- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-21850
BANKUNITED FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 65-037773
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
255 ALHAMBRA CIRCLE, CORAL GABLES, FLORIDA 33134
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) ZIP CODE
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (305) 569-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
CLASS A COMMON STOCK, $.01 PAR VALUE
8% NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES 1996
8% NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES 1993
9% NONCUMULATIVE PERPETUAL PREFERRED STOCK
(TITLE OF CLASS)
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, and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. [ ]
The aggregate market value of the Class A Common Stock held by
non-affiliates of the Registrant, based upon the average price on December
11, 1996, was $68,776,342.* The other voting securities of the Registrant are
not publicly traded.
The shares of the Registrant's common stock outstanding as of December 11,
1996 were as follows:
CLASS NUMBER OF SHARES
----- ----------------
Class A Common Stock, $.01 par value 7,675,931
Class B Common Stock, $.01 par value 251,515
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Definitive Proxy Statement for its 1997 Annual Meeting of
Stockholders will be filed with the Securities and Exchange Commission not
later than 120 days after the end of the fiscal year covered by this Form
10-K pursuant to Rule G(3) of the General Instructions for Form 10-K.
Information from such Definitive Proxy Statement will be incorporated by
reference into Part III, Items 10, 11, 12 and 13 hereof.
1
<PAGE>
- -----------------------------------------------------------------------------
* Based on reported beneficial ownership of all directors and executive
officers of the Registrant; this determination does not, however,
constitute an admission of affiliated status for any of these individual
stockholders.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
1
<PAGE>
PART I
ITEM 1. BUSINESS
BUSINESS OF BANKUNITED FINANCIAL CORPORATION
BankUnited Financial Corporation (the "Company" or "BankUnited") is a
Florida corporation organized in December 1992 for the purpose of becoming
the savings and loan holding company for BankUnited, FSB (the "Bank"). This
holding company reorganization, together with BankUnited's conversion from a
Florida-chartered stock savings bank to a federally chartered stock savings
bank, became effective in March 1993. Unless the context requires otherwise,
all references herein to the Company include the Company, the Bank and their
subsidiaries on a consolidated basis, and before March 15, 1993, include the
Bank and its subsidiaries only.
The Company currently has 15 branch offices in Dade, Broward and Palm
Beach counties, Florida ("South Florida") and anticipates opening three or
more additional branches there in the next 18 months. The Company's business
has traditionally consisted of attracting deposits from the general public
and using those deposits, together with borrowings and other funds, to
purchase nationwide and to originate in its market area single-family
residential mortgage loans, and to a lesser extent, to purchase and originate
commercial real estate, commercial business and consumer loans. The Company's
revenues are derived principally from interest earned on loans,
mortgage-backed securities and investments. The Company's primary expenses
arise from interest paid on savings deposits and borrowings and overhead
expenses incurred in its operations.
The Company's operating plan emphasizes (i) concentrating lending
activities on the origination of single-family residential mortgage loans and
purchasing such loans as favorable market opportunities arise; (ii) expanding
the Company's deposit base by providing convenience, competitive rates and
personalized service in its market area; (iii) continuing expansion of the
Company's branch network through de novo branching or the acquisition of
branches of, and mergers with, existing financial institutions, although
there are no current plans, arrangements, understandings, or agreements
regarding such acquisitions; (iv) expanding the Company's commercial and
multi-family real estate, commercial business, and real estate construction
lending; and (v) managing exposure to interest rate risk, while optimizing
operating results through effective asset/liability management and investment
policies.
In 1995, the Company redefined its strategy to increase its emphasis on
strategic product niches which management believes are being underserved as
South Florida's banking market consolidates. These products include
commercial business and commercial real estate lending and deposit services
for small to mid-size businesses. The Company has also focused on attracting
depositors who are seeking convenience, competitive rates and personalized
service. In order to accomplish this strategy, the Company has attracted
management with expertise in developing and managing its new product lines.
The Bank is a member of the Federal Home Loan Bank ("FHLB") system and is
subject to comprehensive regulation, examination and supervision by the
Office of Thrift Supervision (the "OTS") and the Federal Deposit Insurance
Corporation (the "FDIC"). Deposits at the Bank are insured by the Savings
Association Insurance Fund of the FDIC (the "SAIF") for up to $100,000 for
each insured account holder, which is the maximum permitted by law.
FORWARD-LOOKING STATEMENTS
When used in this Form 10-K or future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases "will
likely result", "are expected to", "will continue", "is anticipated",
"estimate", "project", "believe" or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
2
<PAGE>
Securities Litigation Reform Act of 1995. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements,
which speak only as of the date made, and to advise readers that various
factors, including regional and national economic conditions, changes in
levels of market interest rates, credit risks of lending activities, and
competitive and regulatory factors, could affect the Company's financial
performance and could cause the Company's actual results for future periods
to differ materially from those anticipated or projected.
The Company does not undertake, and specifically disclaims any obligation,
to publicly release the result of any revisions which may be made to any
forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
SUNCOAST ACQUISITION
As part of the Company's plan to expand within South Florida, on November
15, 1996, the Company completed the purchase of Suncoast Savings & Loan
Association, FSA ("Suncoast"), a federally chartered savings association with
assets of $409.0 million at September 30, 1996 and merged Suncoast into the
Bank (the "Merger"). Suncoast had six branch offices in the South Florida
market of which at least five will continue to operate and one may be
consolidated with an existing Bank branch office. In addition, as of
September 30, 1996, Suncoast serviced or subserviced approximately $1.2
billion in loans for others. The Company is currently exploring the
possibility of selling a portion of Suncoast's servicing portfolio and
discontinuing certain of Suncoast's subservicing activities. Such actions
could substantially reduce the income derived from servicing as well as the
related expenses from the income and expenses previously reported by
Suncoast.
For additional information, see "Unaudited Pro Forma Condensed Combined
Financial Statements" and Note 18 of Notes to the Consolidated Financial
Statements.
MARKET AREA AND COMPETITION
The Company conducts operations in South Florida, which at June 30, 1996
had a total of approximately $73 billion in deposits in commercial banks,
savings institutions, and credit unions (41% of the total of $178 billion of
deposits in Florida). The Company intends to continue to establish or acquire
branches in its market area where the Company can service its customer base.
In 1995, the Company sold its three branches on the west coast of Florida,
including their deposits which totaled $130 million at the date of sale. The
sale was part of a shift in growth strategy to focus on South Florida and
take advantage of consolidation trends in banking there. Also, as part of
this strategy, the Company opened branches in Boca Raton, Florida in December
1995, Delray Beach, Florida in June 1996 and West Palm Beach, Florida in
September 1996. On March 29, 1996, the Company acquired the Bank of Florida
with total assets of $28.1 million which was merged into the Company's South
Miami Branch. Then on November 15, 1996, as discussed above, the Company
acquired Suncoast.
The Company encounters strong competition in attracting deposits and in
its lending activities. Its most direct competition for deposits historically
has been from commercial banks, brokerage houses, other savings associations,
and credit unions located in the Company's market area, and the Company
expects continued strong competition from such financial institutions in the
foreseeable future. Within the Company's market area are branches of several
commercial banks and savings associations that are substantially larger and
that have more extensive operations than does the Company. In addition, many
financial institutions based in South Florida have recently been acquired by
larger institutions based in other parts of the state or based out of state.
The Company's goal is to compete for savings and other deposits by offering
depositors a higher level of personal service and expertise, together with a
wide range of financial services offered at competitive rates. The Company
believes that this strategy will enable it to attract depositors as the
number of local institutions remaining declines and depositors who desire
more personal service, particularly retirees, relocate their accounts.
The competition in originating real estate and other loans comes
principally from commercial banks, mortgage banking companies and other
savings associations. The Company competes for loan
3
<PAGE>
originations primarily through the interest rates and loan fees it charges,
the type of loans it offers, and the efficiency and quality of service it
provides. The Company purchases residential first mortgage loans in the
existing secondary mortgage market and competes with other mortgage
purchasers in the secondary market primarily on the basis of price. While the
Company has been, and intends to continue to be, primarily a residential
lender, the Company has recently placed more emphasis on commercial real
estate, construction and commercial lending, as discussed more fully below.
Factors that affect competition in lending include general and local economic
conditions, current interest rates and volatility of the mortgage markets. As
with its deposit products, the Company's strategy is to promote its greater
level of personal service and to position itself as a small-to-middle-market
lender to businesses left underserved by larger institutions.
Management's strategy has included and continues to include evaluation of
market needs and offering products to meet those needs. The Company will
continue to offer products and services that will allow it to control the
growth of its assets and liabilities. These new products and services will
allow the Company to properly position itself to its customers as a community
bank.
FACTORS AFFECTING EARNINGS
The results of the Company's operations are affected by many factors
beyond the Company's control, including general economic conditions and the
related monetary and fiscal policies of the federal government. Lending
activities are affected by the demand for mortgage financing and other types
of loans, which is in turn affected by the interest rates at which such
financing may be offered, and other factors affecting the supply of housing
and the availability of funds. Deposit flows and costs of funds are
influenced by yields available on competing investments and by general market
rates of interest.
ASSET AND LIABILITY MANAGEMENT. The Company's net earnings depend
primarily on its net interest income, which is the difference between
interest income received on its interest-earning assets (principally loans,
short-term and long-term investments, and mortgage-backed securities) and
interest expense paid on its interest-bearing liabilities (principally
deposits and FHLB advances). The Company's net interest income is
significantly affected by (i) the difference (the "interest rate spread")
between yields received on its interest-earning assets and the rates paid on
its interest-bearing liabilities and (ii) the relative amounts of its
interest-earning assets and interest-bearing liabilities. When
interest-earning assets equal or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income. The more
such liabilities exceed such assets, the greater the positive interest rate
spread and/or non-interest income must be in order to produce net income.
Non-interest sources of income and non-interest expenses also affect the
Company's net income. The higher non-interest expenses are, the greater the
positive interest rate spread and/or non-interest sources of income must be
to produce net income.
To reduce the adverse impact of rapid increases in market interest rates
on the Company's net interest income, the Company has emphasized the
origination and purchase of adjustable-rate mortgage loans. At September 30,
1996, 69.8% of the Company's net loans receivable and mortgage-backed
securities carried adjustable interest rates. The Company has from time to
time acquired longer term fixed-rate mortgage loans when the yields on these
interest-earning assets have been deemed advantageous by management. As a
part of its asset and liability management program, and as market conditions
permit, the Company attempts to lengthen the maturities of its
interest-bearing liabilities (i) with longer term deposits or (ii) when
advantageous, with borrowed funds. The Company's ability to manage interest
rate risk in its loan and investment portfolios depends upon a number of
factors, such as competition for loans and deposits in its market area and
conditions prevailing in the secondary mortgage market.
The Company has rate-sensitive (due or subject to repricing within one
year) liabilities that exceed its rate-sensitive assets, resulting in a
negative cumulative one-year gap position of 6.4% of total assets as of
September 30, 1996. This imbalance, when coupled with the deregulation of the
restrictions
4
<PAGE>
previously imposed on the types of savings products that financial
institutions are permitted to offer, subjects the Company's earnings to
change based on fluctuations in interest rates and affects the ability of the
Company to maintain adequate liquidity levels. The Company constantly
attempts to reduce the sensitivity of its earnings to fluctuations in
interest rates by adjusting the average maturities of its interest-bearing
liabilities and interest-earning assets. There can be no assurance, however,
of the degree to which the Company will be able to effectively maintain the
balance of its short-term interest-earning assets as compared to its
short-term interest-bearing liabilities and manage the risks to liquidity
associated therewith.
5
<PAGE>
GAP TABLE. The following table sets forth the amount of interest-earning
assets and interest-bearing liabilities outstanding at September 30, 1996,
which are expected to reprice or mature in each of the future time periods
shown.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------
INTEREST SENSITIVITY
PERIOD(1)
--------------------------
OVER
6 MONTHS 6 MONTHS
OR LESS -1 YEAR
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Interest-earning assets:
Investments, tax certificates,
Federal funds sold, FHLB overnight
deposits and other interest earning
assets, at cost .................... $ 62,988 $ 20,892
Mortgage-backed securities ........... 10,738 7,491
Loans:
Adjustable-rate mortgages ............ 383,997 61,532
Fixed-rate mortgages ................. 14,207 9,428
Commercial and consumer loans ....... 6,995 547
---------- -----------
Total loans ......................... 405,199 71,507
---------- -----------
Total interest-earning assets ...... 478,925 99,890
Total non-interest-earning assets .. -- --
---------- -----------
Total assets ........................ $478,925 $ 99,890
========== ===========
Interest-bearing liabilities:
Customer deposits:
Money market and NOW accounts ...... $ 33,821 $ --
Passbook accounts ................... 73,780 --
Certificate accounts ................ 229,225 87,337
---------- -----------
Total customer deposits ............... 336,826 87,337
Borrowings:
FHLB advances ........................ 162,000 45,000
Other borrowings ..................... -- --
---------- -----------
Total borrowings .................... 162,000 45,000
---------- -----------
Total interest-bearing liabilities . 498,826 132,337
---------- -----------
Total non-interest-bearing liabilities -- --
Stockholders' equity .................. -- --
---------- -----------
Total liabilities and stockholders'
equity ............................ $498,826 $132,337
========== ===========
Total interest-earning assets less
interest-bearing liabilities ("GAP") $(19,901) $(32,447)
========== ===========
Ratio of GAP to total assets .......... -2.41% -3.94%
========== ===========
Cumulative excess (deficiency) of
interest-earning assets over
interest-bearing liabilities ........ $(19,901) $(52,348)
========== ===========
Cumulative excess (deficiency) of
interest-earning assets over
interest-bearing liabilities, as a
percentage of total assets .......... -2.41% -6.35%
========== ===========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
NON-
OVER 1 - OVER 5 - OVER 10 - INTEREST
5 YEARS 10 YEARS YEARS EARNING TOTAL
------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Investments, tax certificates,
Federal funds sold, FHLB overnight
deposits and other interest earning
assets, at cost .................... $ 3,782 $ -- $ -- $ -- $ 87,662
Mortgage-backed securities ........... 36,734 10,353 4,849 -- 70,165
Loans:
Adjustable-rate mortgages ............ 45,940 -- -- 4,600 496,069
Fixed-rate mortgages ................. 56,630 30,949 32,466 324 144,004
Commercial and consumer loans ....... 897 16 -- 15 8,470
---------- ---------- ----------- ------------ -----------
Total loans ......................... 103,467 30,965 32,466 4,939 648,543
6
<PAGE>
NON-
OVER 1 - OVER 5 - OVER 10 - INTEREST
5 YEARS 10 YEARS YEARS EARNING TOTAL
------------ ----------- ------------ ------------ -----------
------------ ----------- ------------ ------------ -----------
Total interest-earning assets ...... 143,983 41,318 37,315 4,939 806,370
Total non-interest-earning assets .. -- -- -- 17,990 17,990
---------- ---------- ----------- ------------ -----------
Total assets ........................ $143,983 $41,318 $37,315 $ 22,929 $824,360
========== ========== =========== ============ ===========
Interest-bearing liabilities:
Customer deposits:
Money market and NOW accounts ...... $ -- $ -- $ -- $ 7,301 $ 41,122
Passbook accounts ................... -- -- -- -- 73,780
Certificate accounts ................ 74,642 -- -- -- 391,204
---------- ---------- ----------- ------------ -----------
Total customer deposits ............... 74,642 -- -- 7,301 506,106
Borrowings:
FHLB advances ........................ 30,000 -- -- -- 237,000
Other borrowings ..................... -- 460 315 -- 775
---------- ---------- ----------- ------------ -----------
Total borrowings .................... 30,000 460 315 -- 237,775
---------- ---------- ----------- ------------ -----------
Total interest-bearing liabilities . 104,642 460 315 7,301 743,881
---------- ---------- ----------- ------------ -----------
Total non-interest-bearing liabilities -- -- -- 11,368 11,368
Stockholders' equity .................. -- -- -- 69,111 69,111
---------- ---------- ----------- ------------ -----------
Total liabilities and stockholders'
equity ............................ $104,642 $ 460 $ 315 $ 87,780 $824,360
========== ========== =========== ============ ===========
Total interest-earning assets less
interest-bearing liabilities ("GAP") $ 39,341 $40,858 $37,000 $(64,851) $ --
========== ========== =========== ============ ===========
Ratio of GAP to total assets .......... 4.77% 4.96% 4.49% -7.87% --
========== ========== =========== ============ ===========
Cumulative excess (deficiency) of
interest-earning assets over
interest-bearing liabilities ........ $(13,007) $27,851 $64,851 $ -- $ --
========== ========== =========== ============ ===========
Cumulative excess (deficiency) of
interest-earning assets over
interest-bearing liabilities, as a
percentage of total assets .......... -1.58% 3.38% 7.87% -- --
========== ========== =========== ============ ===========
</TABLE>
- -----------------------------------------------------------------------------
(1) In preparing the table above, certain assumptions have been made with
regard to the repricing or maturity of certain assets and liabilities.
Assumptions as to prepayments on first and second mortgage loans and
mortgage-backed securities were obtained from prepayment rate tables that
provide assumptions correlating to recent actual repricing experienced in
the marketplace. Assumptions have also been made with regard to payments
on tax certificates based on historical experience. Money market, NOW and
passbook accounts are assumed to be rate sensitive in six months or less.
The rates paid in these accounts, however, are determined by management
based on market conditions and other factors and may reprice more slowly
than assumed. All other assets and liabilities have been repriced based
on the earlier of repricing or contractual maturity. The mortgage
prepayment rate tables, deposit decay rates and the historical
assumptions used regarding payments on tax certificates should not be
regarded as indicative of the actual repricing that may be experienced by
the Company.
6
<PAGE>
ASSET AND LIABILITY MANAGEMENT. The Company's net earnings depend
primarily on its net interest income, which is the difference between
interest income received on its interest-earning assets (principally loans,
short-term and long-term investments, and mortgage-backed securities) and
interest expense paid on its interest-bearing liabilities (principally
deposits and FHLB advances).
NET PORTFOLIO VALUE. The OTS adopted a final rule in August of 1993
incorporating an interest rate risk ("IRR") component into the risk-based
capital rules (see "Regulations"). The IRR component is a dollar amount that
is deducted from total capital for the purpose of calculating an
institution's risk-based capital requirement and is measured in terms of the
sensitivity of its net portfolio value ("NPV") to changes in interest rates.
An institution's NPV is the difference between incoming and outgoing
discounted cash flows from assets, liabilities, and off-balance sheet
contracts. An institution's IRR component is measured as the change in the
ratio of NPV to the present value of total assets as a result of a
hypothetical 200 basis point change in market interest rates. A resulting
decline in this ratio of more than 2% of the estimated market value of an
institution's assets will require the institution to deduct from its capital
50% of that excess decline. Implementation of the rule has been postponed
indefinitely.
The following table presents the Company's ratio of NPV to the present
value of total assets as of September 30, 1996, as calculated by the OTS,
based on information provided to the OTS by the Company.
<TABLE>
<CAPTION>
CHANGE IN INTEREST RATES RATIO OF NPV
IN BASIS POINTS PRESENT VALUE OF TO THE PRESENT VALUE OF
(RATE SHOCK) NPV TOTAL ASSETS TOTAL ASSETS CHANGE
- ------------------------- ---------- ----------------- ------------------------ ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
+400 $19,142 $763,216 2.51% (5.92)%
+200 48,290 798,031 6.05 (2.38)
Static 69,597 825,359 8.43 --
-200 79,063 841,628 9.39 .96
-400 87,288 856,792 10.19 1.76
</TABLE>
Certain shortcomings are inherent in the method of analysis presented in
the foregoing table. For example, although certain assets and liabilities may
have similar maturities or periods to repricing, they may react in different
degrees to changes in market interest rates. Also, the interest rates on
certain types of assets and liabilities may fluctuate in advance of changes
in market interest rates, while interest rates on other types may lag behind
changes in market rates. Additionally, certain assets, such as
adjustable-rate mortgage loans, have features that restrict changes in
interest rates on a short-term basis and over the life of the asset. Further,
in the event of a change in interest rates, prepayment and early withdrawal
levels would likely deviate significantly from those assumed in calculating
the tables. Finally, the ability of many borrowers to service their debt may
decrease in the event of an interest rate increase.
In addition, the previous table does not necessarily indicate the impact
of general interest rate movements on the Company's net interest income
because the repricing of certain categories of assets and liabilities is
subject to competitive and other pressures beyond the Company's control. As a
result, certain assets and liabialities indicated as maturing or otherwise
repricing within a stated period may in fact mature or reprice at different
times and at different volumes.
7
<PAGE>
YIELDS EARNED AND RATES PAID. The following table sets forth certain
information relating to the categories of the Company's interest-earning
assets and interest-bearing liabilities for the periods indicated. All yield
and rate information is calculated on an annualized basis. Yield and rate
information for a period is average information for the period calculated by
dividing the income or expense item for the period by the average balances
during the period of the appropriate balance sheet item. Net interest margin
is net interest income divided by average interest-earning assets.
Non-accrual loans are included in asset balances for the appropriate periods,
whereas recognition of interest on such loans is discontinued and any
remaining accrued interest receivable is reversed, in conformity with federal
regulations. The yields and net interest margins appearing in the following
table have been calculated on a pre-tax basis.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
---------------------------------------
1996
---------------------------------------
AS OF
9/30/96 AVERAGE
YIELD/RATE BALANCE INTEREST
------------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest-earning assets:
Loans receivable, net ........... 7.97% $540,313 $41,313
Mortgage-backed securities ..... 6.82 62,711 4,250
Short-term investments(1) ...... 5.30 41,240 2,359
Tax certificates ................ 8.96 34,831 3,018
Long-term investments and FHLB
stock, net .................... 6.98 17,352 1,192
--------- --------- ---------
Total interest-earning assets . 7.80 696,447 52,132
--------- --------- ---------
Interest-bearing liabilities:
NOW/Money Market ................ 2.45 33,148 775
Savings ......................... 4.40 59,965 2,627
Certificate of deposits ......... 5.52 313,521 17,389
FHLB advances and other
borrowings .................... 5.74 235,264 13,831
--------- --------- ---------
Total interest-bearing
liabilities .................. 5.31 641,898 34,622
--------- --------- ---------
Excess of interest-earning assets
over interest-bearing
liabilities .................... $ 54,549
========= ---------
Net interest income .............. $17,510
=========
Interest rate spread ............. 2.49%
=============
Net interest margin .............. 2.90%
=============
Ratio of interest-earning assets
to interest-bearing liabilities 108.50%
=========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1995 1994
----------------------------------- ----------------------------------------------
YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
--------- ----------- ----------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net ........... 7.65% $419,501 $30,171 7.19% $364,224 $23,513 6.46%
Mortgage-backed securities ..... 6.78 59,204 4,093 6.91 35,215 2,308 6.55
Short-term investments(1) ...... 5.72 23,844 1,491 6.25 21,101 803 3.81
Tax certificates ................ 8.66 37,377 3,087 8.26 39,228 3,207 8.17
Long-term investments and FHLB
stock, net .................... 6.87 7,930 577 7.29 10,041 590 5.89
------- ----------- ----------- --------- ----------- ----------- ---------
Total interest-earning assets . 7.49 547,856 39,419 7.20 469,809 30,421 6.48
------- ----------- ----------- --------- ----------- ----------- ---------
Interest-bearing liabilities:
NOW/Money Market ................ 2.34 41,196 875 2.12 51,860 1,102 2.12
Savings ......................... 4.38 55,950 2,420 4.33 46,925 1,716 3.66
Certificate of deposits ......... 5.55 276,564 14,554 5.26 221,074 8,526 3.86
FHLB advances and other
borrowings .................... 5.88 144,052 8,456 5.87 120,604 4,951 4.11
------- ----------- ----------- --------- ----------- ----------- ---------
Total interest-bearing
liabilities .................. 5.39 517,762 26,305 5.08 440,463 16,295 3.70
------- ----------- ----------- --------- ----------- ----------- ---------
Excess of interest-earning assets
over interest-bearing
liabilities .................... $ 30,094 $ 29,346
<PAGE>
1995 1994
----------------------------------- -----------------------------------------------
YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
--------- ----------- ----------- --------- ----------- ----------- ---------
--------- =========== ----------- --------- ===========
Net interest income .............. $13,114 $14,126
--------- =========== ===========
Interest rate spread ............. 2.10% 2.12% 2.78%
========= ========= =========
Net interest margin .............. 2.51% 2.39% 3.01%
========= ========= =========
Ratio of interest-earning assets
to interest-bearing liabilities 105.81% 106.66%
========= =========== ===========
</TABLE>
- --------------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and certificates
of deposit.
8
<PAGE>
RATE/VOLUME ANALYSIS. The following table presents, for the periods
indicated, the changes in interest income and the changes in interest expense
attributable to the changes in interest rates and the changes in the volume
of interest-earning assets and interest-bearing liabilities. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to: (i) changes in volume
(change in volume multiplied by prior year rate); (ii) changes in rate
(change in rate multiplied by prior year volume); (iii) changes in
rate/volume (change in rate multiplied by change in volume); and (iv) total
changes in rate and volume.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------
1996 V. 1995
--------------------------------------
INCREASE (DECREASE)
DUE TO
--------------------------------------
CHANGES CHANGES CHANGES
IN IN IN
VOLUME RATE RATE/VOLUME
---------- ---------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income attributable to:
Loans .............................. $ 8,689 $1,905 $548
Mortgage-backed securities and
collateralized mortgage obligations 242 (81) (4)
Short-term investments(1) .......... 1,088 (127) (93)
Tax Certificates ................... (210) 152 (11)
Long-term investments and
FHLB stock ....................... 687 (33) (39)
--------- --------- -----------
Total interest-earning assets .... 10,496 1,816 401
--------- --------- -----------
Interest expense attributable to:
NOW/Money Market ................. (171) 88 (17)
Savings ............................ 173 31 3
Certificates of Deposit ............ 1,946 785 104
FHLB advances and other borrowings 5,354 13 8
--------- --------- -----------
Total interest-bearing liabilities 7,302 917 98
--------- --------- -----------
Increase (decrease) in net interest
income ........................... $ 3,194 $ 899 $303
========= ======== ===========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------
1995 V. 1994
------------------------------------------------------------------
INCREASE (DECREASE)
DUE TO
------------------------------------------------------------------
TOTAL CHANGES CHANGES CHANGES TOTAL
INCREASE IN IN IN INCREASE
(DECREASE) VOLUME RATE RATE/VOLUME (DECREASE)
----------- ---------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Interest income attributable to:
Loans .............................. $11,142 $3,568 $ 2,683 $ 407 $ 6,658
Mortgage-backed securities and
collateralized mortgage obligations 157 1,572 126 87 1,785
Short-term investments(1) .......... 868 104 517 67 688
Tax Certificates ................... (69) (151) 33 (2) (120)
Long-term investments and
FHLB stock ....................... 615 (124) 140 (29) (13)
--------- --------- ----------- ---------- ---------
Total interest-earning assets .... 12,713 4,969 3,499 530 8,998
--------- --------- ----------- ---------- ---------
Interest expense attributable to:
NOW/Money Market ................. (100) (227) -- -- (227)
Savings ............................ 207 330 314 60 704
Certificates of Deposit ............ 2,835 2,140 3,108 780 6,028
FHLB advances and other borrowings 5,375 963 2,128 414 3,505
--------- --------- ----------- ---------- ---------
Total interest-bearing liabilities 8,317 3,206 5,550 1,254 10,010
--------- --------- ----------- ---------- ---------
Increase (decrease) in net interest
income ........................... $ 4,396 $1,763 $(2,051) $ (724) $(1,012)
========= ========= =========== ========== =========
</TABLE>
- ---------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and certificates
of deposit.
