Bay View Bank Sub Notes Expected `BB' by Fitch IBCA.

NEW YORK--(BUSINESS WIRE)--Dec. 9, 1999--

Fitch IBCA, Inc. expects to assign its `BB' rating to Bay View Bank's (BVB) proposed $125 million subordinated note issue due January 2007. Proceeds from the note offering are expected to be used for general corporate purposes. Bay View Bank is wholly owned subsidiary of Bay View Capital Corporation (BVC).

The rating reflects Fitch IBCA's view that the recent acquisition of Franchise Mortgage Acceptance Company (FMAC), while adding business diversity to BVC, will also increase the bank holding company's financial leverage and credit risk profile. During the past few years, BVC has evolved its relatively standard thrift balance sheet, with predominately conforming residential mortgages and securities funded by time deposits and wholesale borrowings, into a more diversified depository institution. As part of the evolution, BVB converted to a national commercial bank charter, effective March 1, 1999. The FMAC transaction is consistent with BVC's strategy to increase its exposure to asset classes that its considers to have higher prospective risk-adjusted returns. Other loan segments that BVC has targeted and become more active originating include indirect auto loans, some of which possess nonprime credit characteristics, along with asset-based commercial transactions. BVC also has a meaningful exposure to high loan-to-value home equity loans. Although the performance of these asset classes has generally been positive for BVC, asset quality has not been tested in a less favorable economic environment.

Additional acquisitions of deposit franchises, also consistent with the company's recent operating history, would generally be viewed positively, although the financing of such transactions would be scrutinized given what Fitch IBCA considers to be a currently aggressive capital structure at BVC.