” and the “2001 Stock Option and Incentive Plan,” which authorize the issuance of 1,759,430, 2,500,000, 400,000, 270,576 and 3,200,000 shares of common stock, respectively. The non-employee director stock option plans were as follows: the “Amended and Restated 1989 Non-Employee Director Stock Option and Incentive Plan,” the “1998 Non-Employee Director Stock Option and Incentive Plan,” and the “2001 Non-Employee Director Stock Option Plan,” which authorize the issuance of up to 550,000, 200,000, and 500,000 shares of common stock, respectively.

The following table illustrates the stock options available for grant as of March 31, 2003:



				Non-Employee Director
	Employee Stock Option			Stock Option and
	and Incentive Plans			Incentive Plans			Total

Shares reserved for issuance		8,130,006			1,250,000			9,380,006
Granted		(9,239,892	)		(1,137,000	)		(10,376,892	)
Forfeited		3,034,481			235,000			3,269,481
Expired		(428,688	)		(166,000	)		(594,688	)

Total available for grant		1,495,907			182,000			1,677,907

At March 31, 2003, 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, 2002		5,201,104		$	4.59-34.41	$	8.80
Granted		—			—		—
Exercised		(707,500	)		4.59-5.41		4.63
Forfeited		(411,722	)		5.41-34.41		16.42

Outstanding at March 31, 2003		4,081,882		$	4.59-34.41	$	8.75

Exercisable at March 31, 2003		4,081,882		$	4.59-34.41	$	8.75

All of our stock option plans define a change in control as including a sale of all or substantially all of our assets, and all of our stock option plans provide for the automatic acceleration of the exercisability of stock options in the event of a change in control with the exception of our 2001 Stock Option and Incentive Plan (the “2001 Plan”). The 2001 Plan provides for the acceleration of the exercisability of stock options in such circumstances as the stock option committee of our Board of Directors determines to be appropriate. On October 3, 2002, the Board of Directors authorized such acceleration. As of March 31, 2003, the acceleration of the exercisability of stock options resulting from the change in control for all other plans had an insignificant impact on our consolidated financial statements.

Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2003
(Unaudited)

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

The Stock Option Agreement of all holders of options under the 2001 Plan whose employment with the Company terminated or terminates on or after November 15, 2002 were amended to provide that the optionee shall have the right to exercise options under the 2001 Plan within a period of 18 months following termination.

Stock-Based Compensation

In December 2002, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” which amends Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation.” This Statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. It also amends the disclosure requirements to require prominent disclosure in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The disclosure requirements under this Statement are required for financial statements issued after December 15, 2002.

Statement No. 123 establishes financial accounting and reporting standards for stock-based compensation plans, including employee stock purchase plans, stock options and restricted stock. Statement No. 123 encourages all entities to adopt a fair value method of accounting for stock-based compensation plans, whereby compensation cost is measured at the grant date based upon the fair value of the award and is realized as an expense over the service or vesting period. However, Statement No. 123 also allows an entity to continue to measure compensation cost for these plans using the intrinsic value method of accounting prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.”

We account for our stock-based awards to employees and directors using the intrinsic value method of accounting in accordance with Accounting Principles Board Opinion No. 25. Under the intrinsic value method, compensation cost is generally the excess, if any, of the quoted market price of the stock at the grant or other measurement date over the exercise price.

Had compensation cost related to our stock option awards to employees and directors been determined under the fair value method prescribed under Statement No. 123, our net assets in liquidation and net assets in liquidation per share and our net loss and loss per share would have been the pro forma amounts illustrated in the table below for the periods indicated:

Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2003
(Unaudited)


		For the Three Months Ended March 31, 2002

		(Dollars in thousands, except per share amounts)
As reported net loss in Consolidated Statement of Operations and Comprehensive Loss		$	(12,006	)
Stock-based employee compensation expense (determined under fair value method, net of taxes)			(670	)

Pro forma net loss, after stock-based employee compensation expense		$	(12,676	)

Net loss per share — basic:
	As reported	$	(0.19	)
	Pro forma	$	(0.20	)
Net loss per share — diluted:
	As reported	$	(0.19	)
	Pro forma	$	(0.20	)

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 (“OCC”) and the Federal Reserve Bank of San Francisco.

The agreement between the Bank and the OCC was dated September 6, 2000. A provision of the agreement states that the Bank may not declare or distribute any dividends without the prior written approval of the OCC.

The agreement between the Company and the Federal Reserve Bank of San Francisco was dated September 28, 2000. The agreement 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 of San Francisco. The agreement further requires the prior written approval of the Federal Reserve Bank of San Francisco 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 of San Francisco.

At March 31, 2003, the Company’s regulatory capital levels exceeded minimum regulatory capital requirements while the Bank’s regulatory capital levels exceeded the requirements necessary to be considered well-capitalized.

Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2003
(Unaudited)

Note 6. 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 were $9.5 million for the first quarter of 2003.

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 determines a probability-weighted gross future undiscounted cash flow for each automobile lease. For those leases where the gross future undiscounted cash flows are less than net book value, the lease is considered impaired.