9
<PAGE>
LENDING ACTIVITIES
GENERAL. The Company focuses its lending activity on purchasing and
originating single-family residential mortgage loans. The Company's lending
strategy also includes expanding its commercial real estate, commercial
business, and real estate construction lending. The Company also currently
offers consumer loans, such as automobile loans and boat loans, primarily as
an accommodation to existing customers.
LOAN PORTFOLIO. The Company's loan portfolio primarily consists of
adjustable-rate mortgage loans and, to a lesser extent, fixed-rate mortgage
loans secured by one-to-four-family residential and commercial real estate.
As of September 30, 1996, the Company's loan portfolio totaled $644.0
million, of which $570.9 million or 79.7% consisted of one-to-four-family
residential first mortgages. At the present time, the Company's residential
real estate loans are primarily "conventional" loans, which means that these
loans are not insured by the Federal Housing Administration (the "FHA") or
guaranteed by the Veterans Administration (the "VA"). The Company is,
however, approved to originate FHA and VA loans. The average yield on the
Company's mortgage loans, of which 76.7% had adjustable rates and 23.3% had
fixed rates, was 7.65%, 7.19% and 6.46% for the fiscal years ended September
30, 1996, 1995 and 1994, respectively. The remainder of the Company's loan
portfolio consisted of $49.3 million of commercial real estate loans (6.9% of
total loans); five or more unit
9
<PAGE>
residential loans of $12.6 million (1.7% of total loans); $2.7 million of
second mortgage loans (0.4% of total loans); $2.6 million of consumer loans
(0.4% of total loans); $5.8 million of commercial business loans (0.8% of
total loans); and $2.7 million of other loans (0.4% of total loans).
At September 30, 1996, the Company's loan portfolio included $38.2 million
of residential mortgage loans to nonresident aliens. See "Mortgage Loan
Purchases and Originations" for additional information on the Company's loans
to non-resident aliens.
Set forth below is a table showing the Company's loan origination,
purchase and sale activity for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------
1996 1995 1994
------------ ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Total loans receivable, net, at beginning of period(1) ..... $ 453,350 $413,287 $310,441
Loans originated:
Residential real estate .................................... 65,954 54,438 72,108
Commercial, business and consumer .......................... 16,705 7,556 3,885
------------ ----------- -----------
Total loans originated .................................... 82,659 61,994 75,993
Loans purchased ............................................. 250,215 76,081 150,502
Loans sold .................................................. (4,356) (2,449) (21,867)
Principal payments and amortization of discounts and
premiums .................................................. (133,836) (93,787) (96,214)
Loans charged off ........................................... (493) (594) (1,582)
Transfers to real estate owned .............................. (1,154) (1,182) (3,986)
------------ ----------- -----------
Total loans receivable, net, at end of period(1) ........ $ 646,385 $453,350 $413,287
============ =========== ===========
</TABLE>
- ---------
(1) Includes loans held for sale.
10
<PAGE>
The following table sets forth certain information with respect to the
composition of the Company's loan portfolio, including mortgage loans held
for sale and mortgage-backed securities, as of the dates indicated. For
additional information as to the Company's mortgage-backed securities,
including carrying values and approximate market values of such securities,
see Notes 1 and 4 of the Notes to the Company's Consolidated Financial
Statements included in Appendix D hereto.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
------------------------------------
1996 1995
----------------------- -----------
AMOUNT PERCENT AMOUNT
----------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
First mortgage loans:
One-to-four-family residential $570,890 79.7% $433,122
Five-or-more-unit residential . 12,559 1.7 1,124
Commercial ..................... 49,318 6.9 10,223
Second mortgage loans ........... 2,748 0.4 2,412
---------- ---------- -----------
Total first and second mortgage
loans ........................... 635,515 88.7 446,881
---------- ---------- -----------
Consumer loans .................. 2,648 0.4 920
Commercial business loans ...... 5,822 0.8 3,632
---------- ---------- -----------
Total loans receivable ......... 643,985 89.9 451,433
---------- ---------- -----------
Deferred loan fees, premiums and
(discounts) ..................... 4,558 0.6 3,386
Allowance for loan losses ...... (2,158) (0.3) (1,469)
---------- ---------- -----------
Loans receivable, net(1) ........ 646,385 90.2 453,350
---------- ---------- -----------
Mortgage-backed securities, net 70,165 9.8 52,998
---------- ---------- -----------
Total loans receivable, net
and mortgage-backed
securities .................. $716,550 100.0% $506,348
========== ========== ===========
Weighted average yield on total
loan losses receivable, net, and
mortgage-backed securities ..... 7.86%
==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1994 1993 1992
----------------------- ----------------------- -----------------------
PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
---------- ----------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
First mortgage loans:
One-to-four-family residential 85.5% $395,028 84.0% $301,689 93.3% $224,707 89.7%
Five-or-more-unit residential . 0.2 2,164 0.5 705 0.2 856 0.3
Commercial ..................... 2.0 4,469 0.9 748 0.2 350 0.1
Second mortgage loans ........... 0.5 2,616 0.6 623 0.2 631 0.3
-------- ---------- -------- ---------- ---------- -------- --------
Total first and second mortgage
loans ........................... 88.2 404,277 86.0 303,765 93.9 226,544 90.4
-------- ---------- -------- ---------- ---------- -------- --------
Consumer loans .................. 0.2 2,336 0.5 2,786 0.9 2,664 1.1
Commercial business loans ...... 0.7 4,732 1.0 3,665 1.1 2,143 0.8
-------- ---------- -------- ---------- ---------- -------- --------
Total loans receivable ......... 89.1 411,345 87.5 310,216 95.9 231,351 92.3
-------- ---------- -------- ---------- ---------- -------- --------
Deferred loan fees, premiums and
(discounts) ..................... 0.7 2,783 0.6 1,409 0.4 (437) (0.2)
Allowance for loan losses ...... (0.3) (841) (0.2) (1,184) (0.4) (265) (0.1)
-------- ---------- -------- ---------- ---------- -------- --------
Loans receivable, net(1) ........ 89.5 413,287 87.9 310,441 95.9 230,649 92.0
-------- ---------- -------- ---------- ---------- -------- --------
Mortgage-backed securities, net 10.5 57,155 12.1 13,156 4.1 19,957 8.0
-------- ---------- -------- ---------- ---------- -------- --------
Total loans receivable, net
and mortgage-backed
securities .................. 100.0% $470,442 100.0% $323,597 100.0% $250,606 100.0%
======== ========== ======== ========== ========== ======== ========
Weighted average yield on total
loan losses receivable, net, and
mortgage-backed securities ..... 7.53% 6.60% 6.37% 7.90%
======== ======== ========== ========
</TABLE>
- ---------
(1) Includes loans held for sale.
The following table sets forth, as of September 30, 1996 the amount of
11
<PAGE>
loans, mortgage loans held for sale and mortgage-backed securities held in
the Company's portfolio by category and expected principal repayments by
year. As of September 30, 1996, the total amount of loans with contractual
maturities greater than one year with fixed and adjustable interest rates
totaled approximately $119.0 million and $368.3 million, respectively.
<TABLE>
<CAPTION>
OUTSTANDING ON
SEPTEMBER 30,
1996 1997 1998
--------------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
First Mortgage Loans:
One-to-four-family residential $570,890 $133,259 $ 96,871
Five-or-more-unit residential . 12,559 3,763 2,973
Commercial ..................... 49,318 13,415 10,668
Second Mortgage loans ........... 2,748 792 736
--------------- ----------- -----------
Total first and second mortgage
loans ........................ 635,515 151,229 111,248
Consumer ....................... 2,648 1,552 1,096
Commercial business loans ..... 5,822 3,885 1,937
--------------- ----------- -----------
Total loans receivable ......... 643,985 156,666 114,281
Mortgage-backed securities ..... 70,002 17,099 14,128
--------------- ----------- -----------
Total ......................... $713,987 $173,765 $128,409
=============== =========== ===========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
2001- 2003- 2006 AND
1999 2000 2002 2006 THEREAFTER
---------- ---------- ---------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
First Mortgage Loans:
One-to-four-family residential $72,613 $55,069 $42,273 $109,147 $61,658
Five-or-more-unit residential . 2,331 1,810 1,390 292 --
Commercial ..................... 8,431 6,614 10,190 -- --
Second Mortgage loans ........... 686 534 -- -- --
--------- ---------- ---------- ---------- -----------
Total first and second mortgage
loans ........................ 84,061 64,027 53,853 109,439 61,658
Consumer ....................... -- -- -- -- --
Commercial business loans ..... -- -- -- -- --
--------- ---------- ---------- ---------- -----------
Total loans receivable ......... 84,061 64,027 53,853 109,439 61,658
Mortgage-backed securities ..... 11,738 6,943 3,951 10,718 5,425
--------- ---------- ---------- ---------- -----------
Total ......................... $95,799 $70,970 $57,804 $120,157 $67,083
========= ========== ========== ========== ===========
</TABLE>
Applicable regulations permit the Company to engage in various categories
of secured and unsecured commercial and consumer lending, in addition to
residential real estate financing, subject to limitations on the percentage
of total assets attributable to certain categories of loans. An additional
11
<PAGE>
limitation imposed by regulation requires that certain types of loans only be
made in aggregate amounts that do not exceed specified percentages of the
institution's capital. As of September 30, 1996, 19.5% of the Company's gross
loans receivable (15.3% of total assets) were secured by properties located
in California and 40.8% of gross loans receivable (31.9% of total assets)
were secured by properties located in Florida. Because of this concentration,
regional economic circumstances in those states could affect the level of the
Company's non-performing loans. The following table sets forth, as of
September 30, 1996 the distribution of the amount of the Company's loans
(including mortgage loans held for sale) by state.
<TABLE>
<CAPTION>
OUTSTANDING ON
STATE SEPTEMBER 30, 1996
- ---------------------------- -------------------
(IN THOUSANDS)
<S> <C>
Florida(1) ................. $262,747
California ................. 125,802
Ohio ....................... 27,808
New Jersey ................. 20,411
Maryland ................... 19,346
Colorado ................... 19,099
Virginia ................... 19,038
New York ................... 18,363
Illinois ................... 16,261
Arizona .................... 12,275
Michigan ................... 11,179
Minnesota .................. 10,996
Connecticut ................ 10,661
Massachusetts .............. 10,274
Texas ...................... 6,884
Georgia .................... 5,679
Washington ................. 5,492
Pennsylvania ............... 4,475
Nevada ..................... 2,762
Utah ....................... 1,915
District of Columbia ....... 1,839
Missouri ................... 1,816
Tennessee .................. 1,704
South Carolina ............. 1,664
North Carolina ............. 1,485
Oregon ..................... 1,458
New Hampshire .............. 1,357
Oklahoma ................... 1,331
Kentucky ................... 1,280
Arkansas ................... 1,250
Alabama .................... 1,154
Indiana .................... 1,036
Kansas ..................... 1,036
Wisconsin .................. 1,010
Maine ...................... 858
Louisana ................... 831
Rhode Island ............... 792
Hawaii ..................... 731
Idaho ...................... 641
Others(2) .................. 775
Not secured by real estate 8,470
-------------------
Total ..................... $643,985
===================
</TABLE>
- ---------
(1) Does not include $40.1 million of tax certificates representing liens
secured by properties in Florida.
(2) Less than $500,000 in any one state.
12
<PAGE>
RESIDENTIAL MORTGAGE LOAN PURCHASES AND ORIGINATIONS. The Company's
lending primarily involves purchasing in the secondary mortgage market and
originating loans secured by first mortgages on real estate improved with
single-family dwellings. The Company services loans in its portfolio that it
originates. The Company attempts to purchase loans servicing-released, when
available, although at September 30, 1996, the Company's loan portfolio
included $320.0 million of loans that were serviced by others. As of
September 30, 1996, the Company was servicing a total of approximately $318.8
million in mortgage loans, including $3.8 of loans serviced for others.
The Company's first mortgage loans purchased or originated are generally
repayable over 15 or 30 years. Additionally, the Company offers second
mortgage residential loans with maturities ranging from five to 15 years.
Residential loans typically remain outstanding for shorter periods than their
contractual maturities because borrowers prepay the loans in full upon sale
of the mortgaged property or upon refinancing of the original loan. The
Company currently originates and purchases fixed-rate and adjustable-rate
first mortgage loans secured by owner-occupied residences with 15-year term
or 30-year term amortization, and second mortgage loans with 15-year term
amortization or 30-year term amortization with a balloon payment after five
years.
The Company's adjustable-rate mortgage loans ("ARMs") generally have
interest rates that adjust monthly, semi-annually or annually at a margin
over the weekly average yield on U.S. Treasury securities adjusted to a
constant maturity of one year published by the Federal Reserve or the FHLB
11th District cost-of-funds index ("COFI") published by the FHLB of San
Francisco. The maximum interest rate adjustment of the Company's ARMs is
generally 1% semi-annually and 6% over the life of the loan, above or below
the initial rate on the loan for semi-annual adjustables, or 2% annually and
6% over the life of the loan, above or below the initial rate on the loan for
annual adjustables. The Company's COFI loans with monthly adjustable interest
rates also provide for a 7.5% cap on monthly payment increases from one
annual payment adjustment to the next, except at the end of five years, when
monthly payments may be adjusted by more than the payment increase cap in
order to provide for the complete amortization by maturity. Because of the
payment cap and the different times at which interest rate adjustments and
payment adjustments are made on these loans, monthly payments on these loans
may not be sufficient to pay the interest accruing on the loan. The amount of
any shortage is added to the principal balance of the loan to be repaid
through future monthly payments to the Company ("negative amortization"). If
the loan-to-value ratio is high, negative amortization could significantly
increase the risk associated with the loan; the Company's management,
however, believes that this risk is mitigated due to the relative stability
of the index used and to conservative underwriting policies.
The Company sometimes purchases or originates loans with "teaser" rates
that are below market rates during an initial period after the loan is x
originated. For loans with teaser rates, the borrower's ability to repay is
determined upon fully indexed rates.
Applicable regulations permit the Company to lend up to 100% of the
appraised value of the real property securing a loan ("loan-to-value ratio").
The Company, however, generally does not make or acquire loans with
loan-to-value ratios that exceed 80% at origination. When terms are
favorable, the Company will purchase or originate single-family mortgage
loans with loan-to value ratios between 80% and 95%. In most of these cases,
the Company will, as a matter of policy, require the borrower to obtain
private mortgage insurance that insures that portion of the loan exceeding
the 80% loan-to-value ratio, thereby reducing the risk to no more than 80% of
appraised value.
The Company generally applies the same underwriting criteria to
residential mortgage loans purchased or originated. In its loan purchases,
the Company generally reserves the right to reject particular loans from a
loan package being purchased and does reject loans in a package that do not
meet its underwriting criteria. In determining whether to purchase or
originate a loan, the Company assesses both the borrower's ability to repay
the loan and the adequacy of the proposed collateral. On originations, the
Company obtains appraisals of the property securing the loan. On purchases,
the Company reviews the appraisal obtained by the loan seller or originator
and arranges for an updated
13
<PAGE>
review appraisal before purchasing the loan. On purchases and originations,
the Company reviews information concerning the income, financial condition,
employment and credit history of the applicant. On purchases, the Company
generally obtains a credit report on the borrower separate from that provided
by the loan seller.
The Company has adopted written, non-discriminatory underwriting standards
for use in the underwriting and review of every loan considered for
origination or purchase. These underwriting standards are reviewed and
approved annually by the Company's Board of Directors. The Company's
underwriting standards for residential mortgage loans generally conform to
(except as to principal balance and with regard to certain loans discussed
below, as to the borrower's citizenship and related factors) standards
established by Fannie Mae ("FNMA") and the Federal Home Loan Mortgage
Corporation (the "FHLMC"). A loan application is obtained or reviewed by the
Company's underwriters to determine the borrower's ability to repay, and
confirmation of the more significant information is obtained through the use
of credit reports, financial statements, and employment and other
verifications.
The Company generally uses appraisals to determine the value of collateral
for all loans it originates. When originating a real estate mortgage loan,
the Company obtains a new appraisal of the property from an independent third
party to determine the adequacy of the collateral, and such appraisal is
reviewed by one of the underwriters. With respect to a substantial percentage
of loans purchased, the collateral value is determined by reference to a
review appraisal. Otherwise, the collateral value is determined by reference
to the documentation contained in the original file. Borrowers are required
to obtain casualty insurance and, if applicable, flood insurance in amounts
at least equal to the outstanding loan balance or the maximum amount allowed
by law.
The Company also requires that a survey be conducted and title insurance
be obtained, insuring the priority of its mortgage lien. Pursuant to its
underwriting standards, the Company generally requires private mortgage
insurance policies on newly originated mortgage loans with loan-to-value
ratios greater than 80%. All loans are reviewed by the Company's underwriters
to ensure that its guidelines are met or that waivers are obtained in limited
situations where offsetting factors exist.
With regard to loan purchases, a legal review of every loan file is
conducted to determine the adequacy of the legal documentation. The Company
receives various representations and warranties from the sellers of the loans
regarding the quality and characteristics of the loans.
Approximately $38.2 million, or 5.9%, of the Company's gross loans
receivable are first mortgage loans to non-resident aliens secured by
single-family residences located in Florida. These loans are purchased and
originated by the Company in a manner similar to that described above for
other residential loans. Loans to non-resident aliens generally afford the
Company an opportunity to receive rates of interest higher than those
available from other single-family residential loans. Nevertheless, such
loans generally involve a greater degree of risk than other single-family
residential mortgage loans. The ability to obtain access to the borrower is
more limited for non-resident aliens, as is the ability to attach or verify
assets located in foreign countries. The Company has attempted to minimize
these risks through its underwriting standards for such loans (including
generally lower loan-to-value ratios and qualification based on verifiable
assets located in the United States).
COMMERCIAL REAL ESTATE LENDING. The Company's commercial real estate
lending division originates or purchases multi-family and commercial real
estate loans from $250,000 to $4.0 million. The Company's strategy is to
promote commercial lending together with private banking (see "Private
Banking" below), as both areas seek to develop long-term relationships with
select businesses, real estate borrowers, and professionals. At September 30,
1996, the Company had $49.3 million of commercial real estate loans,
representing a total of 6.9% of the Company's loan portfolio before net
items. The Company's commercial real estate loan portfolio includes loans
secured by apartment buildings, office buildings, warehouses, retail stores
and other properties, which are located in the Company's primary market area.
Commercial real estate loans generally are originated in amounts up
14
<PAGE>
to 75% of the appraised value of the property securing the loan. In
determining whether to originate or purchase multi-family or commercial real
estate loans, the Company also considers such factors as the financial
condition of the borrower and the debt service coverage of the property.
Commercial real estate loans are made at both fixed and adjustable interest
rates for terms of up to 10 years.
Appraisals on properties securing commercial real estate loans originated
by the Company are performed at the time the loan is made by an independent
appraiser. In addition, the Company's underwriting procedures generally
require verification of the borrower's credit history, income and financial
statements, banking relationships, references and income projections for the
property. Personal guarantees are generally obtained for the Company's
commercial real estate loans.
Management's expansion into this area reflects its business strategy to
obtain seasoned loan product divested by the super-regional financial
companies in South Florida and its belief that commercial real estate loans
are generally of short-to moderate-term with higher-yielding variable
interest rates as compared to residential loans. In December 1995, the
Company purchased approximately $32.0 million of commercial real estate loans
in Florida from another financial institution. The loan package comprised 23
loans with principal balances ranging from $430,000 to $4.7 million.
Management believes that with the recent acquisition of several Florida-based
financial institutions by out-of-state regional banks, the Company will be
able to expand its commercial real estate business.
Commercial real estate lending affords the Company an opportunity to
receive interest at rates higher than those generally available from
one-to-four-family residential lending. Nevertheless, loans secured by such
properties are generally larger and involve a greater degree of risk than
one-to-four-family residential mortgage loans. Because payments on loans
secured by commercial real estate properties are often dependent on the
successful operation or management of the properties, repayment of such loans
may be subject to adverse conditions in the real estate market or the
economy. If the cash flow from the project is reduced (for example, if leases
are not obtained or renewed), the borrower's ability to repay the loan may be
impaired. In addition, adjustable-rate commercial real estate loans are
subject to increased risk of delinquency or default as interest rates
increase. The Company has attempted to minimize these risks through its
underwriting standards.
REAL ESTATE CONSTRUCTION LENDING. The Company has commenced a program to
make real estate construction loans to individuals for the construction of
their residences, as well as to builders and real estate developers for the
construction of one-to-four-family residences and commercial and multi-family
real estate, although at September 30, 1996, the Company had no construction
loans.
Construction loans to individuals for their residences may be, but would
not be required to be, structured to be converted to permanent loans with the
Company at the end of the construction phase. Such residential construction
loans would generally be underwritten pursuant to the same guidelines used
for originating permanent residential loans. The Company's construction loans
would typically have terms of up to nine months and have rates higher than
permanent one-to-four-family loans offered by the Company. During the
construction phase, the borrower would pay interest only. Generally, the
maximum loan-to-value ratio of owner-occupied, single-family construction
loans would be 75%.
The Company may from time to time make construction loans on commercial
real estate projects secured by apartments, shopping centers, industrial
properties, small office buildings, medical facilities or other property.
Such loans would generally be structured to be converted to permanent loans
at the end of the construction phase, which generally runs from 12 to 18
months. These construction loans would have rates and terms that match any
permanent commercial real estate loan then offered by the Company, except
that during the construction phase, the borrower would pay interest only.
These loans would generally provide for the payment of interest and loan fees
from loan proceeds.
Because of the uncertainties inherent in estimating construction costs and
the market for the project upon completion, it is relatively difficult to
evaluate accurately the total loan funds that would be required to complete a
project, the related loan-to-value ratios, and the likelihood of ultimate
15
<PAGE>
success of a project. Construction loans to borrowers other than
owner-occupants also involve many of the same risks discussed above regarding
commercial real estate loans and tend to be more sensitive to general
economic conditions than many other types of loans. Also, the funding of loan
fees and interest during the construction phase makes the monitoring of the
progress of the project particularly important, as customary early warning
signals of project difficulties may not be present.
COMMERCIAL BUSINESS LENDING. Commercial business loans totaled $5.8
million as of September 30, 1996, representing .8% of total loans. In its
commercial business loan underwriting, the Company evaluates the value of the
collateral securing the loan and assesses the borrower's creditworthiness and
ability to repay. While commercial business loans generally are made for
shorter terms and at higher yields than one-to-four-family residential loans,
such loans generally involve a higher level of risk than one-to-four-family
residential loans because the risk of borrower default is greater and the
collateral may be more difficult to liquidate and more likely to decline in
value.
LOAN PORTFOLIO QUALITY. Federal regulations require a savings institution
to review its assets on a regular basis and, if appropriate, to classify
assets as "substandard," "doubtful", or "loss" depending on the likelihood of
loss. General allowances for loan losses are required to be established for
assets classified as substandard or doubtful. For assets classified as loss,
the institution must either establish specific allowances equal to the amount
classified as a loss or charge off such amount. Assets that do not require
classification as substandard but that possesses credit deficiencies or
potential weaknesses deserving management's close attention are required to
be designated as "special mention." The deputy director of the appropriate
OTS regional office may approve, disapprove or modify any classifications of
assets and any allowance for loan losses established.
Additionally, under standard banking practices, an institution's asset
quality is also measured by the level of non-performing loans in the
institution's portfolio. Non-performing loans consist of (i) non-accrual
loans; (ii) loans that are more than 90 days contractually past due as to
interest or principal but that are well-secured and in the process of
collection or renewal in the normal course of business; and (iii) loans that
have been renegotiated to provide a deferral of interest or principal because
of a deterioration in the financial condition of the borrower. The Company
provides delinquency notices to borrowers when loans are 30 or more days past
due. The Company places conventional mortgage loans on non-accrual status
when more than 90 days past due. When a loan is placed on non-accrual status,
the Company reverses all accrued and uncollected interest. The Company also
begins appropriate legal procedures to obtain repayment of the loan or
otherwise satisfy the obligation.
As of September 30, 1996, the Company had $8.3 million in substandard
assets of which $7.8 million are included in non-performing assets.
Substandard assets consisted of the following:
AS OF
SEPTEMBER 30, 1996
-------------------
(IN THOUSANDS)
One-to-four-family residential loans ........ $6,409
Consumer and business loans ................ 15
REO ......................................... 632
Tax certificates ............................ 1,264
------
Total Substandard Assets ................... $8,320
======
In addition, $259,000 of tax certificates were classified as loss as of
September 30, 1996 and have been specifically reserved for.
16
<PAGE>
The following table sets forth information regarding the Company's
allowance for loan losses for the periods indicated:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- ---------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Allowance for loan losses balance (at beginning of period $1,469 $ 841 $ 1,184 $ 265 $195
Provisions (credit) for loan losses ...................... (120) 1,221 1,187 1,052 70
Allowance from Bank of Florida ........................... 183 -- -- -- --
Allocation from discounts on loans purchased ............. -- -- -- 90 --
Loans charged off:
One-to four-family residential loans ..................... (493) (535) (1,582) (223) --
Commercial and other ..................................... -- (59) -- -- --
-------- --------- ---------- ---------- --------
Total (493) (594) (1,582) (223) --
-------- --------- ---------- ---------- --------
Recoveries:
One-to four-family residential loans ..................... 1,119 1 52 -- --
-------- --------- ---------- ---------- --------
Allowance for loan losses, balance (at end of period) ... $2,158 $1,469 $ 841 $1,184 $265
======== ========= ========== ========== ========
</TABLE>
Historically, recoveries of charged off loans have been minimal since
charged off loans have been primarily one-to-four family residential loans
and typically the only substantial asset available to the Company is the real
estate securing the loan which is acquired through foreclosure and sold.
However, in its fiscal year ended September 30, 1996, the Company received a
recovery of approximately $1.0 million as settlement of litigation the
Company initiated against a seller of residential mortgage loans. The Company
is not aware of any significant liability related to REO or loans that may be
foreclosed.
The following table sets forth the allocation of general allowance for
loan losses by loan category for the periods indicated.
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
------------------------------------------------------------------------------
1996 1995 1994
------------------------ ------------------------ ---------------------------
% OF LOANS % OF LOANS % OF LOANS
IN EACH IN EACH IN EACH
CATEGORY TO CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
--------- -------------- --------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at end of period
applicable to: ..................
One-to-four-family residential
mortgages ....................... $1,381 88.6% $1,207 95.9% $766 96.0%
Commercial and other loans ..... 739 11.4% 168 4.1% 75 4.0%
Unallocated ..................... 38 N/A 94 N/A -- N/A
-------- --------- ------- -------- -------- ------
Total allowances for loan losses $2,158 100.0% $1,469 100.0% $841 100.0%
======== ========= ======= ======== ======== ======
</TABLE>
For additional information regarding the Company's allowance for loan
losses and the credit quality of the Company's assets, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Financial Condition--Credit Quality" in Appendix C hereto.
PRIVATE BANKING
The Company's Private Banking Division focuses on the diverse lending and
deposit needs of professionals and executives in South Florida. Private
banking is customer-oriented, not transaction-oriented, with an emphasis on
building a total banking relationship. The Private Banking target market
includes the upscale markets of metropolitan Miami with emphasis on the Coral
Gables and southwest Dade County areas.
Currently, the Company's commercial business loans and
non-interest-bearing demand deposit accounts are originated primarily by the
Private Banking Division. The Company is developing its
17
<PAGE>
capability to deliver loan services to businesses in communities served by
its branch offices. The Private Banking Division is also responsible for a
portion of the residential real estate loans originated by the Company,
particularly the loans with higher balances, which usually generate higher
fees. The Company's consumer lending business is also generated by this
division.
MORTGAGE BANKING
The Company has established a correspondent mortgage banking operation for
the origination of single-family residential mortgage loans in its market
area. This correspondent operation consists of a network of mortgage brokers
and lenders in South Florida that generate mortgage loans for the Company.
Originations in the correspondent program, together with branch lending,
reached $54.0 million in fiscal 1996.
INVESTMENTS
The Company maintains an investment portfolio consisting primarily of
federal agency securities, FHLB overnight deposits, securities purchased
under agreements to resell and tax certificates. Federal regulations limit
the instruments in which the Company may invest its funds. The Company's
current investment policy permits purchases only of investments (with the
exception of tax certificates) rated in one of the three highest grades by a
nationally recognized rating agency and does not permit purchases of
securities of non-investment grade quality (such as so-called "junk bonds").
The Company's portfolio also includes tax certificates issued by various
counties in the State of Florida. Tax certificates represent tax obligations
that are auctioned by county taxing authorities on an annual basis in order
to collect delinquent real estate taxes. Although tax certificates have no
stated maturity, the certificate holder has the right to collect the
delinquent tax amount, plus interest, and can file for a tax deed if the
delinquent tax amount is unpaid at the end of two years. Tax certificates
have a claim superior to most other liens. If the holder does not file for
deed within seven years, the certificate becomes null and void. The Company
has adopted detailed policies with regard to its investment in tax
certificates, which specify due diligence procedures, purchasing procedures
(including parameters for the location, type and size of tax certificates
acceptable for purchase) and procedures for managing the portfolio after
acquisition.
The following table sets forth information regarding the Company's
investments as of the dates indicated. Amounts shown are historical amortized
cost. For additional information regarding the Company's investment
securities, including the carrying values and approximate market values of
such investment securities, see Notes 1 and 4 of the Notes to the Company's
Consolidated Financial Statements included in Appendix D hereto.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
----------------------------------
1996 1995 1994
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Securities purchased under agreements to
resell ........................................ $ -- $ -- $ 700
Federal funds sold ............................ 400 400 375
Federal agency securities ..................... 4,985 4,675 2,003
FHLB overnight deposits ....................... 28,253 31,813 11,212
Tax certificates .............................. 40,088 39,544 42,612
Other ......................................... 1,711 11 11
--------- --------- ---------
Total investment securities .................. $75,437 $76,443 $56,913
========= ========= =========
Weighted average yield ....................... 7.35% 7.88% 7.61%
========= ========= =========
</TABLE>
18
<PAGE>
The following table sets forth information regarding the maturities of the
Company's investments as of September 30, 1996. Amounts shown are book
values.
<TABLE>
<CAPTION>
PERIODS TO MATURITY
FROM SEPTEMBER 30, 1996
------------------------------------
WITHIN 1 THROUGH OVER
1 YEAR 5 YEARS 5 YEARS
---------- ------------ -----------
<S> <C> <C> <C>
Federal agency securities $ 2,004 $2,981 $ --
FHLB overnight deposits .. 28,253 -- --
Tax certificates(1) ....... 40,088 -- --
Federal funds sold ........ 400 -- --
Other ..................... 910 765 36
--------- --------- -------
Total .................... $71,655 $3,746 $ 36
========= ========= =======
Weighted average yield .. 7.36% 7.15% 6.76%
========= ========= =======
</TABLE>
- ----------
(1) Maturities are based on historical experience.
OTHER INTEREST-EARNINGS ASSETS
Included in other interest-earning assets is stock of the FHLB of Atlanta,
which totaled $12.2 million, $12.3 million and $7.9 million as of September
30, 1996, 1995 and 1994, respectively. The Company also had a $25,000 equity
investment in the Community Reinvestment Group as of September 30, 1996 and
1995. Carrying value, which is par, is estimated to be the fair market value
of these assets.
SOURCES OF FUNDS
The Company's primary sources of funds for its investment and lending
activities are customer deposits, loan repayments, funds from operations, the
Company's capital and FHLB advances.
DEPOSITS. The Company offers a full variety of deposit accounts ranging
from passbook accounts to certificates of deposit with maturities of up to
five years. The Company also offers transaction accounts, which include
commercial checking accounts, negotiable order of withdrawal ("NOW")
accounts, super NOW accounts and money market deposit accounts. The rates
paid on deposits are established periodically by management based on the
Company's need for funds and the rates being offered by the Company's
competitors with the goal of remaining competitive without offering the
highest rates in the market area. The Company has not utilized brokered
deposits.
The Company has placed increasing reliance on passbook accounts, money
market accounts, certificates of deposit and other savings alternatives that
are more responsive to market conditions than long-term, fixed-rate
certificates. While market-sensitive savings vehicles permit the Company to
reduce its cost of funds during periods of declining interest rates, such
savings alternatives also increase the Company's vulnerability to periods of
high interest rates. There are no regulatory interest rate ceilings on the
Company's accounts.
19
<PAGE>
The following table sets forth information concerning the Company's
deposits by account type and the weighted average nominal rates at which
interest is paid thereon as of the dates indicated:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
--------------------------------------------------------------------
1996 1995 1994
--------------------- --------------------- -----------------------
AMOUNT RATE AMOUNT RATE AMOUNT RATE
----------- -------- ----------- -------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Passbook accounts:
Regular ............................... $ 73,741 4.44% $ 50,327 3.04% $ 44,533 3.04%
Holiday club .......................... 39 2.00 46 2.00 50 1.75
----------- ---------- -------------
Total passbook accounts .............. 73,780 50,373 44,583
----------- ---------- -------------
Checking:
Insured money market .................. 16,556 3.87 7,733 2.68 18,006 1.51
NOW and non-interest-bearing accounts 24,566 1.49 18,157 2.17 29,805 1.67
----------- -------- ---------- ------------
Total transaction accounts ........... 41,122 25,890 47,811
----------- ---------- ------------
Total passbook and checking accounts 114,902 76,263 92,394
----------- ---------- ------------
Certificates:
30-89-day certificates of deposit .... 91 2.73 166 3.01
3-5-month certificates of deposit .... 7,114 4.67 1,465 4.78 4,552 3.95
6-8-month certificates of deposit .... 159,850 5.40 93,684 5.65 87,071 4.23
9-11-month certificates of deposit ... 20,279 5.45 5,654 5.55 1,302 3.53
12-17-month certificates of deposit .. 124,637 5.49 79,637 5.90 71,115 4.44
18-23-month certificates of deposit .. 12,375 5.79 12,382 5.37 33,282 4.31
24-29-month certificates of deposit .. 42,875 5.94 18,593 5.57 24,453 4.36
30-35-month certificates of deposit .. 1,774 5.57 2,868 4.99 4,867 4.66
36-60-month certificates of deposit .. 22,300 5.93 19,437 5.81 28,593 5.46
----------- -------- ---------- ----------- --------
Total certificates ................... 391,204 233,811 255,401
----------- ---------- -----------
Total ............................... $506,106 $310,074 $347,795
=========== ========== ===========
Weighted average rate .............. 5.11% 4.99% 3.88%
======== ======== ========
</TABLE>
The following table sets forth information by various rate categories
regarding the amounts of the Company's certificate accounts (under $100,000)
as of September 30, 1996 that mature during the periods indicated:
<TABLE>
<CAPTION>
PERIODS TO MATURITY
FROM SEPTEMBER 30, 1996
-------------------------------------------------
AS OF WITHIN 1 TO 2 TO MORE THAN
SEPTEMBER 30, 1996 1 YEAR 2 YEARS 3 YEARS 3 YEARS
------------------- ----------- ---------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Certificate accounts:
3.00% to 3.99% ................... $ 93 $ 93 $ -- $ -- $ --
4.00% to 4.99% ................... 6,700 6,182 366 152 --
5.00% to 5.99% ................... 309,070 257,517 43,406 3,965 4,182
6.00% to 6.99% ................... 21,555 8,819 6,762 2,405 3,569
7.00% to 7.99% ................... 862 368 -- 48 446
8.00% to 8.99% ................... -- -- -- -- --
------------------- ----------- ---------- ---------- ------------
Total certificate accounts (under
$100,000) ....................... $338,280 $272,979 $50,534 $6,570 $8,197
=================== =========== ========== ========== ============
</TABLE>
20
<PAGE>
The following table sets forth information by various rate categories
regarding the amounts of the Company's jumbo ($100,000 and over) certificate
accounts as of September 30, 1996 that mature during the periods indicated:
<TABLE>
<CAPTION>
PERIODS TO MATURITY
FROM SEPTEMBER 30, 1996
------------------------------------------------
AS OF WITHIN 1 TO 2 TO MORE THAN
SEPTEMBER 30, 1996 1 YEAR 2 YEARS 3 YEARS 3 YEARS
------------------- ---------- ---------- ---------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Jumbo certificate accounts:
2.00% to 2.99% .................. $ 100 $ 100 $ 135 $ -- $ --
4.00% to 4.99% .................. 1,733 1,598 6,308 331 219
5.00% to 5.99% .................. 46,969 40,111 1,076 631 540
6.00% to 6.99% .................. 4,021 1,774 -- -- --
7.00% to 7.99% .................. 101 -- -- -- 101
------------------- ---------- ---------- ---------- ------------
Total jumbo certificate accounts $52,924 $43,583 $7,519 $962 $860
=================== ========== ========== ========== ============
</TABLE>
Of the Company's total deposits at September 30, 1996, 1995 and 1994,
10.5%, 8.6% and 10.3%, respectively, were deposits of $100,000 or more issued
to the public. Although jumbo certificates of deposit are generally more rate
sensitive than smaller size deposits, management believes that the Company
will retain these deposits.
In 1995, the Company sold its three branches on the west coast of Florida,
including their deposits which totaled $130 million at the date of sale. The
sale was part of a shift in growth strategy to focus on South Florida and
take advantage of consolidation trends in banking there. Also, as part of
this strategy, the Company opened branches in Boca Raton, Florida in December
1995, Delray Beach, Florida in June 1996 and West Palm Beach, Florida in
September 1996. On March 29, 1996, the Company acquired the Bank of Florida
whose single branch with total deposits of $27.3 million was consolidated
with the Company's South Miami branch. On November 15, 1996, as discussed
above, the Company acquired Suncoast which had six branches.
BORROWINGS. When the Company's primary sources of funds are not sufficient
to meet deposit outflows, loan originations and purchases and other cash
requirements, the Company may borrow funds from the FHLB of Atlanta and from
other sources. The FHLB system acts as an additional source of funding for
savings institutions. In addition, the Company uses subordinated notes and
agreements to repurchase in order to increase funds.
FHLB borrowings, known as "advances," are made on a secured basis, and the
terms and rates charged for FHLB advances vary in response to general
economic conditions. As a shareholder of the FHLB of Atlanta, the Bank is
authorized to apply for advances from this bank. A wide variety of borrowing
plans are offered by the FHLB of Atlanta, each with its own maturity and
interest rate. The FHLB of Atlanta will consider various factors, including
an institution's regulatory capital position, net income, quality and
composition of assets, lending policies and practices, and level of current
borrowings from all sources, in determining the amount of credit to extend to
an institution. In addition, an institution that fails to meet the qualified
thrift lender test may have restrictions imposed on its ability to obtain
FHLB advances. BankUnited currently meets the qualified thrift lender test.
See "Regulation--Savings Institution Regulation--Qualified Thrift Lender
Test."
21
<PAGE>
The following tables set forth information as to the Company's borrowings
as of the dates and for the periods indicated.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
-----------------------------------------------------------------------------
1996 1995 1994
------------------------ ------------------------ --------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
PERIOD END BALANCES:
FHLB advances(1) ................... $237,000 5.73% $241,000 5.92% $136,000 5.17%
Subordinated notes ................. 775 9.00 775 9.00 775 9.00
Securities sold under agreements to
repurchase (2) ..................... -- -- -- -- 21,400 4.49
----------- ----------- ----------- ---------- ----------- --------
Total borrowings .................. $237,775 5.74% $241,775 5.93% $158,175 5.10%
========== ========= =========== ========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------------------
1996 1995 1994
------------------------ ------------------------ --------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
AVERAGE BALANCES:
FHLB advances(1) ................... $234,489 5.77% $136,706 5.86% $116,493 4.03%
Subordinated notes ................. 775 9.00 775 9.00 775 9.00
Securities sold under agreements to
repurchase (2) ................... -- -- 6,571 5.59 3,224 5.68
----------- --------- ----------- ------- --------- -----
Total borrowings .................. $235,264 5.78% $144,052 5.86% $120,492 4.11%
=========== ========= =========== ======= ========= ====
</TABLE>
- ----------
(1) The maximum amount of FHLB advances outstanding during the years ended
September 30, 1996, 1995 and 1994 was $244.0 million, $246.0 million and
$149.0 million, respectively.
(2) The maximum amount of securities sold under agreements to repurchase at
any month-end during the years ended September 30, 1995 and 1994 was
$33.6 million and $21.4 million.
ACTIVITIES OF SUBSIDIARY.
T&D Properties of South Florida, Inc., a Florida corporation ("T&D"), is a
wholly owned operating subsidiary of the Bank, organized in 1991 to invest in
tax certificates. T&D also holds title to, maintains, manages and supervises
the disposition of real property acquired through tax deeds.
Bay Holdings, Inc., a Florida corporation ("Bay Holding") is a wholly
owned operating subsidiary of the Bank that holds title to, maintains,
manages and supervises the disposition of real property acquired through
foreclosure. Bay Holdings was established in 1994 for the purpose of
insulating the Bank from risk of liability concerning maintenance, management
and disposition of real property.
BU Ventures, Inc., a Florida corporation ("BU Ventures") is a wholly owned
operating subsidiary of the Company organized in 1994 to assume from T&D the
responsibility for the maintenance, management and disposition of real
property acquired through tax deeds.
EMPLOYEES
At September 30, 1996, the Company had 126 full-time equivalent employees.
The Company's employees are not represented by a collective bargaining group,
and the Company considers its relations with its employees to be excellent.
The Company provides employee benefits customary in the
22
<PAGE>
savings industry, which include group medical and life insurance, a 401(k)
savings plan and paid vacations. The Company also provides stock awards and a
profit sharing plan for certain officers, directors and employees.
REGULATION
RECENT LEGISLATIVE DEVELOPMENTS
In recent years, measures have been taken to reform the thrift and banking
industries and to strengthen the insurance funds for depository institutions.
The most significant of these measures for savings institutions was the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (the
"FIRREA"), which has had a major impact on the operation and regulation of
savings associations generally. In 1991, the Federal Deposit Insurance
Corporation Improvement Act of 1991 (the "FDICIA"), became law. Although the
FDICIA's primary purpose was to recapitalize the Bank Insurance Fund (the
"BIF") of the FDIC, which insures the deposits of commercial banks, the
FDICIA also affected the supervision and regulation of all federally insured
depository institutions, including federal savings banks such as the Bank.
More recent legislation has attempted to resolve the problems of the SAIF in
meeting its minimum required reserve ratio and the related concern facing
SAIF-insured institutions, such as the Bank, of paying significantly higher
deposit insurance premiums than BIF-insured institutions. The following
discussion is a summary of the significant provisions of the recent
legislation affecting the banking industry.
THE FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT OF 1989.
The FIRREA, which was enacted in response to concerns regarding the soundness
of the thrift industry, brought about a significant regulatory restructuring,
limited savings institutions' business activities, and increased their
regulatory capital requirements. The FIRREA abolished the Federal Home Loan
Bank Board and the Federal Savings and Loan Insurance Corporation (the
"FSLIC"), and established the OTS as the primary federal regulator for
savings institutions. Deposits at the Bank are insured through the SAIF, a
separate fund managed by the FDIC for institutions whose deposits were
formerly insured by the FSLIC. Regulatory functions relating to deposit
insurance are generally exercised by the FDIC. The Resolution Trust
Corporation (the "RTC") was created to manage conservatorships and
receiverships of insolvent thrifts.
THE FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991. The
FDICIA authorizes regulators to take prompt corrective action to solve the
problems of critically undercapitalized institutions. As a result, the
banking regulators are required to take certain supervisory actions against
undercapitalized institutions, the severity of which increases as an
institution's level of capitalization decreases. Pursuant to the FDICIA, the
federal banking agencies have established the levels at which an insured
institution is considered to be "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." See "--Savings Institution Regulations--Prompt Corrective
Action" below for a discussion of the applicable capital levels.
The FDICIA requires that the federal banking agencies revise their
risk-based capital requirements to include components for interest rate risk,
concentration of credit risk and the risk of non-traditional activities. See
"--Savings Institution Regulations--Regulatory Capital Requirements" below
for a description of the final rule adopted by the OTS that incorporates an
interest rate risk component in the risk-based capital requirement. Although
adopted, implementation of this rule has been postponed indefinitely.
In addition, the FDICIA requires each federal banking agency to establish
standards relating to internal controls, information systems, and internal
audit systems that are designed to assess the financial condition and
management of the institution; loan documentation; credit underwriting;
interest
23
<PAGE>
rate exposure; asset growth; and compensation, fees and benefits. The FDICIA
lowered the qualified thrift lender ("QTL") investment percentage applicable
to SAIF-insured institutions. See "--Savings Institution
Regulations--Qualified Thrift Lender Test" below. The FDICIA also provided
that a risk-based assessment system for insured depository institutions must
be established before January 1, 1994. See "--Savings Institution
Regulations--Insurance of Accounts" below. These requirements have been
implemented. The FDICIA further requires annual on-site full examinations of
depository institutions, with certain exceptions, and annual reports on
institutions' financial and management controls.
THE RIEGLE-NEAL INTERSTATE BANKING AND BRANCHING EFFICIENCY ACT OF 1994.
In September 1994, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Branching Act") became law. Savings
associations, whose primary federal regulator is the OTS, generally are not
directly affected by the Interstate Branching Act except for a provision that
allows an insured savings association that was an affiliate of a bank on July
1, 1994, to act as the bank's agent as though it were an insured bank
affiliate of the bank.
The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums based upon their level of
capital and supervisory evaluation. Under the system, institutions classified
as well capitalized (i.e., a core capital ratio of at least 5%, a ratio of
Tier 1 or core capital to risk-weighted assets ("Tier 1 risk-based capital")
of at least 6% and a risk-based capital ratio of at least 10%) and considered
healthy pay the lowest premium while institutions that are less than
adequately capitalized (i.e., core or Tier 1 risk-based capital ratios of
less than 4% or a risk-based capital ratio of less than 8%) and considered of
substantial supervisory concern pay the highest premium. Risk classification
of all insured institutions is made by the FDIC for each semi-annual
assessment period.
The FDIC is authorized to increase assessment rates, on a semiannual
basis, if it determines that the reserve ratio of the SAIF will be less than
the designated reserve ratio of 1.25% of SAIF insured deposits. In setting
these increased assessments, the FDIC must seek to restore the reserve ratio
to that designated reserve level, or such higher reserve ratio as established
by the FDIC. The FDIC may also impose special assessments on SAIF members to
repay amounts borrowed from the United States Treasury or for any other
reason deemed necessary by the FDIC.
For the first six months of 1995, the assessment schedule for members of
the Bank Insurance Fund ("BIF") of the FDIC and SAIF members ranged from .23%
to .31% of deposits. As is the case with the SAIF, the FDIC is authorized to
adjust the insurance premium rates for banks that are insured by the BIF of
the FDIC in order to maintain the reserve ratio of the BIF at 1.25% of BIF
insured deposits. As a result of the BIF reaching its statutory reserve ratio
the FDIC revised the premium schedule for BIF insured institutions to provide
a range of .04% to .31% of deposits. The revisions became effective in the
third quarter of 1995. In addition, the BIF rates were further revised,
effective January 1996, to provide a range of 0% to .27%. The SAIF rates,
however, were not adjusted. At the time the FDIC revised the BIF premium
schedule, it noted that, absent legislative action (as discussed below), the
SAIF would not attain its designated reserve ratio until the year 2002. As a
result, SAIF insured members would continue to be generally subject to higher
deposit insurance premiums than BIF insured institutions until, all things
being equal, the SAIF attained its required reserve ratio.
In order to eliminate this disparity and any competitive disadvantage
between BIF and SAIF member institutions with respect to deposit insurance
premiums, legislation to recapitalize the SAIF was enacted in September 1996.
The legislation provides for a one-time assessment to be imposed on all
deposits assessed at the SAIF rates, as of March 31, 1995, in order to
recapitalize the SAIF. It also provides for the merger of the BIF and the
SAIF on January 1, 1999 if no savings associations then exist. The special
assessment rate has been established at .657% of deposits by the FDIC and the
resulting assessment of $2.6 million (exclusive of an additional $2.3 million
payment which relates to Suncoast deposits) was paid in November 1996. This
special assessment significantly increased noninterest expense and adversely
affected the Bank's results of operations for the year ended September 30,
1996. As a result of the special assessment, the Bank's deposit insurance
premiums were
24
<PAGE>
reduced to .067% based upon its current risk classification and the new
assessment schedule for SAIF insured institutions. These premiums are subject
to change in future periods.
Prior to the enactment of the legislation, a portion of the SAIF
assessment imposed on savings associations was used to repay obligations
issued by a federally chartered corporation to provide financing ("FICO") for
resolving the thrift crisis in the 1980's. Although the FDIC has proposed
that the SAIF assessment be equalized with the BIF assessment schedule,
effective October 1, 1996, SAIF-insured institutions will continue to be
subject to a FICO assessment as a result of this continuing obligation.
Although the legislation also now requires assessments to be made on
BIF-assessable deposits for this purpose, effective January 1, 1997, that
assessment will be limited to 20% of the rate imposed on SAIF assessable
deposits until the earlier of December 31, 1999 or when no savings
association continues to exist, thereby imposing a greater burden on SAIF
member institutions such as the Bank. Thereafter, however, assessments on
BIF-member institutions will be made on the same basis as SAIF-member
institutions. The rates to be established by the FDIC to implement this
requirement for all FDIC-insured institutions is uncertain at this time, but
are anticipated to be about a 6.5 basis points assessment on SAIF deposits
and 1.5 basis points on BIF deposits until BIF insured institutions
participate fully in the assessment.
SAVINGS AND LOAN HOLDING COMPANY REGULATIONS
TRANSACTIONS WITH AFFILIATES. The Company is a unitary savings and loan
holding company and is subject to the OTS regulations, examination,
supervision and reporting requirements pursuant to certain provisions of the
Home Owners' Loan Act (the "HOLA") and the Federal Deposit Insurance Act. As
an insured institution and a subsidiary of a savings and loan holding
company, the Bank is subject to restrictions in its dealings with companies
that are "affiliates" of the Company under the HOLA, certain provisions of
the Federal Reserve Act that were made applicable to savings institutions by
the FIRREA, and the OTS regulations.
As a result of the FIRREA, savings institutions' transactions with its
affiliates are subject to the limitations set forth in the HOLA and the OTS
regulations, which incorporate Sections 23A, 23B, 22(g) and 22(h) of the
Federal Reserve Act and Regulation O adopted by the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). Under Section 23A, an
"affiliate" of an institution is defined generally as (i) any company that
controls the institution and any other company that is controlled by the
company that controls the institution, (ii) any company that is controlled by
the shareholders who control the institution or any company that controls the
institution, or (iii) any company that is determined by regulation or order
to have a relationship with the institution (or any subsidiary or affiliate
of the institution) such that "covered transactions" with the company may be
affected by the relationship to the detriment of the institution. "Control"
is determined to exist if a percentage stock ownership test is met or if
there is control over the election of directors or the management or policies
of the company or institution. "Covered transactions" generally include loans
or extensions of credit to an affiliate, purchases of securities issued by an
affiliate, purchases of assets from an affiliate (except as may be exempted
by order or regulation), and certain other transactions. The OTS regulations
and Sections 23A and 23B require that covered transactions and certain other
transactions with affiliates be on terms and conditions consistent with safe
and sound banking practices or on terms comparable to similar transactions
with non-affiliated parties, and imposes quantitative restrictions on the
amount of and collateralization requirements on covered transactions. In
addition, a savings institution is prohibited from extending credit to an
affiliate (other than a subsidiary of the institution), unless the affiliate
is engaged only in activities that the Federal Reserve Board has determined,
by regulation, to be permissible for bank holding companies. Sections 22(g)
and 22(h) of the Federal Reserve Act impose limitations on loans and
extensions of credit from an institution to its executive officers, directors
and principal stockholders and each of their related interests.
ACTIVITIES LIMITATIONS. A unitary savings and loan holding company, such
as the Company, whose sole insured institution subsidiary qualifies as a QTL
(described below) generally has the broadest authority to engage in various
types of business activities. A holding company that acquires
25
<PAGE>
another institution and maintains it as a separate subsidiary or whose sole
subsidiary fails to meet the QTL test will become subject to the activities
limitations applicable to multiple savings and loan holding companies.
In general, a multiple savings and loan holding company (or subsidiary
thereof that is not an insured institution) may not commence, or continue for
more than a limited period of time after becoming a multiple savings and loan
holding company (or a subsidiary thereof), any business activity other than
(i) furnishing or performing management services for a subsidiary insured
institution, (ii) conducting an insurance agency or an escrow business, (iii)
holding, managing or liquidating assets owned by or acquired from a
subsidiary insured institution, (iv) holding or managing properties used or
occupied by a subsidiary insured institution, (v) acting as trustee under
deeds of trust, (vi) those activities previously directly authorized by the
OTS by regulation as of March 5, 1987 to be engaged in by multiple savings
and loan holding companies, or (vii) subject to prior approval of the OTS,
those activities authorized by the Federal Reserve Board as permissible for
bank holding companies. These restrictions do not apply to a multiple savings
and loan holding company if (a) all, or all but one, of its insured
institution subsidiaries were acquired in emergency thrift acquisitions or
assisted acquisitions and (b) all of its insured institution subsidiaries are
QTLs.
SAVINGS INSTITUTION REGULATIONS
Federal savings institutions such as the Bank are chartered by the OTS,
are members of the FHLB system, and have their deposits insured by the SAIF.
They are subject to comprehensive OTS and FDIC regulations that are intended
primarily to protect depositors. SAIF-insured, federally chartered
institutions may not enter into certain transactions unless applicable
regulatory tests are met or they obtain necessary approvals. They are also
required to file reports with the OTS describing their activities and
financial condition, and periodic examinations by the OTS test compliance by
institutions with various regulatory requirements, some of which are
described below.