For those leases considered impaired, the Company then estimates the fair value of the lease. The fair value is 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 is calculated using current market rates which are similar to the original contract lease rate. For those impaired leases where the estimated fair value is less than the net book value, an impairment charge is 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. During the first quarter of 2003, we recorded $4.1 million of additional mark-to-market writedowns on the auto lease portfolio.

Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2003
(Unaudited)

Note 7. Income Taxes

The Company recorded a tax benefit of $0.8 million for the three months ended March 31, 2003. The effective tax rate used in computing the tax benefit for the first three months of 2003 was 32.1%. This expected 2003 effective tax rate is lower than the federal statutory rate due primarily to state income and franchise taxes.

For the first quarter of 2002, the Company recorded a tax benefit of $1.9 million. This tax benefit included tax expense of $2.1 million on pre-tax earnings of $7.6 million offset by a tax benefit of $4.0 million related to the impact of a change in U.S. Treasury regulations in 2002 with respect to a loss on the sale of a subsidiary in 2001. The effective tax rate used in computing the $2.1 million tax expense for the first quarter of 2002 was 41.5%.

As a result of the Company’s Plan, a valuation allowance of $21.5 million was established as of December 31, 2002 based on the realizability of deferred tax assets in years after 2002. The computation of deferred tax assets, net of the valuation allowance, is based on the projection of future operating income, primarily from the Company’s auto finance business, available to absorb existing deferred tax benefits. The amount of the valuation allowance remained unchanged at March 31, 2003.

Note 8. Commitments and Contingencies

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

Note 9. Reserve for Estimated Costs during the Period of Liquidation

The reserve for estimated costs during the period of liquidation includes accruals for severance payments and costs related to facility closures, investment banking and other professional fees and estimated litigation expense and settlements. These expense accruals are reviewed for adequacy on a quarterly basis. Changes to the accruals, if necessary, are recorded as adjustments in liquidation basis in future periods.

At March 31, 2003, the reserve for estimated costs during the period of liquidation was $20.4 million, including accruals for severance and facilities of $7.2 million and $8.8 million, respectively.

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”).

Plan of Dissolution and Stockholder Liquidity

On August 6, 2002, our Board of Directors approved a plan of dissolution and stockholder liquidity (the “Plan”). Under the Plan, we intend to dispose of our remaining assets in an orderly manner and to collect all additional monies owed to us. We have made and will continue to 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. 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 intend to 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 (“FRB”) and Office of the Comptroller of the Currency (“OCC”) approval to make any distributions; the proceeds that we in fact receive from the disposition of other assets that are not yet subject to purchase commitments could be less than we currently anticipate; and our expenses and other obligations prior to liquidation could be greater than we currently anticipate. As a result, no assurance can be given as to the amount of the distributions that will be made to our stockholders, either in cash or in the stock of operating companies.

On October 3, 2002, our stockholders approved the Plan and the sale of the Bank’s retail banking assets to U.S. Bank, N.A. (“U.S. Bank”). Also on October 3, 2002, holders of the Capital Securities of Bay View Capital I approved a waiver of those provisions of the legal instruments governing the Capital Securities and the Company’s 9.76% Junior Subordinated Deferrable Interest Debentures that would, absent the waiver, prevent us from disposing of all of our assets pursuant to the Plan.

As a result of the stockholders’ approval of the Plan and the close of the U.S. Bank transaction on November 1, 2002, we adopted liquidation basis accounting, effective September 30, 2002, in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Segments

Prior to September 30, 2002, we operated two distinct business platforms representing the two basic distribution channels of our primary businesses, retail and commercial banking. As a result of our dissolution and adoption of liquidation basis accounting effective September 30, 2002, we currently operate in a single segment focused on liquidating the Company’s assets and liabilities. Accordingly, the results for the three-month period ended March 31, 2002 have been reclassified to conform to the current period presentation.

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 our investment in operating lease assets, income taxes and the valuation of assets and liabilities in liquidation and the reserve for estimated costs during the period of liquidation.

Investment in Operating Lease Assets

Income Taxes

As a result of the Plan, a valuation allowance of $21.5 million was established as of December 31, 2002 based on the realizability of deferred tax assets in years after 2002. The computation of deferred tax assets, net of the valuation allowance, is based on the projection of future operating income, primarily from our auto finance company, available to absorb existing deferred tax benefits. The amount of the valuation allowance remained unchanged at March 31, 2003.

Liquidation Basis Accounting

We adopted liquidation basis accounting effective September 30, 2002 in accordance with GAAP. Accordingly, assets have been valued at their estimated net realizable values and liabilities include accruals for estimated costs associated with carrying out the Plan. In accordance with liquidation basis accounting, our stockholders’ equity was transferred to net assets in liquidation.

The reserve for estimated costs during the period of liquidation includes accruals for severance payments and facility closures, investment banking and other professional fees and estimated litigation expense. These expense accruals are reviewed for adequacy on a quarterly basis. Changes to the accruals are recorded as adjustments in liquidation basis in future periods.

Results of Operations

Under the liquidation basis of accounting, we are reporting the value of, and the changes in, net assets available for distribution to stockholders (“net assets in liquidation”) instead of results from continuing operations. Accordingly, the Company’s consolidated financial statements as of and for the quarters ended March 31, 2003 and December 31, 2002 have been prepared under the liquidation basis of accounting including the replacement of the Consolidated Statement of Operations and Comprehensive Loss with the Consolidated Statement of Changes in Net Assets in Liquidation. The Company’s consolidated financial statements presented for periods prior to September 30, 2002, (i.e., for the quarter ended March 31, 2002) are presented on a going concern basis of accounting. The Company is providing, herein, (1) Consolidated Statements of Net Assets (Liquidation Basis) as of March 31, 2003 and December 31, 2002, (2) Consolidated Statement of Changes in Net Assets in Liquidation (Liquidation Basis) for the quarter ended March 31, 2003 and (3) Consolidated Statement of Operations and Comprehensive Loss for the quarter ended March 31, 2002 (Going Concern Basis).

Liquidation Basis

Changes in Net Assets in Liquidation – March 31, 2003 vs. December 31, 2002

Our net assets in liquidation at March 31, 2003 totaled $411.0 million, or $6.41 in net assets in liquidation per outstanding shares as compared to $410.1 million, or $6.43 in net assets in liquidation per outstanding share at December 31, 2002. The first quarter increase in net assets in liquidation was primarily due to net income from operations of $0.6 million and $2.6 million of proceeds from stock options and warrants exercised during the quarter partially offset by $2.3 million of dividend payments on our Capital Securities. The decrease in net assets in liquidation per outstanding share was primarily due to an increase of 374,000 diluted common shares outstanding resulting from exercises of stock options and warrants during the quarter.

The net income from operations consisted of $1.4 million of pre-tax income from operations and a tax benefit of $0.8 million partially offset by $1.6 million of net charges for additional liquidation valuation adjustments.

The additional liquidation valuation adjustments consisted primarily of $4.1 million of additional mark-to-market writedowns on the auto lease portfolio as the residual values on these autos declined on continued weakness in used car values. This was partially offset by a $1.3 million gain associated with the financing secured by our auto lease cash flows resulting from favorable experience with the underlying cash flows and a $1.0 million reduction of an accrual related to the settlement of litigation that was negotiated during the quarter.

Leasing Expenses

primarily due to lower depreciation expense associated with the declining balance of our auto-related operating lease portfolio. We ceased purchasing auto leases in June 2000.

At March 31, 2003, approximately 4,401 of the 10,374 vehicles in our automobile lease portfolio, or 42%, were considered impaired under Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” However, this impairment is subject to a number of significant assumptions that could change in the near term, and adversely affect the valuation of the automobile lease portfolio. These assumptions were previously described under Critical Accounting Policies, Investment in Operating Lease Assets. Two of these assumptions - including the residual values of individual leases that are projected by ALG and the relative probabilities of the three alternatives for disposing of vehicles - are particularly susceptible to changes in market conditions. As an illustration of the sensitivity of these assumptions - if the market values of the individual vehicles declined by $250, an additional 14% of the leases would be deemed to be impaired and, therefore, potentially subject to an impairment charge. Furthermore, if the percentage of vehicles returned to the Company were greater than was projected at year-end, the impairment charge could increase because the value realized under this scenario is normally less than if the lessee purchased the automobile prior to the end of the lease term.

Income Taxes

We recorded a tax benefit of $0.8 million for the three months ended March 31, 2003. The effective tax rate used in computing the tax benefit for the first three months of 2003 was 32.1%. This expected 2003 effective tax rate is lower than the federal statutory rate due primarily to state income and franchise taxes.

For the first quarter of 2002, we recorded a tax benefit of $1.9 million. This tax benefit included tax expense of $2.1 million on pre-tax earnings of $7.6 million offset by a tax benefit of $4.0 million related to the impact of a change in U.S. Treasury regulations in 2002 with respect to a loss on the sale of a subsidiary in 2001. The effective tax rate used in computing the $2.1 million of tax expense for the first quarter of 2002 was 41.5%.

Going Concern Basis

Results of Operations – Three Months Ended March 31, 2002

Our net loss for the first quarter of 2002 was $12.0 million, or $0.19 per diluted share. First quarter results were restated to include $18.9 million in goodwill impairment charges, net of taxes, that was recorded during the third quarter of 2002 but was recognized as the cumulative effect of a change in accounting principle as of January 1, 2002. First quarter earnings before the cumulative effect of a change in accounting principle were $6.9 million, or $0.11 per diluted shares.

Net Interest Income and Net Interest Margin

Our net interest income and net interest margin for the first quarter of 2002 were $33.1 million and 4.16%, respectively. Our interest-earning assets, excluding our auto-related operating lease assets, totaled $3.2 billion at March 31, 2002. The average interest-earning assets, excluding our auto-related operating lease assets, for the three months ended March 31, 2002 was $3.2 billion.

Average Balance Sheet

The following table illustrates average yields on our interest-earning assets and average rates on our interest-bearing liabilities for the three-month period ended March 31, 2002. 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 period indicated. Average balances of interest-earning assets and interest-bearing liabilities were calculated by averaging the relevant month-end amounts for the period.