INSURANCE OF ACCOUNTS. The Bank's deposits are insured by the SAIF up to
$100,000 for each insured account holder, the maximum amount currently
permitted by law. Under the FDIC regulations implementing risk-based
insurance premiums, institutions are divided into three groups--well
capitalized, adequately capitalized and undercapitalized--based on criteria
consistent with those established pursuant to the prompt corrective action
provisions of the FDICIA. See "--Prompt Corrective Action" below. Each of
these groups is further divided into three subgroups, based on a subjective
evaluation of supervisory risk to the insurance fund posed by the
institution.
As an insurer, the FDIC issues regulations and conducts examinations of
its insured members. SAIF insurance of deposits may be terminated by the
FDIC, after notice and hearing, upon a finding that an institution has
engaged in unsafe and unsound practices, cannot continue operations because
it is in an unsafe and unsound condition, or has violated any applicable law,
regulation, rule, order or condition imposed by the OTS or FDIC. When
conditions warrant, the FDIC may impose less severe sanctions as an
alternative to termination of insurance. The Bank's management does not know
of any present condition pursuant to which the FDIC would seek to impose
sanctions on the Bank or terminate insurance of its deposits.
REGULATORY CAPITAL REQUIREMENTS. As mandated by the FIRREA, the OTS
adopted capital standards under which savings institutions must currently
maintain (i) a tangible capital requirement of 1.5% of tangible assets, (ii)
a leverage (or core capital) ratio of 3.0% of adjusted tangible assets, and
(iii) a risk-based capital requirement of 8.0% of risk-weighted assets. These
requirements (which cannot be less stringent than those applicable to
national banks) apply to the Bank. Under current law and regulations, there
are no capital requirements directly applicable to the Company. See also
"--Changes to Capital Requirements" below.
Under the current OTS regulations, "tangible capital" includes common
stockholders' equity, noncumulative perpetual preferred stock and related
paid-in capital, certain qualifying non-withdrawable accounts and pledged
deposits, and minority interests in fully consolidated subsidiaries,
26
<PAGE>
less intangible assets (except certain purchased mortgage servicing rights)
and specified percentages of debt and equity investments in certain
subsidiaries. "Core capital" is tangible capital plus limited amounts of
intangible assets meeting marketability criteria. The "risk-based capital"
requirement provides that an institution's total capital must equal 8% of
risk-weighted assets. Certain institutions will be required to deduct an
interest rate risk component from their total capital, as described below.
"Total capital" equals core capital plus "supplementary capital" (which
includes specified amounts of cumulative preferred stock, certain
limited-life preferred stock, subordinated debt and other capital
instruments) in an amount equal to not more than 100% of core capital.
"Risk-weighted assets" are determined by assigning designated risk weights
based on the credit risk associated with the particular asset. As provided by
OTS regulations, representative risk weights include: 0% for cash and assets
that are backed by the full faith and credit of the United States; 20% for
cash items in the process of collection, FHLB stock, agency securities not
backed by the full faith and credit of the United States and certain
high-quality mortgage-related securities; 50% for certain revenue bonds,
qualifying mortgage loans, certain non-high-quality mortgage-related
securities and certain qualifying residential construction loans; and 100%
for consumer, commercial and other loans, repossessed assets, assets that are
90 or more days past due, and all other assets.
As of September 30, 1996, the Bank's tangible, core and risk-based capital
ratios were 7.0%, 7.0% and 14.2%, respectively.
The OTS regulatory capital regulations take into account a savings
institution's exposure to the risk of loss from changing interest rates.
Under the regulations, a savings institution with an above normal level of
interest rate risk exposure will be required to deduct an interest rate risk
("IRR") component from its total capital when determining its compliance with
the risk-based capital requirements. An "above normal" level of interest rate
risk exposure is a projected decline of 2% in the net present value of an
institution's assets and liabilities resulting from a 2% swing in interest
rates. The IRR component will equal one-half of the difference between the
institution's measured interest rate exposure and the "normal" level of
exposure. Savings institutions are required to file data with the OTS that
the OTS will use to calculate, on a quarterly basis, the institutions'
measured interest rate risk and IRR components. The IRR component to be
deducted from capital is the lowest of the IRR components for the preceding
three quarters. The OTS may waive or defer an institution's IRR component on
a case-by-case basis. Implementation of the IRR requirements have been
delayed. As of September 30, 1996, the Company would have been required to
deduct an IRR component from its total capital when determining its
compliance with the Bank's risk-based capital requirements; however, the Bank
would continue to be well capitalized.
If an institution becomes categorized as "undercapitalized" under the
definitions established by the "prompt corrective action" provisions of the
FDICIA, it will become subject to certain restrictions imposed by the FDICIA.
See "--Prompt Corrective Action" below.
PROMPT CORRECTIVE ACTION. The OTS and other federal banking regulators
have established capital levels for institutions to implement the "prompt
corrective action" provisions of the FDICIA. Based on these capital levels,
insured institutions will be categorized as well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized or critically
undercapitalized. The FDICIA requires federal banking regulators, including
the OTS, to take prompt corrective action to solve the problems of those
institutions that fail to satisfy their applicable minimum capital
requirements. The level of regulatory scrutiny and restrictions imposed
become increasingly severe as an institution's capital level falls.
A "well capitalized" institution must have risk-based capital of 10% or
more, core capital ratio of 5% or more and Tier 1 risk-based capital (based
on the ratio of core capital to risk-weighted assets) of 6% or more and may
not be subject to any written agreement, order, capital directive, or prompt
corrective action directive issued by the OTS. The Bank is a well capitalized
institution under the definitions as adopted. An institution will be
categorized as "adequately capitalized" if it has total risk-based capital of
8% or more, Tier 1 risk-based capital of 4% or more, and core capital of 4%
or
27
<PAGE>
more; "undercapitalized" if it has total risk-based capital of less than 8%,
Tier 1 risk-based capital of less than 4%, or core capital of less than 4%;
"significantly undercapitalized" if it has total risk-based capital of less
than 6%, Tier 1 risk-based capital of less than 3%, or core capital of less
than 3%; and "critically undercapitalized" if it has a ratio of tangible
equity to total assets that is equal to less than 2%.
In the case of an institution that is categorized as "undercapitalized,"
such an institution must submit a capital restoration plan to the OTS. An
undercapitalized depository institution generally will not be able to acquire
other banks or thrifts, establish additional branches, pay dividends, or
engage in any new lines of business unless consistent with its capital plan.
A "significantly undercapitalized" institution will be subject to additional
restrictions on its affiliate transactions, the interest rates paid by the
institution on its deposits, the institution's asset growth, compensation of
senior executive officers, and activities deemed to pose excessive risk to
the institution. Regulators may also order a significantly undercapitalized
institution to hold elections for new directors, terminate any director or
senior executive officer employed for more than 180 days prior to the time
the institution became significantly undercapitalized, or hire qualified
senior executive officers approved by the regulators.
The FDICIA provides that an institution that is "critically
undercapitalized" must be placed in conservatorship or receivership within 90
days of becoming categorized as such unless the institution's regulator and
the FDIC jointly determine that some other course of action would result in a
lower resolution cost to the institution's insurance fund. Thereafter, the
institution's regulator must periodically reassess its determination to
permit a particular critically undercapitalized institution to continue to
operate. A conservator or receiver must be appointed for the institution at
the end of an approximately one-year period following the institution's
initial classification as critically undercapitalized unless a number of
stringent conditions are met, including a determination by the regulator and
the FDIC that the institution has positive net worth and a certification by
such agencies that the institution is viable and not expected to fail.
The final rules establishing the capital levels for purposes of the FDICIA
also indicate that the federal regulators intend to lower or eliminate the
core capital requirement from the definitions of well capitalized, adequately
capitalized and undercapitalized after the requirement to deduct an IRR
component from total capital becomes effective. This action has not yet been
taken. See "--Regulatory Capital Requirements" above.
In addition to the foregoing prompt corrective action provisions, the
FDICIA also sets forth requirements that the federal banking agencies,
including the OTS, review their capital standards every two years to ensure
that their standards require sufficient capital to facilitate prompt
corrective action and to minimize loss to the SAIF and the BIF.
RESTRICTIONS ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS. The current OTS
regulation applicable to the payment of dividends or other capital
distributions by savings institutions imposes limits on capital distributions
based on an institution's regulatory capital levels and net income. An
institution that meets or exceeds all of its capital requirements (both
before and after giving effect to the distribution) and is not in need of
more than normal supervision would be a "Tier 1 association." A Tier 1
association may make capital distributions during a calendar year of up to
the greater of (i) 100% of net income for the current calendar year plus 50%
of its capital surplus or (ii) or the amount permitted for a "Tier 2
association" which is 75% of its net income over the most recent four
quarters. Any additional capital distributions would require prior regulatory
approval. The Bank currently exceeds its fully phased-in capital requirements
and qualifies as a Tier 1 association under the regulation. A "Tier 3
association" is defined as an institution that does not meet all of the
minimum regulatory capital requirements and therefore may not make any
capital distributions without the prior approval of the OTS.
Savings institutions must provide the OTS with at least 30 days' written
notice before making any capital distributions. All such capital
distributions are also subject to the OTS' right to object to a distribution
on safety and soundness grounds.
28
<PAGE>
The OTS has proposed regulations that would revise the current capital
distribution restrictions. Under the proposal a savings association may make
a capital distribution without notice to the OTS (unless it is a subsidiary
of a holding company) provided that it has a CAMEL 1 or 2 rating, is not of
supervisory concern, and would remain adequately capitalized (as defined in
the OTS prompt corrective action regulations) following the proposed
distribution. Savings associations that would remain adequately capitalized
following the proposed distribution but do not meet the other noted
requirements must notify the OTS 30 days prior to declaring a capital
distribution. The OTS stated it will generally regard as permissible that
amount of capital distributions that do not exceed 50% of the institution's
excess regulatory capital plus net income to date during the calendar year.
As under the current rule, the OTS may object to a capital distribution if it
would constitute an unsafe or unsound practice. No assurance may be given as
to whether or in what form the regulations may be adopted.
QUALIFIED THRIFT LENDER TEST. Pursuant to amendments effected by the
FDICIA, a savings institution will be a QTL if its qualified thrift
investments equal or exceed 65% of its portfolio assets on a monthly average
basis in nine of every 12 months. Qualified thrift investments, under the
revised QTL test, include (i) certain housing-related loans and investments,
(ii) certain obligations of the FSLIC, the FDIC, the FSLIC Resolution Fund
and the RTC, (iii) loans to purchase or construct churches, schools, nursing
homes and hospitals (subject to certain limitations), (iv) consumer loans
(subject to certain limitations), (v) shares of stock issued by any FHLB, and
(vi) shares of stock issued by the FHLMC or the FNMA (subject to certain
limitations). Portfolio assets under the revised test consist of total assets
minus (a) goodwill and other intangible assets, (b) the value of properties
used by the savings institution to conduct its business, and (c) certain
liquid assets in an amount not exceeding 20% of total assets.
Any savings institution that fails to become or remain a QTL must either
convert to a national bank charter or be subject to restrictions specified in
the OTS regulations. Any such savings institution that does not become a bank
will be: (i) prohibited from making any new investment or engaging in
activities that would not be permissible for national banks; (ii) prohibited
from establishing any new branch office in a location that would not be
permissible for a national bank in the institution's home state; (iii)
ineligible to obtain new advances from any FHLB; and (iv) subject to
limitations on the payment of dividends comparable to the statutory and
regulatory dividend restrictions applicable to national banks. Also,
beginning three years after the date on which the savings association ceases
to be a QTL, the savings association would be prohibited from retaining any
investment or engaging in any activity not permissible for a national bank
and would be required to repay any outstanding advances to any FHLB. A
savings institution may requalify as a QTL if it thereafter complies with the
QTL test. At September 30, 1996, the Bank exceeded the QTL requirements.
FEDERAL HOME LOAN BANK SYSTEM. The Bank is a member of the FHLB system,
which consists of 12 regional Federal Home Loan Banks governed and regulated
by the Federal Housing Finance Board. The Federal Home Loan Banks provide a
central credit facility for member institutions. The Bank, as a member of the
FHLB of Atlanta, is required to acquire and hold shares of capital stock in
the FHLB of Atlanta in an amount at least equal to the greater of 1% of the
aggregate principal amount of its unpaid residential mortgage loans, home
purchase contracts and similar obligations as of the close of each calendar
year, or 5% of its borrowings from the FHLB of Atlanta (including advances
and letters of credit issued by the FHLB on the Bank's behalf). The Bank is
currently in compliance with this requirement, with a $12.2 million
investment in stock of the FHLB of Atlanta as of September 30, 1996.
The FHLB of Atlanta makes advances to members in accordance with policies
and procedures periodically established by the Federal Housing Finance Board
and the Board of Directors of the FHLB of Atlanta. Currently outstanding
advances from the FHLB of Atlanta are required to be secured by a member's
shares of stock in the FHLB of Atlanta and by certain types of mortgages and
other assets. The FIRREA further limited the eligible collateral in certain
respects. Interest rates charged for advances vary depending on maturity, the
cost of funds to the FHLB of Atlanta and the purpose of the borrowing. As of
September 30, 1996, advances from the FHLB of Atlanta totaled $237.0 million.
See Note 8 of the Notes to the Company's Consolidated Financial Statements.
The FIRREA restricted the amount of FHLB advances that a member institution
may obtain, and in some
29
<PAGE>
circumstances requires repayment of outstanding advances, if the institution
does not meet the QTL test. See "--Qualified Thrift Lender Test," above.
LIQUIDITY. OTS regulations currently require member savings institutions
to maintain for each calendar month an average daily balance of liquid assets
(cash and certain time deposits, securities of certain mutual funds, bankers'
acceptances, corporate debt securities and commercial paper, and specified
U.S. government, state government and federal agency obligations) equal to at
least 5% of its average daily balance during the preceding calendar month of
net withdrawable deposits and short-term borrowings (generally borrowings
having maturities of one year or less). An institution must also maintain for
each calendar month an average daily balance of short-term liquid assets
(generally those having maturities of one year or less) equal to at least 1%
of its average daily balance during the preceding calendar month of net
withdrawable accounts and short-term borrowings. The Director of the OTS may
vary this liquidity requirement from time to time within a range of 4% to
10%. Monetary penalties may be imposed for failure to meet liquidity
requirements. For the month of September 1996, the Bank's liquidity ratio was
3.80%, and its short-term liquidity ratio, which must be at least 1%, was
6.75%.
COMMUNITY REINVESTMENT ACT. Under the Community Reinvestment Act (the
"CRA"), as implemented by the OTS regulations, a savings institution has a
continuing and affirmative obligation consistent with its safe and sound
operation to help meet the credit needs of its entire community, including
low and moderate income neighborhoods. The CRA does not establish specific
lending requirements or programs for financial institutions nor does it limit
an institution's discretion to develop the types of products and services
that it believes are best suited to its particular community, consistent with
the CRA. The CRA requires the OTS, in connection with its examination of a
financial institution, to assess the institution's record of meeting the
credit needs of its community and to take such records into account in its
evaluation of certain applications. The FIRREA amended the CRA to require
public disclosure of an institution's CRA rating and to require that the OTS
provide a written evaluation of an institution's CRA performance utilizing a
four-tiered descriptive rating system in lieu of the existing five-tiered
numerical rating system. Based upon an OTS examination in fiscal 1995, the
Bank's CRA rating is satisfactory.
Effective July 1, 1995, the OTS together with the other federal banking
agencies, adopted a joint rule amending each of their regulations concerning
the CRA. Subject to certain exceptions and elections, the new regulations
prescribe three tests for the evaluation of a savings institution's
performance. The lending test evaluates a savings institution's record of
helping to meet the credit needs of its assessment area through its lending
activities by considering an institution's home mortgage, small business,
small farm, and community development lending. The investment test evaluates
a savings institution's record of helping to meet the credit needs of its
assessment area through qualified investments that benefit its assessment
area or a broader statewide or regional area including the assessment area.
Finally, the service test evaluates a savings institution by analyzing both
the availability and the effectiveness of the institution's systems for
delivering retail banking services and the extent and innovativeness of its
community development services. Based upon the savings institution's
performance under the lending, investment and service tests, and any other
tests which may be applicable to the institution under the new regulations,
the OTS will assign the savings institution one of the same four ratings
prescribed under current regulations. Additionally, under the new
regulations, the OTS will continue to consider an institution's record of
performance under the CRA in the same manner and for the same purposes as
required under current regulations.
These new regulations, while effective July 1, 1995, will be implemented
over a two-year time frame. A savings institution may elect to be evaluated
under the revised performance tests beginning January 1, 1996, although the
Company has not made such election. Absent such an election, these revised
performance tests will not become mandatory and will not be deemed to replace
the current regulations described above until July 1, 1997.
30
<PAGE>
LOANS-TO-ONE-BORROWER LIMITATIONS
The FIRREA provided that loans-to-one borrower limits applicable to
national banks apply to savings institutions. Generally, under current
limits, loans and extensions of credit outstanding at one time to a single
borrower shall not exceed 15% of the savings institution's unimpaired capital
and unimpaired surplus. Loans and extensions of credit fully secured by
certain readily marketable collateral may represent an additional 10% of
unimpaired capital and unimpaired surplus. As of September 30, 1996, the Bank
was in compliance with the loans-to-one-borrower limitations.
PORTFOLIO POLICY GUIDELINES
The Federal Financial Institutions Examination Council issued a
Supervisory Policy Statement on Securities Activities (the "Policy"), which
provides guidance to an institution in developing its portfolio policy,
specifies factors that must be considered when evaluating an institution's
investment portfolio, and provides guidance on the suitability of acquiring
and holding certain products, such as mortgage derivative products, in its
investment portfolio. The Policy, among other things, defines "high-risk
mortgage securities" and provides that such securities are not suitable
investment portfolio holdings for depository institutions and that they may
only be acquired to reduce interest rate risk. The determination of a
high-risk mortgage security will be based upon a quantitative calculation of
the average life of the security, and the change in the average life and
market price sensitivity of the security based on a 300-basis-point shift in
the yield curve. Currently, the Bank does not hold any high-risk mortgage
securities. The Policy, however, is applicable to all depository institutions
and will affect the Bank's ability to invest in certain mortgage securities,
primarily collateralized mortgage obligations, in the future.
GENERAL LENDING REGULATIONS
The Bank's lending activities are subject to federal and state regulation,
including the Equal Credit Opportunity Act, the Truth in Lending Act, the
Real Estate Settlement Procedures Act, the Community Reinvestment Act and the
laws of Florida, California and other jurisdictions governing discrimination,
lender disclosure to borrowers, foreclosure procedures and anti-deficiency
judgments, among other matters.
FEDERAL RESERVE SYSTEM
The Bank is subject to certain regulations promulgated by the Federal
Reserve Board. Pursuant to such regulations, savings institutions are
required to maintain reserves against their transaction accounts (primarily
interest-bearing checking accounts) and non-personal time deposits. The
balances maintained to meet the reserve requirements imposed by the Federal
Reserve Board may be used to satisfy liquidity requirements imposed by the
OTS. In addition, Federal Reserve Board regulations limit the periods within
which depository institutions must provide availability for and pay interest
on deposits to transaction accounts. Depository institutions are required to
disclose their check-hold policies and any changes to those policies in
writing to customers. The Bank is in compliance with all such Federal Reserve
Board regulations.
TAXATION
The Company reports its income and expenses under an accrual method of
accounting and has been filing federal income tax returns on a calendar year
basis. For 1994 and thereafter, the Company and its subsidiaries have elected
to file consolidated tax returns on a fiscal year basis ended September 30.
The Tax Reform Act of 1986 (the "1986 Act"), which was signed into law on
October 22, 1986, revised the income tax laws applicable to corporations in
general and to savings institutions, such as the Bank, in particular. Except
as specifically noted, the discussion below relates to taxable years
beginning after December 31, 1986.
31
<PAGE>
The Company has not been notified of a proposed examination by the
Internal Revenue Service (the "IRS") of its federal income tax returns.
BAD DEBT RESERVES
DEDUCTIONS. The Internal Revenue Code of 1986, as amended (the "Code"),
currently permits savings institutions, such as the Bank, to establish a
reserve for bad debts and to make annual additions thereto, which additions
may, within specified formula limits, be deducted in determining taxable
income. The bad debt reserve deduction is generally based upon a savings
institution's actual loss experience (the "experience method"). In addition,
provided that certain definitional tests relating to the composition of
assets and sources of income are met, a savings institution was permitted to
elect annually to compute the allowable addition to its bad debt reserve for
losses on qualifying real property loans (generally loans secured by improved
real estate) by reference to a percentage of its taxable income (the
"percentage of taxable income method").
Under the percentage of taxable income method, a savings institution was
permitted, in general, to claim a deduction for additions to bad debt
reserves equal to 8% of the savings institution's taxable income. Taxable
income for this purpose is defined as taxable income before the bad debt
deduction, but reduced for any addition to the reserve for non-qualifying
loans. For this purpose, the taxable income of a savings institution for a
taxable year is calculated after utilization of net operating loss
carryforwards.
In August 1996, legislation was enacted that repeals the reserve method of
accounting (including the percentage of taxable income method) used by many
thrifts, including the Bank, to calculate their bad debt reserve for federal
income tax purposes. As a result, large thrifts such as the Bank must
recapture that portion of the reserve that exceeds the amount that could have
been taken under the specific charge-off method for post-1987 tax years. The
legislation also requires thrifts to account for bad debts for federal income
tax purposes on the same basis as commercial banks for tax years beginning
after December 31, 1995. The recapture will occur over a six-year period, the
commencement of which will be delayed until the first taxable year beginning
after December 31, 1997, provided the institution meets certain residential
lending requirements. The management of the Company does not believe that the
legislation will have a material impact on the Company or the Bank.
DISTRIBUTIONS. Under the Code, a portion of the Bank's bad debt reserves
may be reduced on account of a "non-dividend" distribution. A distribution is
a non-dividend distribution to the extent that, for federal income tax
purposes, (i) it is in redemption of shares, (ii) it is pursuant to a
liquidation of the institution, or (iii) in the case of a current
distribution it, together with all other such distributions during the
taxable year, exceeds the Bank's current and post-1951 accumulated earnings
and profits. The amount charged against the Bank's bad debt reserves in
respect of a distribution will be includable in its gross income and will
equal the amount of such distribution, increased by the amount of federal
income tax resulting from such inclusion.
ALTERNATIVE MINIMUM TAX
In addition to the income tax, corporations are generally subject to an
alternative minimum tax at a rate of 20%. The alternative minimum tax is
imposed on the sum of regular taxable income (with certain adjustments) and
tax preference items, less any available exemption ("AMTI"). The alternative
minimum tax is imposed to the extent that it exceeds a corporation's regular
income tax liability. The items of tax preference that constitute AMTI for
1990 and thereafter include 75% of the excess of the taxpayer's adjusted
current earnings over AMTI (determined without regard to this preference and
prior to any deduction for net operating loss carryforwards or carrybacks).
Another item of tax preference is the excess of the bad debt deduction over
the amount allowable under the actual loss experience method. In addition,
net operating loss carryforwards cannot offset more than 90% of AMTI.
32
<PAGE>
INTEREST ALLOCABLE TO TAX-EXEMPT OBLIGATIONS
The 1986 Act eliminates for financial institutions the deduction for
interest expense allocable to the purchase or carrying of most tax-exempt
obligations for taxable years ending after December 31, 1986, with respect to
tax-exempt obligations acquired after August 7, 1986 excluding certain
financial institution-qualified issues. For all qualified issues and for
non-qualified tax-exempt obligations acquired after 1982 and before August 7,
1986, 20% of allocable interest expense deductions will be disallowed.
STATE TAXATION
The State of Florida imposes a corporate franchise tax on the Company, at
a rate of 5% of the Company's taxable income as determined for Florida
franchise tax purposes. Taxable income for this purpose is based on federal
taxable income with certain adjustments. A credit against the franchise tax,
for Florida intangible taxes paid, is allowable in an amount equal to the
lesser of (i) the amount of such intangible taxes paid or (ii) 65% of the
franchise tax.
33
<PAGE>
ITEM 2. PROPERTIES.
The executive and administrative offices of the Company and the Bank and
the Coral Gables branch are located at 255 Alhambra Circle, Coral Gables,
Florida 33134. On November 15, 1996 the Company completed the purchase of
Suncoast Savings and Loan Association FSA ("Suncoast"). Suncoast had six
branch offices, two mortgage origination offices and several other facilities
which were acquired by the Company. The Company owns electronic data
processing equipment for its exclusive use, which consists of personal
computers and peripherals and software having an aggregate net book value of
approximately $330,000 as of September 30, 1996.
The following table sets forth the location of, and certain additional
information regarding, the Company's and the Bank's executive and
administrative offices and branches, including Suncoast properties. The total
net book value of the Company's premises as of September 30, 1996 which
excludes the Suncoast properties was approximately $1.1 million.
<TABLE>
<CAPTION>
NET BOOK VALUE OF LEASE EXPIRATION DATE
LOCATION LEASEHOLD IMPROVEMENTS AND RENEWAL TERMS SQUARE FOOTAGE
- ----------------------------------- ----------------------- ---------------------- -----------------
<S> <C> <C> <C>
Executive and
administrative offices, and
savings branches ..................
Boca Raton branch ................. $80,637 1999 2,442
21222 St. Andrews Boulevard #11 (3 options to renew
Boca Raton, Florida 33434 for 3 years each)
Boynton Beach branch .............. $139,182 2001 2,933
117 North Congress Avenue ........ (2 options to renew
Boynton Beach, Florida 33426 .... for 5 years each)
Coral Gables branch ............... $543,891 2004 14,097
255 Alhambra Circle (2 options to renew
Coral Gables, Florida 33134 for 5 years)
Coral Springs branch .............. $22,901 2001 2,805
1307 University Drive (2 options to renew
Coral Springs, Florida 33071 for 5 years each)
Deerfield Beach branch
and Commercial Real Estate office $217,268 1998 4,000
2201 West Hillsboro Boulevard (2 options to renew
Deerfield Beach, Florida 33442 for 5 years each)
Delray Beach branch ............... $16,135 1995 4,000
7431-39 West Atlantic Avenue (3 options to renew
Delray Beach, Florida 33446 for 5 years each)
East Delray Beach branch .......... (5) 2001 4,059
1177 George Bush Boulevard, #102 (1 option to renew
Delray Beach, Florida for 5 years)
Hallandale branch ................. (5) -- (1)(3) 4,500
501 Golden Isles Drive
Hallandale, Florida
Hollywood branch .................. (5) -- (1)(2) 12,200
4350 Sheridan Street
Hollywood, Florida
Lauderdale-by-the-Sea branch ..... (5) -- (1) 5,000
227 Commercial Boulevard
Lauderdale-by-the-Sea, Florida
34
<PAGE>
NET BOOK VALUE OF LEASE EXPIRATION DATE
LOCATION LEASEHOLD IMPROVEMENTS AND RENEWAL TERMS SQUARE FOOTAGE
- ----------------------------------- ----------------------- ---------------------- ------------------
Pembroke Pines branch ............. (5) 2,000 3,500
100 South Flamingo Road (1 option to renew
Pembroke Pines, Florida for 5 years)
Pompano Beach branch .............. (5) -- (1) 7,600
1313 North Ocean Boulevard
Pompano Beach, Florida ...........
South Miami branch ................ $43,059 1998 6,100
6075 Sunset Drive
South Miami, Florida 33143
Tamarac branch .................... $32,148 2002 3,531
5779 North University Drive (1 option to renew
Tamarac, Florida 33321 for 5 years)
West Palm Beach branch ............ $36,379 2001 3,740
2911C North Military Trail ...... (2 options to renew
West Palm Beach, Florida 33409 for 5 years each)
Mortgage Origination office ...... (5) 1998 1,129
7700 North Kendall Drive, #506
Miami, Florida ...................
Mortgage Origination office ...... (5) 2000 32,850
Presidential Circle (2 options to renew
4000 Hollywood Boulevard for 5 years each)
Hollywood, Florida ...............
Storage Warehouses ................ (5) 1996 1,500
1009 South 21st Avenue
Hollywood, Florida
1017 South 21st Avenue (5) 1996 2,322
Hollywood, Florida
Other ............................. (5) 1998 5,371
1177 George Bush Boulevard, #200 (1 option to renew
Delray Beach, Florida ............ for 3 years)(4)
4340 Sheridan Street .............. (5) -- (1)(4) 4,764
Hollywood, Florida
6101 Sunset Drive
South Miami, Florida 33143 ...... -- 1998 4,000
</TABLE>
- --------
(1) The Bank owns the facility.
(2) A savings branch occupies 3,100 square feet. The remainder of the
building is leased by unrelated parties.
(3) The Bank leases 1,400 square feet to unrelated parties.
(4) The entire space is currently sub-leased to an unrelated party
(5) Prior Suncoast properties acquired on November 15, 1996.
35
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
The Company and its subsidiaries, from time to time, are involved as
plaintiff or defendant in various legal actions arising in the normal course
of their businesses. While the ultimate outcome of any such proceedings
cannot be predicted with certainty, it is the opinion of management that no
proceeding exist, either individually or in the aggregate, that, if
determined adversely to the Company and its subsidiaries, would have a
material adverse effect on the Company's consolidated financial condition,
results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended September 30, 1996.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information concerning the executive
officers and directors of the Company and the Bank.
<TABLE>
<CAPTION>
POSITIONS WITH COMPANY
NAME AGE AND BUSINESS EXPERIENCE
---- --- -----------------------
<S> <C> <C>
Alfred R. Camner 52 Director, Chairman of the Board, Chief Executive Officer and President
of the Company (1993 to present); Director, Chairman of the Board and Chief
Executive Officer and President (1984 to present) of the Bank; Senior Managing
Director (1996 to present) and Managing Director of Stuzin and Camner,
Professional Association, attorneys-at-law (1973 to present); Director
and member of the executive committee of the Board of Directors of Loan
America Financial Corporation, a national mortgage banking company (1985
to 1994); Director of CSW Associates, Inc., an asset management firm (1990
to 1995).
Lawrence H. Blum 53 Director and Vice Chairman of the Board of the Company (1993 to present)
and the Bank (1984 to present); Managing Director (1992 to present) and
partner (1974 to present) of Rachlin, Cohen & Holtz, certified public
accountants.
Albert J. Finch(1) 59 Director and Vice Chairman of the Company and the Bank (November 1996 to
present); President and sole owner of Finch Financial, Inc., a financial
consulting firm (November 1996 to present); Director, Chairman of the Board
and Chief Executive Officer of Suncoast (1985 to November 1996); Chief
Operating Officer and President of Suncoast (1992 to November 1996).
James A. Dougherty 46 Director (December 1995 to present) and Executive Vice President of the
Company (1994 to present); Director, Executive Vice President and Chief
Operating Officer of the Bank (1994 to present); Executive Vice President
of Retail Banking of Intercontinental Bank (1989 to 1994).
36
<PAGE>
POSITIONS WITH COMPANY
NAME AGE AND BUSINESS EXPERIENCE
---- --- -----------------------
Earline G. Ford 53 Director, Executive Vice President and Treasurer of the Company (1993 to
present); Director (1984 to present), Executive Vice President (1990 to
present), Senior Vice President--Administration (1988 to 1990), Treasurer
(1984 to present) and Vice President--Administration (1984 to 1988) of
the Bank; Legal Administrator of Stuzin and Camner, Professional Association,
attorneys-at-law (1973 to 1996); Vice Chairman of CSW Associates, Inc.,
an asset management firm (1990 to 1995).
Marc D. Jacobson 54 Director and Secretary of the Company (1993 to present) and the Bank (1984
to present); Vice President of Head-Beckham Insurance Agency, Inc. (1990
to present); President and principal owner of American Central Insurance
Agency, Inc. (1969 to 1990).
Allen M. Bernkrant 65 Director of the Company (1993 to present) and the Bank; private investor
in Miami, Florida (1990 to present); Chairman, President and principal
owner of Southern General Diversified, Inc., manufacturer and distributor
of recreational equipment (1960 to 1990).
Irving P. Cohen(1) 55 Director of the Company and the Bank (November 1996 to present); Director
of Suncoast (1988 to 1996); Partner, Thompson Hine & Flory, attorneys at
law (1995 to present); Partner, Semmes Bowen & Semmes, attorneys at law
(1990 to 1995).
Bruce Friesner 71 Director of the Company (1996 to present) and the Bank (1996 to present);
Director of Loan America Financial Corporation (1990-1994); Partner of
F&G Associates, a commercial real estate development company (1972 to
present).
Patricia L. Frost 58 Director of the Company (1993 to present) and the Bank; private investor
in Miami, Florida; Principal of West Laboratory School, Coral Gables, Florida
(1970 to 1993).
Sandra Goldstein 55 Director of the Company and the Bank (1993 to present); Real estate broker,
Sandra Goldstein & Associates, Inc. (1995 to present); Codina-Klein Realty,
Inc. (1989 to 1995); Broker/salesperson with L.J. Hooker International,
Inc., a real estate agency (1986 to 1989).
Elia J. Gusti(1) 62 Director of the Company and the Bank (November 1996 to present); Director
of Suncoast (1990 to 1996); President and principal owner of Lee Guisti
Realty, Inc., a real estate and mortgage brokerage firm (1982 to present).
Marc Lipsitz 55 Director of the Company (1996 to present); Managing Director (1996 to present)
of Stuzin & Camner, P.A.; General Counsel of Jefferson National Bank
(1993-1996); Partner, Stroock Stroock & Lavan, attorneys at law (1991-1993).
Robert D. Lurie 50 Director of the Company (1993 to present) and the Bank (1993-1996); Chairman,
President and principal owner of Resources for Child Care Management, Inc.,
a provider of child care services to companies (1985 to 1995); Chairman
of Corporate Childcare, Inc. (beginning in 1995).
37
<PAGE>
POSITIONS WITH COMPANY
NAME AGE AND BUSINESS EXPERIENCE
---- --- -----------------------
Norman E. Mains(1) 53 Director of the Company and the Bank (November 1996 to present); Director
of Suncoast (1985 to 1986); Chief Economist and Director of Research for
the Chicago Mercantile Exchange (1994 to present); President and Chief
Operating Officer of Rodman & Renshaw Capital Group, Inc., a securities
broker/dealer firm (1991 to 1994).
Neil Messinger 58 Director of the Company (1996 to present) and the Bank (1996 to present);
radiologist; President (1986 to present), Radiological Associates, P.A.;
Chairman (1986 to present) of Imaging Services of Baptist Hospital.
Christina Cuervo Migoya 31 Director of the Company and the Bank (1995 to present); Assistant City
Manager and Chief of Staff of the City of Miami (1992 to present); Assistant
Vice President of United National Bank (1992); Assistant Vice President,
First Union National Bank/Southeast Bank (1986 to 1992).
Anne W. Solloway 79 Director of the Company and the Bank (1993 to present); private investor
in Miami, Florida.
OFFICERS OF THE COMPANY
AND/OR THE BANK WHO
ARE NOT DIRECTORS:
Charles A. Arnett 48 Executive Vice President of the Bank (beginning in 1995); Executive Vice
President of Intercontinental Bank (1991 to 1995); President and Chief
Executive Officer of Northridge Bank (1990-1991).
Samuel A. Milne 46 Executive Vice President (1996 to present) and Senior Vice President and
Chief Financial Officer of the Company and the Bank (May 1995 to present);
Senior President and Chief Financial Officer, Consolidated Bank (1992 to
1995); Senior Vice President, Southeast Bank (1984 to 1991)
Donald Putnam 40 Executive Vice President of the Bank (1996 to present); Senior Vice President
and Regional Sales Manager, NationsBank of Florida, N.A. (1996); Senior
Vice President of Citizens Federal Bank, a Federal Savings Bank (1994 to
1996); First Vice President (1987-1994).
Nancy L. Ashton 42 Senior Vice President and Assistant Secretary of the Company (1993 to present);
Senior Vice President (1990 to present), Vice President (1988 to 1990),
and Assistant Vice President (1984 to 1988) of the Bank.
Jessica Atkinson 44 Senior Vice President of the Bank (beginning in 1995); Vice President (1991
to 1995) and Southeast Regional Director (1989 to 1991) of American Savings
of Florida, F.S.B.
Pedro J. Gomez 42 Senior Vice President of the Bank (beginning in 1995); Vice President,
First Union National Bank of Florida (1991 to 1995); Vice President of
Southeast Bank, N.A. (1978 to 1991).
Anne Lehner-Garcia 35 Senior Vice President and Secretary of the Bank (1993 to present); Senior
Vice President (1990 to present), Vice President (1987 to 1990) and Assistant
Vice President (1986 to 1987) of the Bank.
38
<PAGE>
POSITIONS WITH COMPANY
NAME AGE AND BUSINESS EXPERIENCE
---- --- -----------------------
Teresa Pacin 42 Senior Vice President of the Bank (beginning in 1995); Vice President,
NationsBank of Florida, N.A. (1994 to 1995); Vice President, First Union
National Bank of Florida (1985 to 1994).
</TABLE>
- -----------
(1) Under the merger agreement with Suncoast, Messrs. Mains, Guisti, and
Cohen were appointed directors of the Company and the Bank, and Mr. Finch
was appointed as a Director and a Vice Chairman of the Company and
BankUnited.
--------------
All executive officers serve at the discretion of the Board of Directors
and are elected annually by the Board.
39
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDERS
MATTERS
STOCK INFORMATION
The Company's Class A Common Stock, $.01 par value ("Class A Common
Stock"), is traded in the over-the-counter market and quoted in the Nasdaq
Stock Market, ("Nasdaq"). The Company's Class B Common Stock, $.01 par value
("Class B Common Stock"), is not currently traded on any established public
market.
At December 11, 1996, there were 430 and 19 holders of record of the
Company's Class A Common Stock and Class B Common Stock, respectively. The
number of holders, of record of the Class A Common Stock includes nominees of
various depository trust companies for an undeterminable number of individual
stockholders. Class B Common Stock is convertible into Class A Common Stock
at a ratio (subject to adjustment on the occurrence of certain events) of one
share of Class A Common Stock for each Class B share surrendered for
conversion.
There were no common stock dividends declared or paid in fiscal 1996 or
1995. See Note 11 to the Company's Consolidated Financial Statements for a
discussion of restrictions on the Bank's payment of dividends to the Company.
The following tables set forth, for the periods indicated, the range of
hgh and low bid prices for the Class A Common Stock quoted on Nasdaq. Stock
price data in the Nasdaq reflects inter-dealer prices, without retail
mark-up, mark-down or commission, and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
CLASS A COMMON
STOCK
------------------
PRICE
------------------
HIGH LOW
-------- --------
<S> <C> <C>
Fiscal Year Ended September 30, 1996:
1st Quarter ........................ $8.75 $6.00
2nd Quarter ........................ $8.50 $6.50
3rd Quarter ........................ $8.50 $7.25
4th Quarter ........................ $8.25 $7.25
Fiscal Year Ended September 30, 1995:
1st Quarter ........................ $7.00 $4.50
2nd Quarter ........................ $6.25 $4.75
3rd Quarter ........................ $7.00 $5.00
4th Quarter ........................ $8.75 $7.13
</TABLE>
40
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
AS OF OR FOR THE YEARS ENDED SEPTEMBER 30,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ---------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA
Interest income ..................................... $ 52,132 $ 39,419 $ 30,421 $ 25,722 $ 24,243
Interest expense .................................... 34,622 26,305 16,295 12,210 14,022
----------- ------------ ------------- ----------- ------------
Net interest income ................................. 17,510 13,114 14,126 13,512 10,221
Provision for loan losses ........................... (120) 1,221 1,187 1,052 70
----------- ------------ ------------- ----------- ------------
Net interest income after provision for loan losses 17,630 11,893 12,939 12,460 10,151
----------- ------------ ------------- ----------- ------------
Non-interest income:
Service fees ........................................ 597 423 358 221 142
Gain on sales of loans and mortgage-backed
securities, net ................................... 5 239 150 1,496 94
Gain (loss) on sales of other assets, net(2) ....... (6) 9,569 -- -- 2
Other ............................................... 53 6 46 2 25
----------- ------------ ------------- ----------- ------------
Total non-interest income ......................... 649 10,237 554 1,719 263
----------- ------------ ------------- ----------- ------------
Non-interest expense:
Employee compensation and benefits ................. 4,275 3,997 3,372 2,721 1,986
Occupancy and equipment ............................ 1,801 1,727 1,258 978 940
Insurance(1) ....................................... 3,610 1,027 844 835 697
Professional fees .................................. 929 1,269 833 543 542
Other .............................................. 3,421 4,129 3,579 2,746 2,002
----------- ------------ ------------- ----------- ------------
Total non-interest expense ........................ 14,036 12,149 9,886 7,823 6,167
----------- ------------ ------------- ----------- ------------
Income before income taxes .......................... 4,243 9,981 3,607 6,356 4,247
Provision for income taxes(3) ....................... 1,657 3,741 1,328 2,318 1,538
----------- ------------ ------------- ----------- ------------
Net income before Preferred Stock dividends ........ 2,586 6,240 2,279 4,038 2,709
Preferred stock dividends:
Bank ............................................... -- -- 198 787 515
Company ............................................ 2,145 2,210 1,871 726 360
----------- ------------ ------------- ----------- ------------
Net income after preferred stock dividends ......... $ 441 $ 4,030 $ 210 $ 2,525 $ 1,834
=========== ============ ============= =========== ============
FINANCIAL CONDITION DATA
Total assets ........................................ $ 824,360 $ 608,415 $ 551,075 $ 435,378 $ 345,931
Loans receivable, net, and mortgage-backed
securities(5) ..................................... 716,550 506,132 470,154 313,899 250,606
Investments, overnight deposits, tax certificates,
reverse purchase agreements, certificates of
deposits and other earning assets ................. 87,662 88,768 64,783 100,118 83,445
Total liabilities ................................... 755,249 562,670 509,807 397,859 322,907
Deposits ............................................ 506,106 310,074 347,795 295,108 275,026
Borrowings .......................................... 237,775 241,775 158,175 97,775 42,241
Total stockholders' equity .......................... 69,111 45,745 41,268 30,273 16,797
Common stockholders' equity ......................... 42,350 21,096 16,667 17,162 11,134
PER COMMON SHARE DATA
Primary earnings per common share and common
equivalent share .................................. $ .10 $ 1.77 $ .10 $ 1.42 $ 1.27
=========== ============ ============= =========== ============
Earnings per common share assuming full dilution ... $ .10 $ 1.26 $ .10 $ 1.00 $ .92
=========== ============ ============= =========== ============
Weighted average number of common shares and common
equivalent shares assumed outstanding during the
period:
Primary .......................................... 4,558,521 2,296,021 2,175,210 1,773,264 1,448,449
Fully diluted ...................................... 4,558,521 4,158,564 2,175,210 3,248,618 2,376,848
Equity per common share ............................. $ 7.85 $ 10.20 $ 8.33 $ 8.86 $ 8.51
Fully diluted equity per common share ............... $ 6.83 $ 7.81 $ 6.87 $ 7.07 $ 6.40
Cash dividends per common share
Class A ............................................ $ -- $ -- $ .075 $ .095 $ .10
Class B ............................................ $ -- $ -- $ .03 $ .038 $ --
</TABLE>
(CONTINUED ON NEXT PAGE)
41
<PAGE>
<TABLE>
<CAPTION>
AS OF OR FOR THE YEARS ENDED SEPTEMBER 30,
----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS
Performance ratios:
Return on average assets(6) ...................................... .36% 1.10% .46% 1.12% .92%
Return on average common equity .................................. 1.30 22.60 1.21 18.55 17.68
Return on average total equity ................................... 4.30 14.70 5.84 14.07 14.72
Interest rate spread ............................................. 2.10 2.12 2.78 3.59 3.34
Net interest margin .............................................. 2.51 2.39 3.01 3.87 3.63
Dividend payout ratio(7) ......................................... 82.95 35.42 96.79 40.66 34.97
Ratio of earnings to combined fixed charges and preferred stock
dividends(8):
Excluding interest on deposits ................................ 1.05 1.52 1.07 1.87 1.83
Including interest on deposits .................................. 1.02 1.21 1.03 1.27 1.18
Total loans, net, and mortgage-backed securities to total
deposits ......................................................... 141.58 163.13 134.40 109.65 91.12
Non-interest expenses to average assets .......................... 1.97 2.14 2.04 2.18 2.09
Efficiency ratio(9) .............................................. 76.38 14.58 66.06 45.17 57.76
ASSET QUALITY RATIOS:
Ratio of non-performing loans to total loans ..................... .99% 1.02% 1.07% 1.54% .45%
Ratio of non-performing assets to total loans, real estate owned
and tax certificates ........................................... 1.14 1.35 1.41 1.78 .66
Ratio of non-performing assets to total assets ................... .95 1.10 1.17 1.46 .50
Ratio of charge-offs to total loans .............................. .08 .13 .39 .07 --
Ratio of loan loss allowance to total loans ...................... .34 .32 .20 .38 .11
Ratio of loan loss allowance to non-performing loans ............ 33.74 31.54 18.89 24.70 25.41
CAPITAL RATIOS:
Ratio of average common equity to average total assets .......... 4.78% 3.14% 3.58% 3.79% 3.51%
Ratio of average total equity to average total assets ........... 8.44 7.47 8.05 7.99 6.24
Tangible capital-to-assets ratio(10) ............................. 7.01% 7.09% 6.65% 7.56% 6.66%
Core capital-to-assets ratio(10) ................................. 7.01 7.09 6.65 7.56 6.66
Risk-based capital-to-assets ratio(10) ........................... 14.19 15.79 14.13 15.85 14.42
</TABLE>
- -----------
(1) In 1996 the Company recorded a one-time SAIF special assessment of $2.6
million ($1.6 million after tax).
(2) In 1995, the Company recorded a $9.3 million gain ($5.8 million after
tax) from the sale of its branches on the west coast of Florida. See
"Risk Factors--Effect of Non-interest Income."
(3) Amount reflects expense from change in accounting principle of $194,843
for fiscal 1994. See Note 15 to Consolidated Financial Statements.
(4) Amount is 1991 reflects extraordinary loss of $50,390 from early
extinguishment of debt.
(5) Does not include mortgage loans held for sale.
(6) Return on average assets is calculated before payment of Preferred Stock
dividends.
(7) The ratio of total dividends declared during the period (including
dividends on the Bank's and the Company's preferred stock and the
Company's Class A and Class B Common Stock) to total earnings for the
period before dividends.
(8) The ratio of earnings to combined fixed charges and Preferred Stock
dividends excluding interest on deposits is calculated by dividing
income before taxes and extraordinary items by interest on borrowings
plus 33% of rental expense plus Preferred Stock dividends on a pretax
basis. The ratio of earnings to combined fixed charges and Preferred
Stock dividends including interest on deposits is calculated by dividing
income before taxes and extraordinary items by interest on deposits plus
interest on borrowings plus 33% of rental expense plus Preferred Stock
dividends on a pretax basis.
(9) Efficiency ratio is calculated by dividing non-interest expenses less
non-interest income by net interest income.
(10) Regulatory capital ratio of the Bank.
42
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This discussion and the related financial data contained herein are
presented to assist the reader in the understanding and evaluating the
financial condition, results of operations and future prospects of BankUnited
Financial Corporation (the "Company") and are intended to supplement, and
should be read in conjunction with, the Consolidated Financial Statements and
related Notes and other financial information presented herein.
The Company's income is derived primarily from its loans and other
investments. Funding for such loans and investments is derived principally
from deposits, loan repayments, and borrowings. Consequently, the Company's
net income depends, to a large extent, on the interest rate spread between
the average yield earned on loans and investments and the average rate paid
on deposits and borrowings. Results of operations are also dependent on the
dollar volume and asset quality of the Company's loans and investments.
The results of the Company's operations, like those of other financial
institution holding companies, are affected by the Company's asset and
liability management policies, as well as factors beyond the Company's
control, such as general economic conditions and the monetary and fiscal
policies of the federal government. Lending activities are affected by the
demand for mortgage financing and other types of loans, which is in turn
affected by the interest rates at which such financing may be offered and
other factors affecting the supply of housing and the availability of funds.
Deposit flows and costs of funds are influenced by yields available on
competing investments and by general market rates of interest.
ACQUISITION OF SUNCOAST SAVINGS & LOAN ASSOCIATION, FSA AND THE BANK OF
FLORIDA.
On November 15, 1996, the Company completed its acquisition of Suncoast
Savings & Loan Association, FSA ("Suncoast"). Suncoast had total assets of
$409.4 million, net loans of $335.0 million, deposits of $298.5 million and
stockholders' equity of $24.7 million as of September 30, 1996. The cost of
the acquisition to the Company was $27.8 million, representing the fair value
of consideration given to Suncoast shareholders as well as option and warrant
holders. See Note 18 of Notes to Consolidated Financial Statements for
additional information regarding this acquisition.
In March 1996, the Company also acquired for cash consideration of $2.8
million, The Bank of Florida, a one branch state commercial bank which had
assets of $28.1 million and deposits of $27.3 million on the date of
acquisition.
RESULTS OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
NET INCOME. Net income before preferred stock dividends for fiscal 1996
was $2.6 million compared to $6.2 million in 1995. The decrease in net income
was primarily attributable to the pretax gain recorded in the fourth quarter
of 1995 of $9.3 million ($5.8 million after tax) from the sale of the
Company's three branches on the west coast of Florida and the expense of a
one-time special assessment by the Savings Association Insurance Fund
("SAIF") of $2.6 million ($1.6 million after tax) in the fourth quarter of
1996. The SAIF special assessment became effective on September 30, 1996, in
connection with the federal government's plan to recapitalize the SAIF. Many
banks and thrifts were levied a 65.7 basis point charge against their SAIF
deposit base to help meet the 1.25% mandated deposit reserve ratio. See
"Non-Interest Expenses" below.
Primary earnings per share were $0.10 in 1996 compared to $1.77 in 1995.
Fully diluted earnings per share totaled $0.10 in 1996 compared to $1.26 in
1995. There were no common stock dividends declared in fiscal 1996 or 1995.
In the fourth quarter of fiscal 1994 the Company suspended common stock
dividends for the foreseeable future in order to use funds to support managed
and controlled growth.
NET INTEREST INCOME. Net interest income before provision for loan losses
increased $4.4 million or 33.6% to $17.5 million in fiscal 1996 from $13.1
million in fiscal 1995. The increase was attributable to an
43
<PAGE>
increase in the average interest-earning assets of $148.6 million, or 27.1%,
to $696.4 million in 1996 from $547.9 million in 1995, offset by a decline in
the net interest rate spread of two basis points, to 2.10% for 1996 from
2.12% for 1995. Average interest earning assets increased primarily because
of purchases of loans which were funded by an increase in certificates of
deposit. The average yield on interest-earning assets increased 29 basis
points to 7.49% for 1996 from 7.20% for fiscal 1995, and the average cost of
interest-bearing liabilities increased 31 basis points to 5.39% for 1996 from
5.08% for 1995.
The increase in interest income of $12.7 million, or 32.2%, to $52.1
million for fiscal 1996 from $39.4 million for 1995 reflects increases in
interest and fees on loans of $11.1 million or 36.9%. The average yield on
loans increased to 7.65% for 1996 from 7.19% for 1995 and the average balance
of loans receivable increased $120.8 million, or 28.8%, to $540.3 million for
fiscal 1996. The increase in average loans receivable was primarily due to
purchases of residential loans. In order to diversify its portfolio and
improve yields on loans receivable, the Company intends to increase
significantly through purchases and originations the amount of
non-residential loans in its portfolio. In this regard the Company acquired
$108.0 million as part of the Suncoast acquisition subsequent to year end.
The increase in interest expense of $8.3 million, or 31.6% to $34.6
million for fiscal 1996 from $26.3 million for 1995 primarily reflects an
increase in interest on deposits of $2.9 million or 16.5% to $20.8 million
for 1996, and an increase in interest on borrowings of $5.4 million, or
63.6%, to $13.8 million for 1996. The average cost of interest bearing
deposits increased 61 basis points to 5.39% in fiscal 1996 compared with
4.78% in fiscal 1995. The average cost of interest bearing deposits increased
primarily because higher rate certificates of deposit represent a greater
percentage of interest bearing liabilities. The average balance of interest
bearing deposits increased $32.9 million or 8.8% to $406.6 million for fiscal
1996. The average cost of borrowings remained relatively unchanged at 5.88%
in fiscal 1996 versus 5.87% in fiscal 1995, however the average balance of
borrowings increased $91.2 million, or 63.3%, to $235.3 million for 1996.
Borrowings increased in the fourth quarter of fiscal 1995 to replace deposits
sold with the Company's branches on the west coast of Florida.
PROVISION FOR LOAN LOSSES. In fiscal 1996, the Company recorded a credit
for loan losses of $120,000 as compared to a provision of $1.2 million in
fiscal 1995. The credit for loan losses recorded in fiscal 1996 was primarily
due to a recovery of $1.0 million as a result of a legal settlement reached
in October, 1995 with a seller/servicer of loans from which the Company had
previously purchased approximately $38.7 million of loans. The Company
experienced unusually large losses on these purchased loans and as a result
instituted a lawsuit against the seller for breach of warranty. Total charge
offs in fiscal 1996 were $493,000 and recoveries were $1.1 million compared
with charge offs of $594,000 and recoveries of $1,000 in fiscal 1995. For a
detailed discussion of the Company's asset quality and allowance for loan
losses, see "Financial Condition-Credit Quality".
NON-INTEREST INCOME. Other income for fiscal 1996 was $0.6 million
compared with $10.2 million in fiscal 1995. Fiscal 1995 included a gain of
$9.3 million from the sale of the Company's branches on the west coast of
Florida, a gain of $263,000 from the sale of $23.7 million of mortgage
servicing rights and gains of $239,000 from the sale of loans and
mortgage-backed securities. There were no significant gains or losses from
the sale of assets in 1996.
NON-INTEREST EXPENSES. Operating expenses increased $1.9 million or 15.5%
to $14.0 million for fiscal 1996 compared to $12.1 million for fiscal 1995
primarily as a result of a $2.6 million ($1.6 million after tax) accrual for
the one time SAIF special assessment. The SAIF special assessment was a 65.7
basis point charge on deposits that were insured by the SAIF of the FDIC on
March 31, 1995. There will be a significant reduction in deposit insurance
premiums in fiscal 1997.