AVERAGE BALANCES, YIELDS AND RATES


		For the Three Months Ended
		March 31, 2002

		Average					Average
		Balance			Interest		Yield/Rate

		(Dollars in thousands)
Assets
Interest-earning assets:
	Loans and leases	$	2,424,823		$	46,471		7.72	%
	Mortgage-backed securities ⁽¹⁾		283,853			3,551		5.00
	Investments ⁽¹⁾		487,026			3,671		3.03

Total interest-earning assets			3,195,702			53,693		6.76	%

Other assets			678,503

Total assets		$	3,874,205

Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
	Deposits	$	3,127,324		$	15,002		1.95	%
	Borrowings ⁽²⁾		279,422			5,547		7.98

Total interest-bearing liabilities			3,406,746			20,549		2.44	%

Other liabilities			128,014

Total liabilities			3,534,760
Stockholders’ equity			339,445

Total liabilities and stockholders’ equity		$	3,874,205

Net interest income/net interest spread					$	33,144		4.32	%

Net interest-bearing liabilities		$	(211,044	)

Net interest margin ⁽³⁾								4.16	%

⁽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.

Interest Income

Interest income was $53.7 million for the first quarter of 2002. The average yield on interest-earning assets was 6.76% for the first quarter of 2002. The following table illustrates interest income, by type of interest-earning assets, for the quarter ended March 31, 2002:


		For the Three Months Ended
		March 31, 2002

		Average		Interest		Average
		Balance		Income		Yield

				(Dollars in thousands)
Interest-earning assets:
	Loans	$	2,424,823	$	46,471		7.72	%
	Mortgage-backed securities		283,853		3,551		5.00
	Investments		487,026		3,671		3.03

Total		$	3,195,702	$	53,693		6.76	%

Interest Expense

Deposits

Interest expense on our deposits was $15.0 million for the first quarter of 2002. The average cost of deposits was 1.95% for the first quarter of 2002. The following table summarizes our deposit costs by type for the period ended March 31, 2002:


	For the Three Months
	Ended March 31, 2002

	Average		Average
	Balance		Rate

	(Dollars in thousands)
Savings	$	161,722		0.40	%
Money Market		1,106,950		1.77
Checking accounts		690,949		0.79

Total transaction accounts		1,959,621		1.31
Retail certificates of deposit		1,167,703		3.01

Total deposits	$	3,127,324		1.95	%

Borrowings

Interest expense on our borrowings was $5.5 million for the first quarter of 2002. The average cost of borrowings was 7.98% for the first quarter of 2002. In accordance with GAAP, these amounts exclude the expense associated with our Capital Securities.

Provision for Losses on Loans and Leases

The provision for losses on loans and leases for the first quarter of 2002 was $4.9 million. Our provision reflects the impact of the $2.6 million recovery on the sale of charged-off high loan-to-value home equity loans during the fourth quarter of 2001.

Noninterest Income and Noninterest Expense

Noninterest income totaled $26.2 million for the first quarter of 2002.

General and Administrative Expenses

General and administrative expenses for the first quarter of 2002 were $30.8 million. The following table illustrates the ratio of general and administrative expenses to average total assets, including auto-related securitized assets, on an annualized basis for the period indicated:


	For the Three
	Months Ended

	March 31, 2002

	(Dollars in
	thousands)
General and administrative expenses	$	30,792
Average total assets, including auto-related securitized assets	$	4,064,974

Annualized general and administrative expenses to average total assets, including auto-related securitized assets		3.03	%

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 table illustrates the efficiency ratio for the periods indicated:


	For the Three
	Months Ended

	March 31, 2002

	(Dollars in
	thousands)
General and administrative expenses	$	30,792
Operating revenues, as defined	$	44,038

Efficiency ratio		69.9	%

Leasing Expenses

Leasing expense is attributable 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 is included in leasing expenses, along with the amortization of capitalized initial direct lease costs and impairment charges. Leasing expenses were $15.0 million for the first quarter of 2002. We ceased purchasing auto leases in June 2000.

Real Estate Owned

The net expense related to our real estate owned was $0.5 million for the first quarter of 2002. Additionally, we recorded $0.2 million of provision for losses on real estate owned during the quarter.

Amortization of 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. Amortization expense related to intangible assets was $0.3 million for the first quarter of 2002. We would have recorded $2.8 million of amortization expense for the first quarter of 2002 under the prior accounting rule.

We completed the first and second steps of the transitional goodwill impairment test as of June 30, 2002 and September 30, 2002, respectively. We recorded $18.9 million in impairment charges, net of taxes, for goodwill not expected to be realized upon the disposition of our Asset-based lending, Factored Receivables and Commercial leasing businesses. As required by the transitional provisions of Statement of Financial Accounting Standards No. 142, the impairment loss is measured and recorded as of the date of adoption and recognized as the cumulative effect of a change in accounting principle as of January 1, 2002.

Income Taxes

We recorded a tax benefit of $1.9 million for the first quarter of 2002. This tax benefit included tax expense of $2.1 million on pre-tax earnings of $7.6 million offset by 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 BVFMAC. The $4.0 million tax benefit was a result of a change in federal tax law that occurred in the first quarter of 2002 allowing us to deduct a portion of the loss associated with the sale of BVFMAC. The effective tax rate used in computing the $2.1 million of tax expense for the first quarter of 2002 was 41.5%. This effective tax rate differs from the statutory rate primarily due to the impact of state taxes.