The reduction of operating expenses as a result of the sale of the
Company's three branches on the west coast of Florida in July 1995 were
substantially offset by the opening of three new branches in Palm Beach
County on the east coast of Florida in fiscal 1996.
Employee compensation and benefits increased $278,000 or 7.0% to $4.3
million in fiscal 1996 from $4.0 million in fiscal 1995. The increase
primarily represents increased personnel resulting from the Company's growth.
44
<PAGE>
Insurance expense increased 251.5% due to the one time SAIF special
assessment of $2.6 million. Insurance expense is expected to decrease because
the annual insurance rate will decline to 6.7 basis points in 1997.
Expenses associated with real estate owned ("REO") decreased to $73,000 in
fiscal 1996 from $559,000 in fiscal 1995, a decrease of $486,000. This
decrease reflected net gains on the sale of REO of $178,000 in fiscal 1996,
compared with net losses of $172,000 in fiscal 1995.
Other operating expenses decreased $420,000 or 17.1%, to $2.0 million for
fiscal 1996 from $2.4 million for fiscal 1995. The decrease primarily
reflects a decrease in the provision for losses on tax certificates. In
fiscal 1995, the Company recorded an additional provision on tax certificates
previously purchased, which have not been redeemed and on which the Company
elected not to seek tax deeds.
INCOME TAX PROVISION. The income tax provision was $1.7 million for fiscal
1996 compared to $3.7 million for fiscal 1995. The difference primarily
results in the difference in income before income taxes. The effective tax
rate was 39.1% in 1996 and 37.5% in 1995.
PREFERRED STOCK DIVIDENDS. Total preferred stock dividends were $2.1
million in fiscal 1996 compared to $2.2 million in fiscal 1995. This decrease
was because the Company declared a special dividend in the fourth quarter of
fiscal 1995 on the Series A and Series B Non-Cumulative Convertible Preferred
Stock of $1.25 and $0.92 per share, respectively, payable in Class A Common
Stock. The special dividend represented five quarters of unpaid dividends.
Regular dividends were paid on all other classes of preferred stock for both
fiscal 1996 and 1995.
FINANCIAL CONDITION
Total assets increased $216.0 million, or 35.5% to $824.4 million at
September 30, 1996 from $608.4 million at September 30, 1995, as compared to
$551.1 million at September 30, 1994.
LOANS. The Company's net loans receivable increased by $193.3 million, or
42.6%, to $646.4 million, at September 30, 1996 from $453.1 million at
September 30, 1995. The increase was primarily the result of $218.9 million
of purchased residential loans, a $32.0 million purchase of a commercial real
estate loan package, and $82.7 million of loan originations, partially offset
by principal repayments of $133.8 million, sales of $4.4 million, and
principal charge-offs and transfers to REO of $1.1 million. The commercial
real estate loan package was comprised of 23 loans in South Florida with
principal balances ranging from $376,000 to $4.7 million. Loans receivable
increased $40.1 million from September 30, 1994 to September 30, 1995, a 9.8%
change, primarily due to $76.1 million in residential loans purchased in
fiscal 1995.
Of the new loans originated or purchased during fiscal 1996 totaling
$332.9 million, $207.1 million or 62.3% represented adjustable-rate
residential loans. Of the Company's total net loans receivable of $646.4
million, at September 30, 1996, $448.7 million or 69.4% were adjustable-rate
mortgage loans ("ARM's"). Of this amount the Company had at September 30,
1996 $155.7 million in ARM's tied to the 11th District Federal Home Loan Bank
cost of funds index ("COFI"). COFI is a lagging index in that it does not
change as quickly as market rates.
CREDIT QUALITY. At September 30, 1996 non-performing assets totaled $7.8
million as compared to $6.7 million and $6.4 million at September 30, 1995
and 1994, respectively. Expressed as a percentage of total assets,
non-performing assets declined to 0.95% as of September 30, 1996 as compared
to 1.10% as of September 30, 1995. The declines in fiscal 1996 and fiscal
1995 were due to asset growth.
Prior to 1993, the Company did not experience significant loan losses.
However, beginning late in 1993, the Company began to charge off loans,
particularly in Southern California where real estate values declined. Real
estate values in Southern California had declined because of i) a slowing in
the economy due to plant closings and layoffs in certain industries, ii)
natural disasters in the area, and
45
<PAGE>
iii) an over-valuation of the real estate market, in general, prior to the
decline. While real estate values in Southern California stabilized during
1996, the Company believes that real estate values there have declined
sufficiently since 1993 for there to be a continuing risk that borrowers
faced with home mortgage payments based on 1993 values would default on their
home mortgages. From late 1993 through September 30, 1996 the Company
recorded a total of $2.4 million in charge offs for residential loans secured
by property in Southern California. Of these Southern California charge offs,
$1.0 million or 41.7% (an unusually high charge off rate) were for loans
purchased from a single seller. As a result, the Company instituted legal
action against the seller for breach of warranty to recover the Company's
losses. In October 1995, this legal action was settled, which resulted in a
recovery of $1.0 million. Taking into account this $1.0 million recovery, the
Company recorded net charge offs of $1.7 million for the period from late
1993 through September 30, 1996, of which $1.4 million or 82.4% were for
residential loans secured by real properties in Southern California.
Beginning in fiscal 1993, management began to reduce the percentage of new
loans acquired in California and ceased acquiring all but de minimis amounts
of such loans in April 1994. As of September 30, 1996 the Company had $125.8
million of residential loans in California which constituted 15.3% of its
assets. This compares to $183.6 million, or 33.3% of its assets as of
September 30, 1994, and $147.2 million or 24.2% as of September 30, 1995.
Effective in fiscal 1997, after taking into account the improved economic
conditions in Southern California, management has discontinued this policy
and may purchase additional recently originated residential loans secured by
property located in California.
The allowance for loan losses was $2.2 million, $1.5 million, and $0.8
million at September 30, 1996, 1995, and 1994, respectively. The allowance
for loan losses as a percentage of total loans increased to 0.34% at fiscal
year end 1996, as compared to 0.32% at fiscal year end 1995, and .20% at
fiscal year end 1994. The increase in non-performing assets to $7.8 million
as of September 30, 1996 from $6.7 million as of September 30, 1995 was due
to increases in non-performing loans of $1.7 million and non-accrual tax
certificates of $226,000, partially offset by a decrease in REO of $821,000.
The increase in non-accrual tax certificates was due primarily to
certificates purchased in 1993 which were not redeemed and on which the
Company determined not to apply for tax deeds. REO declined from $1.5 million
as of September 30, 1995 to $632,000 as of September 30, 1996. The decrease
in REO was due to sales of properties in fiscal 1996 with net book values
totaling $2.3 million, partially offset by new additions to REO of $1.4
million during the year. As a percentage of non-performing loans, the
allowance for loan losses increased from 18.9% at September 30, 1994, to
31.5% at September 30, 1995 and 33.7% at September 30, 1996. At September 30,
1996, $2.8 million, or 43.4%, of the Company's non-performing loans were
secured by Southern California properties as compared to $1.1 million or
28.2%, as of September 30, 1995. This level of Southern California
non-performing loans reflected the longer time period required for
foreclosures to be completed on California properties, as compared to that
for foreclosures in other states .
Effective October 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan" as amended by SFAS No. 118. "Accounting by Creditors
for Impairment of a Loan--Income Recognition and Disclosures ("SFAS No.
114"). There was no impact on the consolidated statement of operations upon
implementation due to the composition of the Company's loan portfolio
(primarily residential or collateral dependent loans) and the Company's
policy for establishing the allowance for loan losses. The only impact to the
consolidated statement of financial condition and to non-performing assets
was to reclassify three loans totaling $522,000 previously classified as in
substance foreclosures in real estate owned to non accrual loans. These loans
were reclassified because the Company did not have possession of the
collateral which, under SFAS No. 114 is required for a loan to be classified
as real estate owned. SFAS No. 114 does not apply to large groups of smaller
balance homogenous loans that are collectively evaluated for impairment.
Loans collectively reviewed by the Company for impairment include all
residential and consumer loans that are past due not more than 60 days. All
other loans are reviewed based on specific criteria such as delinquency or
other factors that may come to the attention of management. The Company's
impaired loans within the scope of SFAS No. 114 include all non-performing
loans.
46
<PAGE>
The Company's process for evaluating the adequacy of the allowance for
loans losses has three basic elements: first is the identification of
impaired loans; second is the establishment of an appropriate loan loss
allowance once individual specific impaired loans are identified; and third
is a methodology for establishing loans losses based on the inherent risk in
the remainder of the loan portfolio, past loan loss experience, specific
loans which could have loss potential, geographic and industry concentration,
delinquency trends, economic conditions, the views of its regulators, and
other relevant factors.
The identification of impaired loans is achieved mainly through individual
reviews of all loans 60 or more days past due. Loss allowances are
established for specifically identified impaired loans based on the fair
value of the underlying collateral in accordance with SFAS No. 114.
Impairment losses are included in the allowance for loan losses through a
charge to the provision for loan losses. Adjustments to impairment losses
resulting from changes in the fair value of an impaired loan's collateral are
included in the provision for loan losses. Upon disposition of an impaired
loan any related valuation allowance is removed from the allowance for loan
losses. The allowance for loan losses is adjusted by additions charged to
operations as a provision for loan losses and by loan recoveries, with actual
losses charged as reductions to the allowance.
Management believes that the allowance for loan losses is adequate given
the strength of the Company's collateral position and the attention given to
loan review and classifications. There can be no assurance that additional
provisions for loan losses will not be required in future periods.
The following table sets forth information concerning the Company's
non-performing assets for the periods indicated:
<TABLE>
<CAPTION>
SEPEMBER 30,
--------------------------------------------------------
1996 1995 1994 1993 1992
------------ --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Non-accrual loans(1) ........................ $4,939(3) $3,496 $3,918 $4,225 $1,043
Restructured loans(2) ....................... 1,457 1,070 533 569 --
Loans past due 90 days and still accruing .. -- 92 -- -- --
------------ --------- -------- -------- ---------
Total non-performing loans ................. 6,396 4,658 4,451 4,794 1,043
Non-accrual tax certificates ................ 800 574 -- -- --
Real estate owned ........................... 632 1,453 1,983 1,581 680
------------ --------- -------- -------- ---------
Total non-performing assets ................ $7,828 $6,685 $6,434 $6,375 $1,723
============ ========= ======== ======== =========
Allowance for losses on tax certificates ... $ 614 $ 569 $ 85 $ -- $ --
Allowance for loan losses ................... 2,158 1,469 841 1,184 265
------------ --------- -------- -------- ---------
Total allowance ............................ $2,772 $2,038 $ 926 $1,184 $ 265
============ ========= ======== ======== =========
Non-performing assets as a percentage
of total assets ........................... .95% 1.10% 1.17% 1.46% .50%
Non-performing loans as a percentage
of total loans(4) ......................... .99% 1.02% 1.07% 1.54% .45%
Allowance for loan losses as a percentage
of total loans(4) ......................... .34% .32% .20% .38% .11%
Allowance for loan losses as a percentage of
non-performing loans ...................... 33.74% 31.54% 18.89% 24.70% 25.41%
</TABLE>
- ----------
(1) Gross interest income that would have been recorded on non-accrual loans
had they been current in accordance with original terms was $217,000,
$128,000, $52,000, $295,000, and $127,000, for the years ended September
30, 1996, 1995, 1994, 1993, and 1992, respectively. The amount of
interest income on such non-accrual loans included in net income for
years ended September 30, 1996, 1995, and 1994 was $145,000, $113,000 and
$15,000, respectively.
(2) All restructured loans were accruing.
(3) In addition to the above, management has concerns as to the borrower's
ability to comply with present repayment terms on $109,000 of accruing
loans as of September 30, 1996.
(4) Based on balances prior to deductions for allowance for loan losses.
47
<PAGE>
TAX CERTIFICATES. The Company's investment in tax certificates increased
$544,000, or 1.4%, to $40.1 million at September 30, 1996 from $39.5 million
at September 30, 1995. The increase was primarily the result of $30.4 million
in certificate purchases during fiscal 1996 which exceeded $29.9 million in
certificate redemptions and repayments.
MORTGAGE-BACKED SECURITIES. The Company's held-to-maturity mortgage-backed
securities portfolio decreased $36.2 million, or 71.1%, to $14.7 million at
September 30, 1996 from $50.9 million at September 30, 1995, primarily as a
result of the Company's reclassifying $31.8 million of held-to-maturity
mortgage-backed securities to available-for-sale in accordance with "A Guide
to Implementation of Statement 115 on Accounting for Certain Investments in
Debt and Equity Securities" issued by the Financial Accounting Standards
Board which permitted a one-time reclassification. The reclassified
securities had a market value of $916,000 in excess of their book value at
the time of the transfer.
The Company's available for sale mortgage-backed securities portfolio
increased $53.4 million to $55.5 million as of September 30, 1996 from $2.1
million as of September 30, 1995: $31.8 million of the increase was due to
the reclassification from held to maturity discussed above; $9.1 million of
the increase was due to securities acquired with the Bank of Florida; and the
remainder of the increase was due to purchases made during the 1996 fiscal
year.
DEPOSITS. Deposits increased by $196.0 million, or 63.2%, to $506.1
million at September 30, 1996 from $310.1 million at September 30, 1995.
Management believes the increase in deposits was attributable to the Company
offering competitive interest rates and personalized service. In addition,
the Company acquired deposits of $27.3 million in the purchase of the Bank of
Florida and opened branches in Boca Raton, Florida in December, 1995, Boynton
Beach, Florida in June 1996 and West Palm Beach, Florida in September, 1996.
In July 1995, the Company sold its three branches on the west coast of
Florida with total deposits of $130.3 million. The Company has shifted its
deposit growth strategy to focus on Dade, Broward and Palm Beach Counties.
STOCKHOLDERS' EQUITY. Stockholders' equity was $69.1 million at September
30, 1996, an increase of $23.4 million or 51.1% from $45.7 million at
September 30, 1995. The increase was due primarily to the issuance of
3,565,000 shares of Class A Common Stock pursuant to a stock offering
completed in February 1996. Net proceeds from the offering were approximately
$23.0 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company's most significant sources of funds are deposits, Federal Home
Loan Bank ("FHLB") advances, amortization and pre-payment of mortgage loans
and securities, maturities of investment securities and other short term
investments, and earnings and funds provided from operations. While FHLB
advances, scheduled mortgage loan repayments and securities repayments are
relatively predicable sources of funds, deposit flows and prepayments on
loans and mortgage-backed securities are greatly influenced by general
interest rates, economic conditions and competition. The Company manages the
pricing of its deposits to maintain a desired balance. In addition, the
Company invests excess funds in federal funds and other short-term
interest-earning assets which provide liquidity to meet lending requirements.
The Bank is required under applicable federal regulations to maintain
specified levels of liquid investments in cash, United States government
securities and other qualifying investments. Regulations currently in effect
require the Bank to maintain liquid assets of not less than 5.0% of its net
withdrawable accounts plus short-term borrowings, of which short-term liquid
assets must consist of not less than 1.0%. As of September 30, 1996, the Bank
had liquid assets and short-term liquid assets of 6.75% and 3.80%,
respectively, which was in compliance with these requirements.
The Company's primary use of funds is to purchase or originate loans and
to purchase mortgage-backed and investment securities. In fiscal 1996, 1995,
and 1994, loans increased $193.0 million, $40.1
48
<PAGE>
million, and $117.6 million, respectively, and the Company purchased $22.7
million, $25.7 million, and $61.4 million, respectively, of mortgage-backed
and investment securities. In addition, in 1995, the Company sold branches
having $130.3 million of deposits. Funding for the above came primarily from
increases in deposits of $196.1 million in 1996, increases in FHLB advances
of $83.6 million in 1995 and increases in both deposits and FHLB advances of
$52.7 million and $60.4 million, respectively in 1994.
Federal savings banks such as BankUnited, FSB (the "Bank") are also
required to maintain capital at levels specified by applicable minimum
capital ratios. For a detailed discussion of these requirements, see Note 11
of Notes to Consolidated Financial Statements. At September 30, 1996, the
Bank was in compliance with all capital requirements and met the definition
of a "well capitalized" institution under applicable federal regulations.
The Company is exploring several alternative public and/or private
financings that would provide the Bank with a significant increase in
liquidity and Tier 1 capital to permit additional growth.
IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements presented herein have been prepared
in accordance with generally accepted accounting principles, which require
the measurements of financial position and operating results in terms of
historical dollars without considering changes in the relative purchasing
power of money over time due to inflation. Savings institutions have asset
and liability structures that are essentially monetary in nature, and their
general and administrative costs constitute relatively small percentages of
total expenses. Thus, increases in the general price levels for goods and
services have a relatively minor effect on the total expenses of the Company.
Interest rates have a more significant impact on the Company's financial
performance than the effect of general inflation. Interest rates do not
necessarily move in the same direction or change in the same magnitude as the
prices of goods and services, although periods of increased inflation may
accompany a rising interest rate environment.
RESULTS OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND 1994
NET INCOME. Net income before preferred stock dividends for fiscal 1995
was $6.2 million compared to $2.5 million in 1994. The increase in net income
was primarily attributed to the pretax gain recorded in the fourth quarter of
1995 of $9.3 million ($5.8 million after tax) from the sale of the Company's
three branches on the west coast of Florida
Primary earnings per share were $1.77 in 1995 compared to $0.10 in 1994.
Fully diluted earnings per share totaled $1.26 compared to $0.10 in 1994.
There were no common stock dividends declared in fiscal 1995 compared to
dividends of $0.075 per share of Class A Common Stock and $0.03 per share of
Class B Common Stock declared in fiscal 1994.
NET INTEREST INCOME. Net interest income before provision for loan losses
was $13.1 million in fiscal 1995 as compared to $14.1 million in fiscal 1994.
The $1.0 million, or 7.2%, decrease was attributable to a decline in the net
interest rate spread to 2.12% for fiscal 1995, from 2.78% for fiscal 1994,
which was only partially offset by an increase in the average balance of
interest-earning assets. The average yield on interest-earning assets
increased to 7.20% in fiscal 1995 from 6.48% in fiscal 1994 and the average
cost of interest-bearing liabilities increased to 5.08% in fiscal 1995
compared to 3.70% in fiscal 1994.
The net interest rate spread was negatively impacted by the 300 basis
point rise in market interest rates in 1994 and early 1995, resulting in
interest rate adjustments that were limited by the caps on the Company's
ARMs. In addition, the Company had at September 30, 1995, $156.4 million in
ARMs tied to COFI. Also, in fiscal 1995, in order to mitigate the loss of
deposits from the sale of the west coast branches, the Company paid higher
than usual rates on deposits in an effort to attract new deposits in its
remaining branches, and utilized these new funds and higher cost FHLB
advances in order to maintain its asset size.
49
<PAGE>
The increase in interest income of $9.0 million, or 29.6%, to $39.4
million for fiscal 1995 from $30.4 million for fiscal 1994 reflects increases
in interest and fees on loans of $6.7 million, or 28.3%, and interest on
mortgage-backed securities of $1.8 million, or 77.3%. The yield on loans
increased to 7.19% in fiscal 1995 from 6.46% in fiscal 1994 and the average
balance of loans receivable increased $55.3 million, or 15.2%, to $419.5
million for fiscal 1995. The yield on mortgage-backed securities increased to
6.91% in fiscal 1995 from 6.55% in fiscal 1994 and the average balance of
mortgage-backed securities increased $24.0 million, or 68.1%, to $59.2
million for fiscal 1995. In order to diversify its loan portfolio and improve
yields on loans receivable, the Company intends to increase significantly
through purchases and originations the amount of non-residential loans in its
portfolio. In December 1995, the Company purchased $32.0 million of
commercial real estate loans.
The increase in interest expense of $10.0 million, or 61.4%, to $26.3
million in fiscal 1995 from $16.3 million in fiscal 1994 reflects increases
in interest on deposits of $6.5 million, or 57.3%, to $17.8 million for
fiscal 1995 and an increase in interest on borrowings of $3.5 million, or
70.8%, to $8.4 million in fiscal 1995. The average cost of interest-bearing
deposits increased from 3.55% to 4.78%, and the average balance of
interest-bearing deposits increased $53.9 million, or 16.8%, to $373.7
million for fiscal 1995. The average cost of borrowings increased to 5.87% in
fiscal 1995 from 4.11% in fiscal 1994, and the average balance of borrowings
increased $23.5 million, or 19.4%, to $144.1 million for fiscal 1995.
PROVISIONS FOR LOAN LOSSES. The provision for loan losses increased
$34,000, or 2.9%, to $1.2 million in fiscal 1995. Net charge offs for fiscal
1995 were $593,000 compared to $1.5 million in fiscal 1994. for a detailed
discussion of the Company's asset quality and allowance for loan losses, see
"Financial Condition--Credit Quality."
NON-INTEREST INCOME. Other income for fiscal 1995 was $10.2 million
compared with $0.6 million in fiscal 1994. Fiscal 1995 included a gain of
$9.3 million from the sale of Company's branches on the west coast of
Florida, a gain of $263,000 from the sale of $23.7 million in mortgage
servicing rights and gains of $239,000 from sale of loans and mortgage-backed
securities. Fiscal 1994 included gains of $150,000 from the sale of loans and
mortgage-backed securities.
NON-INTEREST EXPENSES. Operating expenses increased $2.3 million, or
22.9%, to $12.1 million for fiscal 1995 compared to $9.9 million for fiscal
1994. Expenses increased in nearly every major category. The sale of the
Company's west coast branches did not significantly impact expenses because
it occurred late in the year.
Employee compensation and benefits increased $625,000 or 18.5% to $4.0
million in fiscal 1995 from $3.4 million in fiscal 1994. The increase
primarily represents a carryover from 1994, when the Company opened a new
branch in Deerfield Beach, Florida and a mortgage origination center in
Plantation, Florida.
Occupancy and equipment expense increased $469,000, or 37.2%, as a result
of the opening of the new branch and lending office in 1994 and increased
rent expense paid while the new space for the Company's executive and
administrative offices was being prepared for occupancy.
Insurance expense increased $183,000, or 21.7%, due to FDIC insurance paid
on the Company's increased deposits.
Professional fees--legal and accounting increased $436,000, or 52.3%, due
primarily to a legal action to recover losses on loans purchased from a
single seller which was settled in October 1995 and the payment of disputed
prior year legal fees.
Expenses associated with REO increased to $559,000 in fiscal 1995, from
$230,000 in fiscal 1994, an increase of $329,000. Net losses on the sale of
REO increased $117,000 primarily because of losses on
50
<PAGE>
property in Southern California. REO operating expenses increased $213,000
for fiscal 1995, due to higher levels of REO during the year.
INCOME TAX PROVISION. The income tax provision was $3.7 million for fiscal
1995 compared to $1.3 million for fiscal 1994. The difference primarily
resulted from the difference in income before income taxes. The effective tax
rate was 37.5% in 1995 and 31.4% in 1994; 1994 includes a $195,000 expense
for the cumulative effect of a change in accounting principle as a result of
the Company's adoption of Statement of Financial Accounting Standards No.
109-"Accounting for Income Taxes."
PREFERRED STOCK DIVIDENDS. Total preferred stock dividends were $2.2
million in fiscal 1995 compared to $2.1 million in fiscal 1994. In the fourth
quarter of fiscal 1995, the Company declared a special dividend on the Series
A and Series B Non-Cumulative Convertible Preferred Stock of $1.25 and $0.92
per share, respectively, payable in Class A Common Stock. The dividend
represented five quarters of unpaid dividends. In fiscal 1994, the Company
paid cash dividends of $0.75 and $0.55 on the Series A and Series B
Non-Cumulative Convertible Preferred Stock, respectively. Dividends of $0.55,
$0.80, and $0.80 were paid on the Company's Series C, Series C-II, and Series
1993, Non Cumulative Convertible Preferred Stock respectively for both years.
Dividends on the 9% Non Cumulative Perpetual Preferred Stock which was issued
in the first quarter of fiscal 1994, were $0.90 and $0.675 per share in
fiscal 1995 and 1994, respectively. In 1994, the Bank paid $198,000 in
preferred stock dividends on stock redeemed with the issuance of the
Non-Cumulative Perpetual Preferred Stock, Series 1993.
51
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Set forth below is selected quarterly data for the fiscal years ended
September 30, 1996 and 1995.
<TABLE>
<CAPTION>
1996
----------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C> <C>
Net interest income .................................... $3,538 $3,758 $4,723 $5,491
Provision (credit)for loan losses ...................... (300) (--) 75 105
Non-interest income .................................... 158 129 198 164
Non-interest expense ................................... 2,528 2,764 3,006 5,738
-------- ---------- ---------- ----------
Income (loss) before taxes and preferred stock
dividends .............................................. 1,468 1,123 1,840 (188)
Income taxes ........................................... 557 430 706 (36)
-------- ---------- ---------- ----------
Net income (loss) before preferred stock dividends .... 911 693 1,134 (152)
Preferred stock dividends .............................. 536 536 537 536
-------- ---------- ---------- ----------
Net income (loss) applicable to common stock .......... $ 375 $ 157 $ 597 $ (688)
======== ========== ========== ==========
Primary earnings (loss) per share ...................... $ 0.16 $ 0.04 $ 0.10 $(0.12)
======== ========== ========== ==========
Fully diluted earnings (loss) per share ................ $ 0.15 $ 0.04 $ 0.10 $(0.12)
======== ========== ========== ==========
</TABLE>
In the fourth quarter of 1996, the Company recorded an expense of $2.6
million for a one-time special assessment by the Savings Association
Insurance Fund ("SAIF"). The SAIF special assessment required by the FDIC
became effective on September 30, 1996, in connection with the federal
government's plan to recapitalize the SAIF.
<TABLE>
<CAPTION>
1995
----------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C> <C>
Net interest income ............................. $3,455 $3,497 $3,177 $2,985
Provision for loan losses ....................... 150 115 75 881
Non-interest income ............................. 369 232 215 9,421
Non-interest expense ............................ 2,856 2,919 2,822 3,552
---------- ---------- ---------- ----------
Income before taxes and preferred stock
dividends ....................................... 818 695 495 7,973
Income taxes .................................... 296 254 181 3,010
---------- ---------- ---------- ----------
Net income before preferred stock dividends .... 522 441 314 4,963
Preferred stock dividends ....................... 502 502 502 704
---------- ---------- ---------- ----------
Net income (loss) applicable to common stock ... $ 20 $ (61) $ (188) $4,259
========== ========== ========== ==========
Primary earnings (loss) per share ............... $ 0.01 $(0.03) $(0.09) $ 1.80
========== ========== ========== ==========
Fully diluted earnings (loss) per share ........ $ 0.01 $(0.03) $(0.09) $ 1.11
========== ========== ========== ==========
</TABLE>
In the fourth quarter of 1995, the Company sold its three branches on the
west coast of Florida and recorded a gain of $9.3 million. In addition, the
Company increased its allowance for loan losses from $720,000 at June 30,
1995 to $1.5 million at September 30, 1995, which required a fourth quarter
provision of $881,000. The additional allowance was required primarily due to
continued deterioration in the Southern California real estate market. The
Company also paid in the fourth quarter approximately $272,000 in previously
disputed legal fees and as part of its annual filings for tax deeds on tax
certificates, recorded approximately $350,000 for losses on tax certificates
primarily for certificates purchased in June 1992, for which the deeds will
not be applied.