Capital Securities

On December 21, 1998, we issued $90 million of 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 distributions 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 first quarter of 2002.

In September of 2000, we entered into an agreement with the FRB which requires that we obtain their approval prior to disbursing any dividends associated with our Capital Securities. Beginning with the third quarter of 2000, we began deferring distributions quarterly in accordance with the terms of the Capital Securities. During this period, deferred distributions were accrued 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. Deferred distributions and interest, which were fully accrued, were $16.6 million at March 31, 2002.

Balance Sheet Analysis

Our total assets were $595.2 million at March 31, 2003 as compared to $875.5 million at December 31, 2002. The decrease in total assets was primarily a result of the utilization of cash and cash equivalents to repay maturing brokered CD’s, loan sales and prepayments, and the continued runoff of the auto lease portfolio.

Securities

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


		March 31,		December 31,
		2003		2002

		(Dollars in thousands)
*Available-for-sale*
Asset-backed securities		$	747	$	6,267
Retained interests in auto securitizations			32,413		31,870

Total investment securities			33,160		38,137

Mortgage-backed securities:
	Fannie Mae		15,546		18,096
	Freddie Mac		11,843		13,335
	Collateralized mortgage obligations		674		1,085

Total mortgage-backed securities			28,063		32,516

Total securities available-for-sale		$	61,223	$	70,653

In accordance with liquidation basis accounting, our investment securities are classified as available-for-sale and recorded at their net realizable value. Adjustments to net realizable value, if any, are recorded on a quarterly basis in earnings through the adjustment for liquidation basis.

We sold $2.7 million of asset-backed securities and $0.1 million of mortgage-backed securities during the first quarter of 2003. Gross losses of $33,000 were realized on the sales. There were no purchases of investment securities during the first quarter of 2003.

Loans and Leases

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


			March 31,		December 31,
			2003		2002

			(Dollars in thousands)
Loans and leases receivable:
	Auto loans ⁽¹⁾		$	157,701	$	142,357
	Other loans:
		Multi-family mortgage loans		1,417		2,443
		Commercial mortgage loans		3,061		7,712
		Franchise loans		37,849		46,928
		Asset-based loans, syndicated loans, factored receivables and commercial leases		24,261		104,362
		Business loans		7,206		7,212

		Total other loans		73,794		168,657

Loans and leases receivable ⁽²⁾⁽³⁾			$	231,495	$	311,014


⁽¹⁾		Amounts exclude auto-related operating lease assets reported separately from loans and leases totaling $154.0 million at March 31, 2003 and $191.0 million at December 31, 2002.

⁽²⁾		All loans and leases are classified as held-for-sale at March 31, 2003 and December 31, 2002.

⁽³⁾		Includes mark-to-market valuation reserves of $24.1 million and $35.1 million at March 31, 2003 and December 31, 2002, respectively.

The decrease in loans and leases receivable at March 31, 2003, as compared to December 31, 2002 was primarily due to the impact of loan sales and repayments during the first quarter of 2003 pursuant to the Plan. During the quarter, we completed the sale of approximately $115.4 million of loans and received an additional $35.8 million in loan repayments. These loan sales and repayments, totaling $151.2 million, were comprised of $74.0 million of asset-based loans, $57.8 million of auto loans, $7.0 million of franchise loans, $5.1 million of syndicated loans, $4.2 million of commercial real estate loans, $2.4 million of multi-family mortgage loans and $0.7 million of factored receivables and commercial leases. At March 31, 2003, our remaining investment in loans to be liquidated was reduced to approximately $74 million from $169 million at December 31, 2002 and $664 million at September 30, 2002. In connection with the Plan, our loans and leases receivable is classified as held-for-sale at March 31, 2003.

We continue to originate auto loans through Bay View Acceptance Corporation (“BVAC”), our auto finance company, but ceased all other loan production activities during the fourth quarter of 2002. BVAC originated $71.6 million of auto loans for the quarter compared to $69.4 million for the fourth quarter of 2002. First quarter auto loan production consisted of 2,533 loan fundings representing the $71.6 million. Weighted average coupon interest rates originated during the quarter were 8.70%; FICO credit scores originated in the quarter averaged 728. At March 31, 2003, BVAC was servicing 35,200 loans representing $601 million.

The following table illustrates our loan and lease originations for the periods indicated:


			For the Three Months Ended

			March 31,		March 31,
			2003		2002

			(Dollars in thousands)
Loan and lease originations:
		Auto loans	$	71,635	$	82,402
		Home equity loans and lines of credit		—		23,878
		Multi-family and commercial mortgage loans		—		113,179
		Asset-based loans, syndicated loans, factored receivables and commercial leases		—		8,252
		Business loans		—		6,831

	Total originations		$	71,635	$	234,542

Credit Quality

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

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


	March 31,		December 31,
	2003		2002

	(Dollars in thousands)
Nonaccrual loans and leases	$	18,695	$	24,683
Real estate owned		3,104		2,402
Other repossessed assets		209		183

Nonperforming assets	$	22,008	$	27,268

The decrease in total nonperforming assets at March 31, 2003, as compared to December 31, 2002, was primarily due to decreases in nonaccruing franchise loans and syndicated loans, resulting from loan sales and prepayments. Our nonperforming assets include mark-to-market valuation reserves of $9.9 million and $16.4 million at March 31, 2003 and December 31, 2002, respectively. Nonperforming assets excluding franchise-related assets were $4.6 million at March 31, 2003, as compared to $6.3 million at December 31, 2002, while non-franchise nonaccrual loans and leases were $4.1 million at March 31, 2003 as compared to $5.9 million at December 31, 2002.

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


		Nonperforming Assets
		as a Percentage of Consolidated Total Assets

		March 31, 2003					December 31, 2002

				(Dollars in thousands)
Loans and leases:
	Auto loans	$	248		0.04	%	$	284	0.03	%
	Multi-family mortgage loans		9		0.00			84	0.01
	Commercial real estate loans		936		0.16			948	0.11
	Franchise loans		17,451		2.93			21,005	2.40
	Asset-based loans, syndicated loans, factored receivables and commercial leases		3,261		0.55			4,850	0.55
	Business loans		103		0.02			97	0.01

Total		$	22,008		3.70	%	$	27,268	3.11	%

Total loans and leases delinquent 60 days or more at March 31, 2003 were $8.5 million as compared to $17.8 million at December 31, 2002. Delinquent franchise related loans were $6.4 million at March 31, 2003 as compared to $15.5 million at December 31, 2002. Total loans and leases delinquent 60 days or more as a percentage of loans and leases receivable was 3.68% at March 31, 2003 as compared to 5.71% at December 31, 2002.

Deposits

The following table illustrates deposits as of the dates indicated:


	March 31, 2003					December 31, 2002

	Amount		Rates			Amount		Rates

			(Dollars in thousands)
Brokered certificates of deposit	$	—		—	%	$	224,189		2.35	%

Total	$	—		—	%	$	224,189		2.35	%

We repaid the $224.2 million of brokered CD’s which had been outstanding at December 31, 2002 and matured during the quarter.

Borrowings

At March 31, 2003, our remaining borrowings totaled $46.3 million and consisted solely of the financing secured by our auto lease contractual cash flows.

Capital Securities

As announced in 2002, the holders of the Capital Securities approved an early redemption of the Capital Securities at the option of individual security holders. We originally intended to complete this early redemption offer during the first quarter of 2003. However, to date, we have received limited expressions of interest in the

optional redemption from the holders of the Capital Securities. The optional redemption offer will be reconsidered at the end of the second quarter.

Liquidity

The objective of our liquidity management program is to ensure that funds are available in a timely manner to meet the loan demand of our auto finance company, BVAC, 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. 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.

Prior to the assumption of our retail deposits by U.S. Bank on November 1, 2002, our retail deposits and ability to borrow from the Federal Home Loan Bank of San Francisco had been our principal source of liquidity. With our stockholders’ authorization of the Plan and the completion of the U.S. Bank transaction, our sources of liquidity have been limited. Since the U.S. Bank transaction, we have relied upon the proceeds from our liquidation and the disposition of our assets to fund the loan demand of BVAC; repay maturing brokered certificates of deposit and other liabilities; and to meet other working capital needs.

On September 6, 2000, the Bank entered into an agreement with the OCC, in which the Bank may not declare or distribute dividends without the prior consent of the Office of the Comptroller of the Currency. On September 29, 2000, the Company entered into an agreement with the FRB of San Francisco in which the Company is required to obtain the prior consent of the FRB of San Francisco in order to pay common stock dividends and disburse distributions associated with our Capital Securities.

On December 31, 2002, following approval by the FRB of San Francisco, we paid cumulative deferred distributions, interest on the deferred distributions and the current quarterly distribution on our Capital Securities. We continue to be required to obtain approval from the FRB of San Francisco for future quarterly distributions until such time as the agreement is terminated.

At March 31, 2003, we had cash and cash equivalents of $80.9 million. At this same date, we had $184 million of obligations for borrowings, the Capital Securities, and other liabilities. The funding to repay these obligations will be generated from proceeds from additional loan repayments, asset dispositions and an anticipated auto loan securitization during the second quarter. Additionally, we are in the process of negotiating a revolving line of credit facility to finance BVAC’s current portfolio of auto loans and its future originations of auto loans. It is anticipated that this credit facility will be in place by the latter part of the second quarter. BVAC intends to periodically securitize and sell its production of auto loans in order to repay the line of credit. There can be no assurances that the Company will be successful in obtaining this financing.

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.

With our adoption of liquidation basis accounting effective September 30, 2002, our stockholders’ equity was transferred to net assets in liquidation. Our net assets in liquidation totaled $411.0 million at March 31, 2003 or $6.41 in net assets in liquidation per outstanding share based on 64,120,863 diluted common shares in liquidation. At December 31, 2002, our net assets in liquidation totaled $410.1 million, or $6.43 in net assets in liquidation per outstanding share at December 31, 2002 based on 63,747,157 diluted common shares in liquidation.