52
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BANKUNITED FINANCIAL CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
---------
Report of Independent Certified Public Accountants ........................ 54
Consolidated Statements of Financial Condition as of September 30, 1996
and September 30, 1995 .................................................... 55
Consolidated Statements of Operations for the Years Ended
September 30, 1996, 1995 and 1994 ......................................... 56
Consolidated Statements of Stockholders' Equity for the Years Ended
September 30, 1996, 1995 and 1994 ......................................... 57
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1996, 1995 and 1994 ......................................... 59
Notes to Consolidated Financial Statements ................................ 61
Unaudited Pro Forma Condensed Combined Financial Statements .............. 88
</TABLE>
53
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
BankUnited Financial Corporation:
In our opinion, the accompanying consolidated statements of financial
condition and the related consolidated statements of operations, of
stockholders' equity, and of cash flows present fairly, in all material
respects, the financial position of BankUnited Financial Corporation and its
subsidiaries at September 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended September 30, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.
As discussed in Notes 1 and 15 to the consolidated financial statements,
the Company changed its method of accounting for income taxes as of October
1, 1993.
PRICE WATERHOUSE LLP
Miami, Florida
November 4, 1996, except as to Note 18,
which is as of November 15, 1996
54
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash ........................................................................ $ 5,483 $ 2,517
Federal Home Loan Bank overnight deposits ................................... 28,253 31,813
Federal funds sold .......................................................... 400 400
Tax certificates, (net of reserves of $614 and $569 at September 30, 1996
and 1995, respectively) ................................................... 40,088 39,544
Investments held to maturity, (market value of approximately $11 and $4,686
at September 30, 1996 and 1995, respectively) ............................. 11 4,686
Investments available for sale, at market ................................... 6,685 --
Mortgage-backed securities held to maturity, (market value of approximately
$14,274 and $50,670 at September 30, 1996 and 1995, respectively) ......... 14,698 50,934
Mortgage-backed securities available for sale, at market .................... 55,467 2,064
Loans receivable, net ....................................................... 646,385 453,134
Mortgage loans held for sale (market value of approximately $217 at
September 30, 1995) ....................................................... -- 216
Other interest earning assets ............................................... 12,225 12,325
Office properties and equipment, net ........................................ 2,608 2,119
Real estate owned, net ...................................................... 632 1,453
Accrued interest receivable ................................................. 7,023 5,573
Prepaid expenses and other assets ........................................... 4,402 1,637
---------- -----------
Total assets .............................................................. $824,360 $608,415
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits ................................................................... $506,106 $310,074
Advances from Federal Home Loan Bank ....................................... 237,000 241,000
Subordinated notes ......................................................... 775 775
Interest payable (primarily on deposits and advances from Federal Home Loan
Bank) .................................................................... 1,244 1,169
Advance payments by borrowers for taxes and insurance ...................... 4,292 3,732
Accrued expenses and other liabilities ..................................... 5,832 5,920
---------- -----------
Total liabilities ......................................................... 755,249 562,670
---------- -----------
Commitments and contingencies (Notes 6 and 16)
Stockholders' equity:
Preferred stock, Series B, C, C-II, 1993 and 9%, $0.01 par value.
Authorized shares--10,000,000; issued and outstanding shares--2,664,547
and 2,679,107 at September 30, 1996 and 1995, respectively ............... 27 27
Class A Common Stock, $.01 par value. Authorized shares--15,000,000; issued
and outstanding shares--5,454,201 and 1,835,170 at September 30, 1996 and
1995, respectively ....................................................... 54 18
Class B Common Stock, $.01 par value. Authorized shares--3,000,000; issued
and outstanding shares--251,515 and 232,324 at September 30, 1996 and
1995, respectively ....................................................... 3 2
Additional paid-in capital .................................................. 62,055 38,835
Retained earnings ........................................................... 7,279 6,838
Net unrealized (losses) gains on securities available for sale, net of tax . (307) 25
---------- -----------
Total stockholders' equity ................................................ 69,111 45,745
---------- -----------
Total liabilities and stockholders' equity ................................ $824,360 $608,415
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
55
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
----------------------------------
1996 1995 1994
---------- ---------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C>
Interest income:
Interest and fees on loans ........................................... $41,313 $30,171 $23,513
Interest on mortgage-backed securities ............................... 4,250 4,093 2,308
Interest on short-term investments ................................... 2,359 1,491 803
Interest and dividends on long-term investments and other
interest-earning assets ............................................ 4,210 3,664 3,797
---------- ---------- ----------
Total interest income ............................................... 52,132 39,419 30,421
---------- ---------- ----------
Interest expense:
Interest on deposits ................................................. 20,791 17,849 11,344
Interest on borrowings ............................................... 13,831 8,456 4,951
---------- ---------- ----------
Total interest expense .............................................. 34,622 26,305 16,295
---------- ---------- ----------
Net interest income before provision (credit) for loan losses ....... 17,510 13,114 14,126
Provision (credit) for loan losses .................................... (120) 1,221 1,187
---------- ---------- ----------
Net interest income after provision (credit) for loan losses ........ 17,630 11,893 12,939
---------- ---------- ----------
Non-interest income:
Service fees ......................................................... 597 423 358
Gain on sale of loans and mortgage-backed securities ................. 5 239 150
Gain (loss) on sale of other assets .................................. (6) 9,569 --
Other ................................................................ 53 6 46
---------- ---------- ----------
Total non-interest income ........................................... 649 10,237 554
---------- ---------- ----------
Non-interest expenses:
Employee compensation and benefits ................................... 4,275 3,997 3,372
Occupancy and equipment .............................................. 1,801 1,727 1,258
Insurance ............................................................ 3,610 1,027 844
Professional fees--legal and accounting .............................. 929 1,269 833
Data processing ...................................................... 340 356 335
Loan servicing expense ............................................... 979 765 672
Real estate owned operations ......................................... 73 559 230
Other operating expenses ............................................. 2,029 2,449 2,342
---------- ---------- ----------
Total non-interest expenses ......................................... 14,036 12,149 9,886
---------- ---------- ----------
Income before income taxes and cumulative effect of change in
accounting principle .............................................. 4,243 9,981 3,607
Income taxes .......................................................... 1,657 3,741 1,133
---------- ---------- ----------
Income before cumulative effect of change in accounting principle
and preferred stock dividends ..................................... 2,586 6,240 2,474
Cumulative effect of change in accounting principle ................... -- -- 195
---------- ---------- ----------
Net income before preferred stock dividends ......................... 2,586 6,240 2,279
Preferred stock dividends of BankUnited, FSB .......................... -- -- 198
Preferred stock dividends of the Company .............................. 2,145 2,210 1,871
---------- ---------- ----------
Net income after preferred stock dividends .......................... $ 441 $ 4,030 $ 210
========== ========== ==========
Primary earnings per share before cumulative effect of change in
accounting principle ................................................ $ 0.10 $ 1.77 $ 0.19
Expense from change in accounting principle ........................... -- -- 0.09
---------- ---------- ----------
Primary earnings per share ............................................ $ 0.10 $ 1.77 $ 0.10
========== ========== ==========
Fully diluted earnings per share before cumulative effect of change in
accounting principle ................................................ $ 0.10 $ 01.26 $ 0.19
Expense from change in accounting principle ........................... -- -- 0.09
---------- ---------- ----------
Fully diluted earnings per share ...................................... $ 0.10 $ 1.26 $ 0.10
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
56
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A
COMMON
PREFERRED STOCK STOCK
----------------------- ------------
SHARES AMOUNT SHARES
------------ --------- -------------
<S> <C> <C> <C>
Balance at September 30, 1993 .. 1,529,107 $16 1,721,325
Underwritten public offering of
the Company's preferred stock
Series 9% .................... 1,150,000 11 --
Issuance costs of the Company's
preferred stock, Series 9% ... -- -- --
Issuance of Class A and Class B
Common Stock ................. -- -- 57,179
Conversion of Class B
Common Stock to Class A Common
Stock ........................ -- -- 8,514
Payment of dividends on
Company's preferred stock .... -- -- --
Payment of dividends on
BankUnited, FSB's
noncumulative
preferred stock .............. -- -- --
Dividend payment of $.075 per
Class A Common Stock and $.03
per Class B Common Stock ..... -- -- --
Net income for the year ended
September 30, 1994 ........... -- -- --
------------ --------- ------------
Balance at September 30, 1994 .. 2,679,107 27 1,787,018
Issuance of Class A and Class B
Common Stock ................. -- -- 22,418
Conversion of Class B
Common Stock to Class A Common
Stock ........................ -- -- 742
Payment of dividends on
Company's preferred stock .... -- -- 24,992
Net unrealized gain on
investments available
for sale ..................... -- -- --
Net income for the year ended
September 30, 1995 ........... -- -- --
------------ --------- ------------
Balance at September 30, 1995 .. 2,679,107 27 1,835,170
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
CLASS B SECURITIES
COMMON STOCK AVAILABLE TOTAL
------------------------------- PAID-IN RETAINED FOR SALE, STOCKHOLDERS'
AMOUNT SHARES AMOUNT CAPITAL EARNINGS NET OF TAX EQUITY
--------- ---------- --------- ----------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1993 .. $17 215,765 $ 2 $27,503 $ 2,735 $-- $30,273
Underwritten public offering of
the Company's preferred stock
Series 9% .................... -- -- -- 11,489 -- -- 11,500
Issuance costs of the Company's
preferred stock, Series 9% ... -- -- -- (876) -- -- (876)
Issuance of Class A and Class B
Common Stock ................. 1 7,583 -- 297 -- -- 298
Conversion of Class B
Common Stock to Class A Common
Stock ........................ -- (8,514) -- -- -- -- --
Payment of dividends on
Company's preferred stock .... -- -- -- -- (1,871) -- (1,871)
Payment of dividends on
BankUnited, FSB's
noncumulative
preferred stock .............. -- -- -- -- (198) -- (198)
Dividend payment of $.075 per
Class A Common Stock and $.03
per Class B Common Stock ..... -- -- -- -- (137) -- (137)
Net income for the year ended
September 30, 1994 ........... -- -- -- -- 2,279 -- 2,279
------ ---------- -------- --------- ----------- --------- --------------
Balance at September 30, 1994 .. 18 214,834 2 38,413 2,808 -- 41,268
Issuance of Class A and Class B
Common Stock ................. -- 18,232 -- 222 -- -- 222
Conversion of Class B
Common Stock to Class A Common
Stock ........................ -- (742) -- -- -- -- --
57
<PAGE>
UNREALIZED
GAIN ON
CLASS B SECURITIES
COMMON STOCK AVAILABLE TOTAL
------------------------------- PAID-IN RETAINED FOR SALE, STOCKHOLDERS'
AMOUNT SHARES AMOUNT CAPITAL EARNINGS NET OF TAX EQUITY
--------- ---------- --------- ----------- ----------- ------------- ------------
Payment of dividends on
Company's preferred stock .... -- -- -- 200 (2,210) -- (2,010)
Net unrealized gain on
investments available
for sale ..................... -- -- -- -- -- 25 25
Net income for the year ended
September 30, 1995 ........... -- -- -- -- 6,240 -- 6,240
------ --------- ----- ------- ------- ------- ---------
Balance at September 30, 1995 .. 18 232,324 2 38,835 6,838 25 45,745
</TABLE>
(TABLE CONTINUED ON NEXT PAGE)
57
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY--(CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A
COMMON
PREFERRED STOCK STOCK
----------------------- ------------
SHARES AMOUNT SHARES
------------ --------- ------------
<S> <C> <C> <C>
Conversion of Preferred Stock
to Common Stock Class A .... (14,560) -- 21,340
Issuance of Class A and Class
B Common Stock ............. -- -- 25,210
Underwritten public offering
of the Company's Common
Class A, net ............... -- -- 3,565,000
Payment of dividends on the
Company's Preferred Stock .. -- -- 7,481
Net change in unrealized loss
on investments available
for sale ................... -- -- --
Net income for the year ended
September 30, 1996 ......... -- -- --
----------- ------- ---------
Balance at September 30, 1996 2,664,547 $27 5,454,201
=========== ======= =========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
CLASS B SECURITIES
COMMON STOCK AVAILABLE TOTAL
------------------------------- PAID-IN RETAINED FOR SALE, STOCKHOLDERS'
AMOUNT SHARES AMOUNT CAPITAL EARNINGS NET OF TAX EQUITY
--------- ---------- --------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Conversion of Preferred Stock
to Common Stock Class A .... -- -- -- -- -- -- --
Issuance of Class A and Class
B Common Stock ............. -- 19,191 1 330 -- -- 331
Underwritten public offering
of the Company's Common
Class A, net ............... 36 -- -- 22,831 -- -- 22,867
Payment of dividends on the
Company's Preferred Stock .. -- -- -- 59 (2,145) -- (2,086)
Net change in unrealized loss
on investments available
for sale ................... -- -- -- -- -- (332) (332)
Net income for the year ended
September 30, 1996 ......... -- -- -- -- 2,586 -- 2,586
------ --------- ------ --------- --------- --------- -----------
Balance at September 30, 1996 $54 251,515 $ 3 $62,055 $ 7,279 $(307) $69,111
====== ========= ====== ========= ========= ========= ===========
</TABLE>
The beginning balance at September 30, 1993 of each series of the
Company's preferred stock were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
------------ ---------
<S> <C> <C>
Series A ..... 55,000 $ 1
Series B ..... 142,378 2
Series C ..... 363,636 4
Series C-II . 222,223 2
Series 1993 . 745,870 7
----------- -------
Total ...... 1,529,107 $16
=========== =======
</TABLE>
The ending balance at September 30, 1996 of Preferred Stock were as
follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
------------ ---------
<S> <C> <C>
Series B ..... 183,818 $ 2
Series C ..... 363,636 4
Series C-II . 222,223 2
Series 1993 . 744,870 7
Series 9% .... 1,150,000 12
----------- -------
Total ...... 2,664,547 $27
=========== =======
</TABLE>
Effective September 30, 1995, the Series A Preferred Stock was exchanged
for Series B Preferred Stock.
See accompanying notes to consolidated financial statements.
58
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ................................................... $ 2,586 $ 6,240 $ 2,279
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Provision (credit) for loan losses ........................ (120) 1,221 1,187
Provision for losses on tax certificates .................... 76 484 85
Depreciation and amortization ............................... 674 526 308
Amortization of discounts and premiums on investments ...... 20 3 32
Amortization of discounts and premiums on
mortgage-backed securities ................................ 144 84 92
Amortization of discounts and premiums on loans ............ (2,332) (784) 138
Loans originated for sale ................................... (4,141) (2,376) (12,387)
Increase in accrued interest receivable ..................... (1,239) (320) (859)
Increase in interest payable on deposits and FHLB advances . 31 685 61
Increase (decrease) in accrued expenses ..................... 213 (68) 121
Increase (decrease) in accrued taxes ........................ (2,960) 3,065 (547)
Increase (decrease) in deferred taxes ....................... (469) 33 (174)
Increase (decrease) in other liabilities .................... 2,841 1,763 (800)
(Increase) decrease in prepaid expenses and other assets ... (224) 566 (962)
Gain on sales of mortgage-backed securities ................. -- (231) (221)
Proceeds from sale of loans ................................. 4,362 2,456 21,797
Recovery on loans ........................................... 1,119 1 52
(Gain) loss on sales of loans ............................... (5) (8) 71
(Gain) loss on real estate owned operations ................. (185) 94 63
(Gain) on sales of tax certificates ......................... -- (3) (1)
(Gain) loss on sale of other assets ......................... 7 -- --
Gain on sale of loan servicing rights ....................... -- (265) --
Gain on sale of branches .................................... -- (9,304) --
----------- ---------- -----------
Net cash provided by (used in) operating activities ....... (398) 3,862 10,335
----------- ---------- -----------
Cash flows from investing activities:
Net increase in loans ....................................... (185,457) (44,744) (117,689)
Proceeds from sale of real estate owned ..................... 2,661 4,607 3,522
Purchase of investment securities ........................... (3,510) (4,675) (4,180)
Purchase of mortgage-backed securities ...................... (19,228) (11,931) (57,188)
Purchases of other earning assets ........................... (650) (9,580) --
Proceeds from sale of loan servicing rights ................. -- 265 --
Proceeds from repayments of investment securities .......... 5,675 2,000 7,150
Proceeds from repayments of mortgage-backed securities ..... 10,523 6,326 7,021
Proceeds from repayments of other earning assets ........... 750 5,125 --
Proceeds from sales of investment securities ................ 2,097 -- --
Proceeds from sale of mortgage-backed securities ........... -- 9,947 6,297
Purchases of office properties and equipment ................ (1,170) (742) (1,109)
Net decrease (increase) in tax certificates ................. (620) 2,587 1,682
Purchase of Bank of Florida, net of acquired cash
equivalents ............................................... 1,521 -- --
----------- ---------- -----------
Net cash used in investing activities ...................... (187,408) (40,815) (154,494)
----------- ---------- -----------
</TABLE>
(CONTINUED ON NEXT PAGE)
59
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
--------------------------------------
1996 1995 1994
----------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase in deposits ...................................... $168,744 $ 92,555 $ 52,687
Net (decrease) in deposits from sale of branches .............. -- (130,276) --
Net (decrease) increase in Federal Home Loan Bank advances ... (4,000) 105,000 39,000
Net (decrease) increase in other borrowings ................... -- (21,400) 21,400
Premium on sale of branches ................................... -- 9,304 --
Underwritten public offering of Company's 9%
Preferred Stock ............................................. -- -- 5,873
Redemption of preferred stock--minority interests ............ -- -- (2,496)
Net proceeds from issuance of common stock .................... 23,198 222 298
Cash dividends paid on the Bank's noncumulative
preferred stock ............................................. -- -- (198)
Dividends paid on the Company's preferred stock ............... (2,086) (2,010) (1,871)
Cash dividends on common stock ................................ -- -- (137)
Increase in advances from borrowers for taxes and insurance .. 560 1,526 200
---------- ---------- --------
Net cash provided by financing activities .................... 186,416 54,921 114,756
---------- ---------- --------
Increase (decrease) in cash and cash equivalents .............. (594) 17,968 (29,403)
Cash and cash equivalents at beginning of year ................ 34,730 16,762 46,165
---------- ---------- --------
Cash and cash equivalents at end of year ...................... $ 34,136 $ 34,730 $ 16,762
========== ========== ========
Supplemental Disclosures:
Interest paid on deposits and borrowings ...................... $ 34,547 $ 25,617 $ 16,235
========== ========== ========
Income taxes paid ............................................. $ 4,626 $ 676 $ 1,888
========== ========== ========
Transfers from loans to real estate owned ..................... $ 1,154 $ 1,182 $ 3,986
========== ========== ========
Transfer of mortgage-backed securities from held for sale to
held to maturity at the lower of cost or market ............. $ -- $ -- $ 3,627
========== ========== ========
Transfer of mortgage-backed securities from held to maturity
to available for sale ....................................... $ 31,780 $ -- $ --
========== ========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
60
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of BankUnited Financial Corporation
(the "Company") and subsidiaries conform to generally accepted accounting
principles and to general practices within the savings and loan industry.
Presented below is a description of the Company and its principal accounting
policies.
(A) BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, BankUnited, FSB ("the Bank"), a federally chartered
savings bank and BU Ventures, Inc. and the Bank's wholly-owned subsidiaries,
T&D Properties of South Florida, Inc. ("T&D") and Bay Holdings Company, Inc.,
("Bay Holdings"). The Bank provides a full range of banking services to
individual and corporate customers through its branches in South Florida. The
Bank is subject to the regulations of certain federal agencies and undergoes
periodic examinations by those regulatory authorities. T&D invests in tax
certificates and holds title to, maintains, manages and supervises the
disposition of real property acquired through tax deeds. Bay Holdings holds
title to, maintains, manages and supervises the disposition of real estate
acquired through foreclosure. All significant intercompany transactions and
balances have been eliminated.
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the consolidated
financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of
the date of the consolidated statements of financial condition and operations
for the period.
Material estimates that are particularly susceptible to significant change
in the near term relate to the determination of the allowances for loan
losses and the allowance for losses on tax certificates and the valuation of
real estate acquired in connection with foreclosures or in satisfaction of
loans. In connection with the determination of the allowances for loan losses
and real estate owned, management obtains independent appraisals for all
properties.
(B) MORTGAGE-BACKED SECURITIES AND INVESTMENTS
The Company adopted Statement of Financial Accounting Standards No. 115
("SFAS No. 115"), "Accounting for Certain Investments in Debt and Equity
Securities," effective October 1, 1994. In accordance with SFAS No. 115,
mortgage-backed securities and other investments available for sale are
carried at fair value (market value), inclusive of unrealized gains and/or
losses, and net of discount accretion and premium amortization computed using
the level yield method. Net unrealized gains and losses are reflected as a
separate component of stockholders' equity, net of applicable deferred taxes.
Prior to adoption of SFAS No. 115, mortgage-backed securities and other
securities designated as held for sale were carried at the lower of cost or
market value, determined in the aggregate. Net unrealized losses were
recognized in a valuation allowance by charges to income.
Mortgage-backed securities and investments held to maturity are carried at
amortized cost. Under the guidance of SFAS No. 115, mortgage-backed
securities and investment securities that the Company has the positive intent
and ability to hold to maturity are designated as held-to-maturity
securities.
Gain or losses on sales of mortgage securities and investments are
recognized on the specific identification basis.
61
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Tax certificates are considered investments held to maturity and,
accordingly, are carried at cost less a valuation allowance. Interest is
accrued on tax certificates until payoff or until it appears uncollectible.
When deemed uncollectible, accrued but uncollected interest is reversed.
Applicable law permits application for tax deeds to be applied for two years
after the effective date of the acquisition of the tax certificate. Tax deeds
applied for are carried at the cost adjusted for accrued interest. Tax deeds
applied for carry an annual interest rate of 18%.
(C) ALLOWANCE FOR LOAN LOSSES
A provision for losses on loans is charged to operations when, in
management's opinion, the collectibility of the balances is doubtful and the
carrying value is greater than the estimated net realizable value of the
collateral. The provision is based upon a review of the nature, volume,
delinquency status and inherent risk of the loan portfolio in relation to the
allowance for loan losses.
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the allowance for loan losses.
Such agencies may require additions to the allowance based on their judgments
about information available to them at the time of their examination.
The Company's non-accrual policy provides that all loans are placed on
non-accrual status when they are 90 days past due as to either principal or
interest, unless the loan is fully secured and in the process of collection.
Loans are returned to accrual status when they become less than 90 days
delinquent.
Payments received on impaired loans are generally applied to principal and
interest based on contractual terms.
See Note 5 for information regarding the Company's adoption of Statement
of Financial Accounting Standards No. 114 "Accounting by Creditors for
Impairment of a Loan".
(D) LOANS RECEIVABLE
Loans receivable are considered long-term investments and, accordingly,
are carried at historical cost. Loans held for sale are recorded at the lower
of cost or market, determined in the aggregate. In determining cost, deferred
loan origination fees are deducted from principal balances of the related
loans.
(E) LOAN-ORIGINATION FEES, COMMITMENT FEES AND RELATED COSTS
Loan origination fees are accounted for in accordance with SFAS No. 91,
"Accounting for Non-refundable Fees and Costs Associated with Originating or
Acquiring Loans and Initial Direct Costs of Leases." Loan origination fees
and certain direct loan origination costs are deferred, and the net fee or
cost is recognized as an adjustment to interest income using the interest
method over the contractual life of the loans, adjusted for estimated
prepayments based on the Company's historical prepayment
62
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
experience. Commitment fees and costs relating to commitments, of which the
likelihood of exercise is remote, are recognized over the commitment period
on a straight-line basis. If the commitment is subsequently exercised during
the commitment period, the remaining unamortized commitment fee at the time
of exercise is recognized over the life of the loan as an adjustment of
yield.
(F) OTHER INTEREST EARNING ASSETS
Other interest earning assets include Federal Home Loan Bank of Atlanta
stock and an equity investment in the Community Reinvestment Group. The fair
value is estimated to be the carrying value which is par.
(G) OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are carried at cost less accumulated
depreciation and amortization. Depreciation is provided using the estimated
service lives of the assets for furniture, fixtures and equipment (7 to 10
years), and computer equipment and software (3 to 5 years), or with leases,
the term of the lease or the useful life (10 years), whichever is shorter.
Repair and maintenance costs are charged to operations as incurred, and
improvements are capitalized.
(H) ACCRUED INTEREST RECEIVABLE
Recognition of interest on the accrual method is generally discontinued
when interest or principal payments are greater than 90 days in arrears,
unless the loan is well secured and in the process of collection. At the time
a loan is placed on nonaccrual status, previously accrued and uncollected
interest is reversed against interest income in the current period.
(I) INCOME TAXES
The Company and its subsidiaries file consolidated income tax returns.
Deferred income taxes have been provided for elements of income and expense
which are recognized for financial reporting purposes in periods different
than such items are recognized for income tax purposes. Effective October 1,
1993, the Company implemented Statement of Financial Accounting Standards No.
109 ("SFAS No. 109"), "Accounting for Income Taxes." SFAS No. 109 requires
accounting for deferred taxes utilizing the liability method, which applies
the enacted statutory rates in effect at the statement of financial condition
date to differences between the book and tax bases of assets and liabilities.
The resulting deferred tax liabilities and assets are adjusted to reflect
changes in tax laws. Prior to implementing SFAS No. 109, the Company
accounted for income taxes in accordance with Accounting Principles Board
Opinion No. 11, which provided for deferred taxes based on differences
between taxable income and book income.
The implementation of SFAS No. 109 on October 1, 1993 resulted in an
increase of the net deferred tax liability of $195,000. This amount was
reported separately as a cumulative effect of a change in the method of
accounting for income taxes in the Consolidated Statement of Operations.
(J) EARNINGS PER SHARE
Primary earnings per common and common equivalent share is computed on a
weighted average number of common shares and common share equivalents
outstanding during the year. Common share
63
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
equivalents include the dilutive effect of stock options using the treasury
stock method. The weighted average number of common share equivalents assumed
outstanding for the years ended September 30, 1996, 1995 and 1994 were
4,559,000, 2,296,000, and 2,175,000, respectively. Earnings per common share,
assuming full dilution, assume the maximum dilutive effect of the average
number of shares from stock options and the conversion equivalents of
preferred stocks. The weighted average number of fully diluted common shares
outstanding during the years ended September 30, 1996, 1995 and 1994 were
4,559,000, 4,159,000, and 2,175,000, respectively. Stock dividends have been
included in the calculation of earnings per share for all years presented.
(K) REAL ESTATE OWNED
Property acquired through foreclosure, deeds in lieu of foreclosures, or
loans judged to be in-substance foreclosures are recorded at the lower of the
related principal balance at foreclosure or estimated fair value less
estimated costs to sell the property. Any excess of the loan balance over the
net realizable value is charged to the allowance for loan losses when the
property is classified as real estate owned. The net realizable value is
reviewed periodically and, when necessary, any decline in the value of the
real estate is charged to expense. Significant property improvements which
enhance the salability of the property are capitalized to the extent that the
carrying values do not exceed their estimated realizable values. Maintenance
and carrying costs on the property are charged to operations as incurred.