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

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

Bay View Bank’s regulatory capital levels at March 31, 2003 exceeded 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	$	487,110		69.49	%	$	28,041		4.00	%	$	35,051		5.00	%
Tier 1 risk-based	$	487,110		99.80	%	$	19,524		4.00	%	$	29,286		6.00	%
Total risk-based	$	487,110		99.80	%	$	39,049		8.00	%	$	48,811		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 March 31, 2003, 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	$	500,914		68.37	%	$	29,308		4.00	%
Tier 1 risk-based	$	500,914		97.90	%	$	20,467		4.00	%
Total risk-based	$	500,914		97.90	%	$	40,934		8.00	%

Share Repurchase Program

Our outstanding shares of common stock were 63,537,590 at March 31, 2003 and 62,947,396 at December 31, 2002. The outstanding shares in liquidation (including potential dilutive common shares) used for computing net assets in liquidation per outstanding share at March 31, 2003 and December 31, 2002 were 64,120,863 and 63,747,157 shares, respectively.

In August 1998, our Board of Directors authorized the repurchase of up to $50 million in shares of our common stock. At March 31, 2003, we had approximately $17.6 million in remaining authorization available for future share repurchases. Pursuant to our agreement with the FRB of San Francisco, we must obtain prior written approval before repurchasing shares.

Recent Accounting Pronouncements

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” FIN 45 expands on the accounting guidance of Statements No. 5, 57, and 107 and incorporates without change the provisions of FASB Interpretation No. 34 which was superseded. FIN 45 elaborates on the existing disclosure requirements for most guarantees and requires that guarantors recognize a liability for the fair value of guarantees at inception. The disclosure requirements of this Interpretation are required for financial statement periods ended after December 15, 2002. The initial recognition and measurement provisions of FIN 45 are applied on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of the measurement provisions of FIN 45 does not have a material impact on the Company’s net assets in liquidation.

In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities.” The purpose of this interpretation is to provide guidance on how to identify a variable interest entity (VIE) and determine when the assets, liabilities, noncontrolling interests, and results of operations of a VIE need to be included in a company’s consolidated financial statements. A company that holds variable interests in an entity will be required to consolidate that entity if the company’s interest in the VIE is such that the company will absorb a majority of the VIE’s expected losses and /or receive a majority of the VIE’s expected residual returns, if they occur. New disclosure requirements are also prescribed by FIN 46. FIN 46 became effective upon its issuance. As of March 31, 2003, the Company did not have any VIE’s for which this interpretation would be applicable.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Asset and Liability Management

The objective of our asset and liability management has historically been to measure interest rate and liquidity risks in order to manage the type and mix of our interest-earning assets and interest-bearing liabilities within safe and sound parameters—thereby optimizing net interest income and the market value of equity. To measure interest rate risk, we used simulation analysis as well as asset and liability repricing or “gap” analysis.

As a result of the decision to proceed with the Plan, the Company and the Bank have been primarily engaged in asset disposition activities. Since November 1, 2002, the Bank has not operated any branches, accepted any deposits, nor otherwise conducted traditional banking activities. With the liquidation that has been accomplished through March 31, 2003—in which we have sold our retail banking assets and repaid all deposits—the Bank substantively no longer operates as a financial institution. By March 31, 2003, approximately 69% of consolidated assets were funded by equity capital.

BVAC, our auto finance company, is the only significant subsidiary of the Company that is currently conducting on-going operations. As a result of the liquidation, it is now operating as an independent finance company rather than a portfolio-lending unit of the Bank. BVAC is originating auto loans for sale or securitization and anticipates completing such sales or securitizations not less than semi-annually. Prior to sale or securitization, we anticipate funding these loans through a combination of a revolving line of credit facility and equity capital, and hedging our market value risk in these loans between the origination and sale or securitization dates.

The Company is proceeding with the liquidation of all other assets and liabilities. With the exception of our investment in operating lease assets, we anticipate that this liquidation process will be substantially completed by the end of 2003. The operating lease assets are fixed rate auto leases, which are funded by a combination of fixed rate debt and equity capital. The liquidation of these assets will be completed by the end of the third quarter of 2005.

For these reasons, management believes that the Company’s remaining sensitivity to interest rates has been minimized. Accordingly, management no longer considers our historical asset and liability management process to be a relevant element of our current financial management process. Furthermore, the Company no longer retains the capacity to actively manage the composition of interest-earning assets and interest-bearing liabilities, beyond the liquidation of existing assets and repayment of existing liabilities, because of the limitations of the liquidation process. Accordingly, our previous disclosures of interest rate sensitivity, including the results of our simulation and gap analyses, are no longer being provided.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. The Company’s principal executive officer and its principal financial officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 12(a) — and 15(d) — 14(c)) as of a date within 90 days of the filing of this quarterly report, have concluded that, as of such date, the Company’s disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities.

(b) Changes in internal controls. There have been no changes in the Company’s internal controls or in the other factors that could significantly affect the Company’s disclosure controls and procedures subsequent to the date of their evaluation, nor were there any significant deficiencies or material weaknesses in the Company’s internal controls. As a result, no corrective actions were required or undertaken.

PART II. OTHER INFORMATION


Item 1.		Legal Proceedings

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

Item 2.		Changes in Securities
		None

Item 3.		Defaults Upon Senior Securities
		None

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

Item 5.		Other Information
		None

Item 6.		Exhibits and Reports on Form 8-K

a(i)		None

b(i)		The Registrant filed the following report on Form 8-K dated January 31, 2003 during the three months ended March 31, 2003:

		On January 31, 2003, the Registrant filed Exhibit 99.1 a copy of its earnings release for the quarter ended December 31, 2002.

b(ii)		The Registrant filed the following report on Form 8-K dated February 24, 2003 during the three months ended September 30, 2002:

		The Board of Directors established April 24, 2003 as the date of the Annual Meeting of Stockholders.

b(iii)		The Registrant filed the following report on Form 8-K dated March 25, 2003 during the three months ended March 31, 2003:

		On March 25, 2003, the Registrant filed as Exhibit 99.1 a copy of the Company’s letter to stockholders from its Chairman and Chief Executive Officer, which was included in the package sent to stockholders for the Annual meeting on April 24, 2003.

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: May 15, 2003	BY:	/s/ John Okubo

		John Okubo
		Executive Vice President and Chief Financial Officer
		(Principal Financial and 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 March 31, 2003:

(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.

DATE: May 15, 2003

CERTIFICATIONS

I, Charles G. Cooper, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: May 15, 2003


	/s/ Charles G. Cooper

	Charles G. Cooper
	President and Chief
	Executive Officer

CERTIFICATIONS

I, John Okubo, certify that:

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

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

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

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

Date: May 15, 2003


	/s/ John Okubo

	John Okubo
	Executive Vice President and
	Chief Financial Officer

/s/ Charles G. Cooper

/s/ John Okubo

Charles G. Cooper

John Okubo

President and Chief Executive Officer

Executive Vice President
and Chief Financial Officer

	•		Until the dissolution of Bay View Bank, N.A. (the “Bank”) is completed later this year, a number of actions the Company and the Bank intend to take, including distributions to the Company’s stockholders, cannot be taken unless approvals are obtained from the Board of Governors of the Federal Reserve System (the “FRB”) in the case of the Company and the Office of the Comptroller of the Currency (the “OCC”) in the case of the Bank;

	•		Unforeseen delays in the disposition of the assets of the Company and the Bank and their formal dissolution may occur;

	•		The realization of the Company’s deferred tax assets could be less than the Company currently projects;

	•		The Company and the Bank may encounter difficulty in selling some of their assets, and certain assets may not be able to be sold for the prices the Company and the Bank currently anticipate;

	•		The Company and the Bank may not be able to discharge certain liabilities for the amounts the Company and the Bank currently estimate;

	•		The Company and the Bank may incur or discover presently unanticipated claims, liabilities or expenses;

	•		The Company’s ability to obtain commercial financing to fund the ongoing operations of our auto lending business, Bay View Acceptance Corporation (“BVAC”);

	•		The amounts the Bank is able to distribute to the Company and the amounts the Company is able to distribute to its stockholders could be adversely affected by the results of operations of the Company’s and the Bank’s remaining operations, particularly in the case of BVAC while the dissolution process is being implemented;

	•		These estimates of the distribution amounts include projections of future events and performance as distant as 2006 and, accordingly, are inherently subject to many uncertainties;

	•		The expenses of the disposition of assets and the dissolution proceeds may exceed the amounts currently estimated; and

	•		Court proceedings could restrict or delay distributions to stockholders if claimants or creditors satisfy the court that the amounts to be distributed by the Bank or the Company to stockholders are needed to provide for the payment of expenses and liabilities of the Company or the Bank; or, if the amounts ultimately required to discharge the expenses and liabilities of the Company or the Bank in full exceeds the value of the remaining assets of the Company or the Bank, respectively.


	Unrealized
	Gain on			Minimum			Debt of
	Securities			Pension			Employee
	Available-for-			Liability			Stock			Total
	Sale,			Adjustment,			Ownership			Stockholders’
	Net of Tax			Net of Tax			Plan			Equity

	(Amounts in thousands, except per share amounts)
Balance at December 31, 2001	$	523		$	(294	)	$	(1,071	)	$	336,187
Exercise of stock options, including tax benefits		—			—			—			292
Distribution of director’s retirement plan shares		—			—			—			5
Exercise of stock warrants		—			—			—			4
Expense recognized on stock options with below market strike price		—			—			—			671
Change in unrealized gain on securities available-for-sale, net of tax		(297	)		—			—			(297	)
Change in debt of ESOP		—			—			1,071			1,071
Net income		—			—			—			6,914

Balance at March 31, 2002	$	226		$	(294	)	$	—		$	344,847

⁽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.

	(a)		Evaluation of disclosure controls and procedures. The Company’s principal executive officer and its principal financial officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 12(a) — and 15(d) — 14(c)) as of a date within 90 days of the filing of this quarterly report, have concluded that, as of such date, the Company’s disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities.

	(b)		Changes in internal controls. There have been no changes in the Company’s internal controls or in the other factors that could significantly affect the Company’s disclosure controls and procedures subsequent to the date of their evaluation, nor were there any significant deficiencies or material weaknesses in the Company’s internal controls. As a result, no corrective actions were required or undertaken.

(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.