(L) STOCK OPTIONS
At the time stock options are granted to employees and directors, no
accounting entries are made, as the options are granted at the fair market
value of the Company's common stock. The proceeds from the exercise of
options are credited to common stock for the par value of the shares issued,
and the excess, net of any tax benefit is credited to paid-in capital.
(M) IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In May 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 122 ("SFAS No. 122")
"Accounting for Mortgage Servicing Rights" an amendment of FASB Statement No.
65. SFAS No. 122 requires that the Company recognize rights to service
mortgage loans for others as a separate asset, regardless of how those
servicing rights were acquired. The value of the mortgage servicing rights
should be recorded at their relative fair values. SFAS No. 122 was adopted
prospectively beginning October 1, 1995. The impact of adopting SFAS No. 122
was not material.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123 ("SFAS No. 123"), "Accounting for Stock-Based
Compensation." SFAS No. 123 establishes financial accounting and reporting
standards for stock based employee compensation plans. The statement defines
a "fair value based method" of accounting for employee stock options or
similar equity instruments and encourages all entities to adopt that method
of accounting for all of their employee stock compensation plans. However,
SFAS No. 123 also allows an entity to continue to measure compensation costs
for those plans using the "intrinsic value based method" of accounting, which
the Company currently uses. The Company currently intends to continue to use
the "intrinsic value based method" and disclose in the notes to the
consolidated financial statements, the required information using the "fair
value based method."
64
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
In June 1996, the FASB issued Statement of Financial Accounting Standards
No. 125 ("SFAS 125"), "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities." SFAS 125 provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishment of liabilities based on a financial-components approach that
focuses on control. SFAS 125 is effective for transfers and servicing of
financial assets and extinguishment of liabilities occurring after December
31, 1996 and is to be prospectively applied. Management is currently
evaluating the impact of adoption of SFAS 125 on its financial position and
results of operations.
(N) FINANCIAL STATEMENT RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the
September 30, 1996 consolidated financial statements.
(2) TAX CERTIFICATES
Tax certificates are certificates representing delinquent real estate
taxes owed to the respective counties. A substantial percentage of tax
certificates are for properties located in southeast Florida. The Company's
policy is to purchase tax certificates only for properties located in
Florida.
The net carrying value of tax certificates was $40.0 million and $39.5
million at September 30, 1996 and 1995, respectively. Included in these
amounts at September 30, 1996 and 1995 were $1.9 million and $3.9 million,
respectively of tax certificates for which the Company had made application
for the tax deeds. The Company maintains loss reserves for tax certificates
which were $614,000 and $569,000 at September 30, 1996 and 1995,
respectively.
The estimated market values of the Company's tax certificates are the same
as the carrying values, since historically the tax certificates have had
relatively short lives and their yields approximate market rates.
(3) SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
Interest income from securities purchased under agreements to resell
aggregated approximately $1.2 million and $701,000 for the years ended
September 30, 1995 and 1994, respectively.
65
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
The following sets forth information concerning the Company's securities
purchased under agreements to resell for the periods indicated:
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEAR ENDED SEPTEMBER 30,
-------------------------------------
1996 1995 1994
------- ---------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Maximum amount of outstanding agreements at
any month end during the period ............ -- $ 700 $ 6,800
Average amount outstanding during the period -- $20,262 $18,283
Weighted average interest rate for the period -- 6.10% 3.83%
Maturity ..................................... -- -- Oct. 1, 1994
</TABLE>
(4) INVESTMENTS AND MORTGAGE-BACKED SECURITIES
Pursuant to the provisions of SFAS No. 115, securities designated as
available for sale are carried at market value with the resultant after-tax
appreciation or depreciation from amortized cost reflected as an addition to,
or deduction from, stockholders' equity. In December of 1995 the Company
reclassified $31.8 million of held-to-maturity mortgage-backed securities to
available-for-sale in accordance with "A Guide to Implementation of Statement
115 on Accounting for Certain Investments in Debt and Equity Securities"
issued by the Financial Accounting Standard Board. The reclassified
securities had a market value of $916,000 in excess of their book value at
the time of transfer.
INVESTMENTS
Presented below is an analysis of the carrying values and approximate
market values of investments held to maturity.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
----------- ------------- ------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
State of Israel
bonds ............... $11 $-- $-- $11
----------- ------------ ------------- ---------
Total .............. $11 $-- $-- $11
=========== ============= ============= =========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
----------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
----------- ------------- ------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. government agency securities $4,675 $-- $-- $4,675
State of Israel bonds ............ 11 -- -- 11
----------- ------------- ------------- ---------
Total ........................... $4,686 $-- $-- $4,686
=========== ============= ============= =========
</TABLE>
All investments held to maturity at September 30, 1996 and 1995 had
maturities between one and five years.
66
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(4) INVESTMENTS AND MORTGAGE-BACKED SECURITIES--(CONTINUED)
Presented below is an analysis of the investments designated as available
for sale.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------------------------------
GROSS GROSS
HISTORICAL UNREALIZED UNREALIZED CARRYING
COST GAINS LOSSES VALUE
------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury notes .............. $2,005 $-- $ (1) $2,004
U.S. government agency securities 2,999 -- (18) 2,981
Other ............................ 1,702 -- (2) 1,700
------------- ------------- ------------- -----------
Total ........................... $6,706 $-- $(21) $6,685
============= ============= ============= ===========
</TABLE>
The Company had no investments classified as available for sale in 1995.
MORTGAGE-BACKED SECURITIES
The carrying value and historical cost of mortgage-backed securities
available for sale are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------------------------------
GROSS GROSS
HISTORICAL UNREALIZED UNREALIZED CARRYING
COST GAINS LOSSES VALUE
------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
GNMA mortgage-backed securities $24,943 $207 $(338) $24,812
FNMA mortgage-backed securities 6,055 61 (2) 6,114
FHLMC mortgage-backed
securities ..................... 22,172 33 (432) 21,773
Other .......................... 2,772 6 (10) 2,768
------------- ------------- ------------- -----------
Total ......................... $55,942 $307 $(782) $55,467
============= ============= ============= ===========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
--------------------------------------------------------
GROSS GROSS
HISTORICAL UNREALIZED UNREALIZED CARRYING
COST GAINS LOSSES VALUE
------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
FHLMC mortgage-backed securities $2,025 $39 $-- $2,064
------------- ------------- ------------- -----------
Total .......................... $2,025 $39 $-- $2,064
============= ============= ============= ===========
</TABLE>
67
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(4) INVESTMENTS AND MORTGAGE-BACKED SECURITIES--(CONTINUED)
The market value and historical cost of mortgage-backed securities held to
maturity are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
----------- ------------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
GNMA ............................... $ 83 $ 5 $ -- $ 88
FHLMC .............................. 4,144 -- (118) 4,026
Collateralized mortgage obligations 8,802 -- (289) 8,513
Mortgage pass-through certificates 1,669 -- (22) 1,647
----------- ------------- ------------- ---------
Total ............................. $14,698 $ 5 $(429) $14,274
=========== ============= ============= =========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
-----------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
----------- ------------- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
GNMA ............................... $25,644 $453 $(143) $25,954
FNMA ............................... 4,761 126 -- 4,887
FHLMC .............................. 7,406 -- (231) 7,175
Collateralized mortgage obligations 3,580 -- (84) 3,496
Mortgage pass-through certificates 9,543 -- (385) 9,158
----------- ------------- ------------- ----------
Total ............................. $50,934 $579 $(843) $50,670
=========== ============= ============= ==========
</TABLE>
The mortgage-backed securities have contractual maturities which range
from the years 1996 to 2026, however, expected maturities will differ from
contractual maturities as borrowers have the right to prepay obligations with
or without prepayment penalties.
There were no sales of mortgage-backed securities and collateralized
mortgage obligations in 1996, however, gross proceeds on sales of
mortgage-backed securities and collateralized mortgage obligations were $10.0
million and $6.3 million during the years ended September 30, 1995 and 1994,
respectively. Gross realized gains were $231,000 and $221,000 on sales of
mortgage-backed securities during the years ended September 30, 1995 and
1994, respectively. There were no realized losses during the years ended
September 30, 1995 and 1994.
At September 30, 1995 and 1994, GNMA, FHLMC and FNMA mortgage-backed
securities with carrying values of approximately $3.0 million and $5.4
million, respectively, were pledged as collateral for public funds on
deposit. There were none pledged in 1996. At September 30, 1994, FNMA and
GNMA mortgage-backed securities with a carrying value of approximately $25.0
million and a market value of approximately $23.7 million were pledged as
collateral for a $21.4 million reverse repurchase agreement. The securities
underlying the agreement were held in safekeeping by a trustee.
68
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(5) LOANS RECEIVABLE
Loans receivable consist of the following:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
------------------------
1996 1995
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Mortgage loans--conventional .................... $263,757 $224,160
Mortgage loans--conventional serviced by others 317,103 209,339
Mortgage loans--other ........................... 53,817 12,381
Commercial loans:
Secured ........................................ 5,618 3,372
Unsecured ...................................... 787 260
Line of credit loans ............................ 1,254 892
Share loans ..................................... 648 218
Installment loans ............................... 1,001 595
----------- -----------
Total .......................................... 643,985 451,217
Less allowance for loan losses .................. (2,158) (1,469)
Deferred loan fees, discounts and premiums ..... 4,558 3,386
----------- -----------
Loans receivable, net .......................... $646,385 $453,134
=========== ===========
</TABLE>
Of the total gross loans receivable of $644.0 million at September 30,
1996, approximately $262.7 million, or 40.8%, represents residential loans
secured by properties in Florida, $125.8 million, or 19.5% represents loans
in California and $255.5 million, or 39.7% represents loans in other states.
See Note 8 for loans collateralized for Federal Home Loan Bank Advances.
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------
1996 1995 1994
--------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of the period $1,469 $ 841 $ 1,184
Provision (credit) ................ (120) 1,221 1,187
Allowance from Bank of Florida ... 183 -- --
Loans charged-off ................. (493) (594) (1,582)
Recoveries ........................ 1,119 1 52
--------- --------- ----------
Balance at end of the period ..... $2,158 $1,469 $ 841
========= ========= ==========
</TABLE>
Effective October 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan" as amended by SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan Income Recognition and Disclosures" ("SFAS No.
114"). There was no impact on the consolidated statement of operations upon
implementation due to the composition of the Company's loan portfolio
(primarily residential or collateral dependent loans) and the Company's
policy for establishing the allowance for loan losses. The only impact to the
consolidated statement of financial condition and to non-performing assets
was to reclassify three loans totaling $522,000 previously classified as
insubstance foreclosures in real estate owned to non-accrual
69
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(5) LOANS RECEIVABLE--(CONTINUED)
loans. These loans were reclassified because the Company did not have
possession of the collateral which, under SFAS No. 114, is required for a
loan to be classified as real estate owned.
As of September 30, 1996 and 1995, the Company had impaired or non-accrual
loans of $4.9 million and $3.5 million, respectively, and had recorded
specific reserves on these loans of $801,000 and $802,000, respectively. For
the years ended September 30, 1996, 1995 and 1994 the average amounts of
impaired loans were $4,808,000, $2,251,000 and $2,576,000, respectively. No
income is recognized on loans during the period for which the loan is deemed
impaired.
(6) OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are summarized as follows:
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
----------------------
1996 1995
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Leasehold improvements .............. $ 1,640 $ 1,068
Furniture, fixtures and equipment .. 1,881 1,409
Computer equipment and software .... 1,124 1,016
--------- ----------
Total ............................... 4,645 3,493
Less: accumulated depreciation ..... (2,037) (1,374)
--------- ----------
Office properties and equipment, net $ 2,608 $ 2,119
========= ==========
</TABLE>
Depreciation expense was $674,000, $526,000, and $308,000 for the years
ended September 30, 1996, 1995, and 1994, respectively.
The Company has entered into non-cancelable leases with approximate
minimum future rentals as follows:
<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30, AMOUNT
- --------------------------- ---------------------
(DOLLARS IN THOUSANDS)
<S> <C>
1997 ..................... $1,002
1998 ..................... 917
1999 ..................... 837
2000 ..................... 809
2001 ..................... 754
Thereafter ............... 1,538
---------------------
Total ................... $5,857
=====================
</TABLE>
Rent expense for the years ended September 30, 1996, 1995, and 1994 was
$905,000, $959,000, and $768,000, respectively.
70
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(7) DEPOSITS
The weighted average nominal interest rate payable on all deposit accounts
at September 30, 1996 and 1995 was 5.11% and 5.14%, respectively.
Types of deposits and related range of interest rates were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------------------------------------------------------
1996 1995
------------------------------------- -------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest-bearing deposits .......... --% - --% $ 7,301 --% - --% $ 2,804
Passbook and statement savings deposits 2.00% - 4.97% 73,780 2.00% - 4.97% 50,373
Super NOW deposits ..................... .00% - 3.00% 17,265 0.00% - 3.00% 15,353
Money market deposits .................. .00% - 4.65% 16,556 0.00% - 3.10% 7,733
Certificates of deposit ................ 3.92% - 6.16% 391,204 2.71% - 6.65% 233,811
--------- ----------
Total ................................. $506,106 $310,074
========= ==========
</TABLE>
Deposit accounts with balances of $100,000 or more totaled approximately
$69.4 million and $33.4 million at September 30, 1996 and 1995, respectively.
Interest expense on deposits for the years ended September 30, 1996, 1995
and 1994 was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Super NOW and money market deposits ... $ 775 $ 875 $ 1,102
Passbook and statement savings deposits 2,627 2,420 1,716
Certificates of deposit ................ 17,389 14,554 8,526
--------- ---------- ---------
Total ................................. $20,791 $17,849 $11,344
========= ========== =========
</TABLE>
Early withdrawal penalties on deposits are recognized as a reduction of
interest on deposits. For the years ended September 30, 1996, 1995 and 1994,
early withdrawal penalties totaled $42,000, $110,000, and $27,000,
respectively.
The amounts of scheduled maturities of certificate accounts at September
30, 1996 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30, AMOUNT
- --------------------------- -------------------------
(DOLLARS IN THOUSANDS)
<S> <C>
1997 ..................... $316,562
1998 ..................... 58,053
1999 ..................... 7,532
Thereafter ............... 9,057
---------------------
Total: .................. $391,204
=====================
</TABLE>
71
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(8) ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank of Atlanta (FHLB) incur interest
and are repayable as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
REPAYABLE DURING YEAR ENDING SEPTEMBER 30, INTEREST RATE 1996 1995
- ------------------------------------------- ---------------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
1996 ..................................... 4.27% -6.80% $ -- $179,000
1997 ..................................... 4.56% -6.07% 192,000 57,000
1998 ..................................... 6.13% 5,000 5,000
2001(1) .................................. 5.33% -5.61% 40,000 --
---------- --------
$237,000 $241,000
========== ========
</TABLE>
- ------------------
(1) Advances for $15 million are callable by the FHLB in 1997 and $25 million
are callable in 1998.
The terms of a security agreement with the FHLB of Atlanta include a
blanket floating lien that requires the maintenance of qualifying first
mortgage loans as pledged collateral with unpaid principal amounts at least
equal to 100% of the FHLB advances, when discounted at 65% of the unpaid
principal balance. The FHLB of Atlanta stock, which is recorded at cost, is
also pledged as collateral for these advances.
(9) SECURITIES SOLD UNDER AN AGREEMENT TO REPURCHASE
Interest expense on securities sold under an agreement to repurchase
aggregated $367,000 and $183,000 for the years ended September 30, 1995 and
1994, respectively.
The following sets forth information concerning repurchase agreements for
the periods indicated:
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEARS ENDED SEPTEMBER 30,
------------------------------------
1996 1995 1994
-------- ---------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Maximum amount of outstanding agreements at
any
month-end during the period ................. $ -- $33,600 $21,400
Average amount outstanding during the period . $-- $ 6,572 $ 3,856
Weighted average interest rate for the period $-- 5.59% 4.49%
Maturity ...................................... $-- -- Dec. 19, 1994
</TABLE>
At September 30, 1996 and 1995, the Company had no pledged securities
under repurchase agreements. At September 30, 1994, the Company had pledged
$25.0 million of FNMA and GNMA mortgage-backed securities as collateral for
the above repurchase agreements.
(10) SUBORDINATED NOTES
At September 30, 1996 and 1995, the Bank had outstanding $775,000, of
subordinated notes which, pursuant to the regulations of the Office of Thrift
Supervision (the "OTS"), are included in the Bank's risk-based capital. The
subordinated notes bear interest at 9% and mature from August 31, 2003 to
June 10, 2009.
72
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(11) REGULATORY CAPITAL
The Bank is required by federal regulations to maintain minimum levels of
capital as follows:
<TABLE>
<CAPTION>
REGULATORY CAPITAL
REQUIREMENT ACTUAL CAPITAL EXCESS CAPITAL
---------------------- ---------------------- ----------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Tangible capital ... $12,196 $ 9,101 $56,967 $43,010 $44,771 $33,909
1.5% 1.5% 7.0% 7.1% 5.5% 5.6%
Core Capital ........ $24,392 $18,201 $56,967 $43,010 $32,575 $24,809
3.0% 3.0% 7.0% 7.1% 4.0% 4.1%
Risked-based capital $33,927 $23,008 $60,164 $45,426 $26,237 $22,418
8.0% 8.0% 14.2% 15.8% 6.2% 7.8%
</TABLE>
Under the OTS regulations adopted to implement the "prompt corrective
action" provisions of the Federal Deposit Insurance Corporation Improvement
Act of 1991 (the "FDICIA"), a "well capitalized" institution must have a
risk-based capital ratio of 10%, a core capital ratio of 5% and a Tier 1
risk-based capital ratio of 6%. (The "Tier 1 risk-based capital" ratio is the
ratio of core capital to risk-weighted assets.) The Bank is a well
capitalized institution under the definitions as adopted. Regulatory capital
and net income amounts as of and for the years ended September 30, 1996, 1995
and 1994 did not differ from regulatory capital and net income amounts
reported to the OTS.
On August 31, 1993, the OTS adopted an amendment to its regulatory capital
regulations to take into account a savings institution's exposure to the risk
of loss from changing interest rates. Under the regulation as amended, a
savings institution with an above normal level of interest rate risk exposure
will be required to deduct an interest rate risk ("IRR") component from its
total capital when determining its compliance with the risk-based capital
requirements. An "above normal" level of interest rate risk exposure is a
projected decline of 2% in the net present value of an institution's assets
and liabilities resulting from a 2% swing in interest rates. The IRR
component will equal one-half of the difference between the institution's
measured interest rate exposure and the "normal" level of exposure. Savings
institutions will be required to file data with the OTS that the OTS will use
to calculate, on a quarterly basis (but with a two-quarter lag),
institutions' measured interest rate risk and IRR components. Implementation
of the IRR requirements have been delayed pending the testing of the OTS
appeals process. If the IRR component had been required as of September 30,
1996, the Bank would have been required to deduct an IRR component from its
total capital when determining its compliance with its risk based capital
requirements, however the Bank would continue to be well capitalized.
Payment of dividends by the Bank is limited by federal regulations, which
provide for certain levels of permissible dividend payments depending on the
Bank's regulatory capital and other relevant factors.
(12) MINORITY INTERESTS--PREFERRED STOCK OF BANKUNITED, FSB
As part of a plan to simplify the Company's capital structure, the Company
commenced an offer in November 1993 to exchange 2.5 shares of its 9%
Noncumulative Perpetual Preferred Stock for each share of the Bank's
Noncumulative Preferred Stock, Series D, E, F and G ("BankUnited Preferred
Stock"). Upon the closing of the exchange offer, all shares of BankUnited
Preferred Stock that remained outstanding were redeemed at $25.00 per share
plus declared but unpaid dividends. The exchange closed on December 28, 1993.
73
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(12) MINORITY INTERESTS--PREFERRED STOCK OF BANKUNITED, FSB--(CONTINUED)
(13) STOCKHOLDERS' EQUITY
The Company has the following capital structure:
PREFERRED STOCK--issuable in series with rights and preferences to be
designated by the Board of Directors. As of September 30, 1996, 7,259,141
shares were authorized but not designated to a particular series.
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES A:
Effective September 30, 1995, pursuant to an Offer to Exchange Preferred
Stock, the holders of the Non-cumulative Convertible Preferred Stock, Series
A, agreed to exchange each of the 55,000 shares of the Series A Preferred
stock for one share of the Company's Non-cumulative Convertible Preferred
Stock, Series B. Because the dividend rate, redemption price, and the
liquidation preference for the Series B Preferred Stock are lower than those
for the Series A Preferred Stock, the Company agreed not to redeem the shares
of Series B Preferred Stock issued pursuant to the exchange offer for a
period of three years and for three years thereafter, such Series B Preferred
Stock shall only be redeemed at a 50% premium or $11.0625 per share.
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES B:
Authorized shares--200,000 shares.
Issued and outstanding shares--183,818 shares as of September 30, 1996 and
197,378 shares as of September 30, 1995.
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $0.7375 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $7.375 per share.
Redemption--except for the shares converted from Series A discussed above,
at the option of the Company at $7.59625 per share at September 30, 1994,
declining thereafter at $.07375 per share during each year through January
31, 1998, and thereafter the redemption price remains at $7.375 per share.
Voting rights--two-and-one-half votes per share. If the Company fails to
pay dividends for six quarters, whether or not consecutive, the holders shall
have the right to elect two additional directors until dividends have been
paid for four consecutive quarters.
Convertibility--convertible into 1.50 shares (adjusted for all stock
dividends) of Class B Common Stock for each share of Noncumulative
Convertible Preferred Stock, Series B, surrendered for conversion, subject to
adjustment on the occurrence of certain events.
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES C:
Authorized shares--363,636 shares.
Issued and outstanding shares--363,636 shares.
74
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(13) STOCKHOLDERS' EQUITY--(CONTINUED)
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $0.550 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $5.50 per share.
Redemption--at the option of the Company, at $5.50 per share.
Voting rights--nonvoting.
Convertibility--convertible into 1.45 shares (adjusted for all stock
dividends) of Class A Common Stock for each share of Noncumulative Preferred
Stock, Series C, surrendered for conversion, subject to adjustment on the
occurrence of certain events.
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES C-II:
Authorized shares--222,223 shares.
Issued and outstanding shares--222,223 shares.
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $0.80 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $9.00 per share.
Redemption--at the option of the Company, at $9.00 per share.
Voting rights--nonvoting.
Convertibility--convertible into 1.32 shares (adjusted for all stock
dividends) of Class A Common Stock for each share of Noncumulative Preferred
Stock, Series C-II, surrendered for conversion, subject to adjustment on the
occurrence of certain events.
8% NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES 1993:
Authorized shares--805,000 shares.
Issued and outstanding--744,870 shares as of September 30, 1996 and
745,870 shares as of September 30, 1995.
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $.80 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $10.00 per share.
75
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(13) STOCKHOLDERS' EQUITY--(CONTINUED)
Redemption--not redeemable prior to July 1, 1998, unless certain criteria
are met, in which case the redemption price would be $10.00 per share;
subsequent to June 30, 1998, redemption is at the option of the Company at a
redemption price of $10.40 per share, declining thereafter at $0.08 per share
during each year through July 1, 2003, and thereafter the redemption price
remains $10.00 per share.
Voting rights--nonvoting. However, if the Company fails to pay dividends
for six quarters, whether or not consecutive, the holders shall have the
right to elect two additional directors until dividends have been paid for
four consecutive quarters.
Convertibility--convertible into one share of Class A Common Stock for
each share of non-cumulative Convertible Preferred Stock, Series 1993,
surrendered for conversion, subject to adjustment on the occurrence of
certain events.
9% NONCUMULATIVE PERPETUAL PREFERRED STOCK:
Authorized shares--1,150,000 shares.
Issued and outstanding--1,150,000 shares.
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $0.90 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $10.00 per share.
Redemption--not redeemable prior to October 1, 1998; subsequent to
September 30, 1998, redemption is at the option of the Company at a
redemption price of $10.00 per share.
Voting rights--nonvoting. However, if the Company fails to pay dividends
for six quarters, whether or not consecutive, the holders shall have the
right to elect two additional directors until dividends have been paid for
four consecutive quarters.
Convertibility--none.
CLASS A COMMON STOCK:
Issuable in series with rights and preferences to be designated by the
Board of Directors:
As of September 30, 1996, 5,000,000 shares of Class A Common Stock were
authorized but not designated to a series.
SERIES I CLASS A COMMON STOCK:
Authorized shares--10,000,000.
Issued and outstanding--5,454,201 shares as of September 30, 1996 and
1,835,170 shares as of September 30, 1995.
76
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(13) STOCKHOLDERS' EQUITY--(CONTINUED)
Dividends--as declared by the Board in the case of a dividend on the Class
A Common Stock alone or not less than 110% of the amount per share of any
dividend declared on the Class B Common Stock.
Voting rights--one tenth of one vote per share.
CLASS B COMMON STOCK:
Authorized shares--3,000,000.
Issued and outstanding--251,515 shares as of September 30, 1996 and
232,324 shares as of September 30, 1995.
Dividends--as declared by the Board of Directors.
Voting rights--one vote per share.
Convertibility--convertible into one share of Class A Common Stock for
each share of Class B Common Stock surrendered for conversion, subject to
adjustment on the occurrence of certain events.
(14) STOCK BONUS PLAN, OPTION AGREEMENTS AND OTHER BENEFIT PLANS
Pursuant to stockholder approval in 1992, the Company maintains the 1992
Stock Bonus Plan. In January 1994, stockholders approved an amendment of this
plan to increase the amount of stock issuable under the plan to 125,000
shares and to allow directors of the Company who are not employees to
participate in the plan and receive stock in partial payment of their
director's fees. As of September 30, 1996, 22,252 shares of Class A Common
Stock and 54,779 shares of Class B Common Stock have been issued under the
1992 Stock Bonus Plan. As of September 30, 1996, there were 47,969 shares
available for grant under the 1992 Stock Bonus Plan.
Pursuant to stockholder approval in 1987, the Company maintains a
non-statutory stock option plan for certain officers, directors and employees
to receive options to purchase shares of Class A and Class B Common Stock.
The stockholders approved an increase in the total number of shares for which
options may be granted under the plan to 750,000 in January 1994. The Board
of Directors approved an increase in the total number of shares for which
options may be granted under the plan to 825,000 (a non-material increase) in
1996. The options are for a period of 10 years and are exercisable at the
fair market value of the stock at the grant date. As of September 30, 1996,
758,718 options have been granted under this plan and 66,412 options have
been exercised.
Pursuant to stockholder approval in January 1994, the Company also
maintains an incentive stock option plan under which options for up to
250,000 shares of Class A and Class B Common Stock may be granted. As of
September 30, 1996, 92,500 options have been granted under this plan.
During October 1984, BankUnited's Board of Directors approved several
non-qualified stock option agreements (the "Agreements") under which options
to purchase shares of Class B Common Stock were granted at the fair market
price of the Class B Common Stock on the date of the grant. The Agreements,
which originally expired on October 23, 1994, have been extended pursuant to
Stockholders' approval to October 23, 1999. As of September 30, 1996, the
Agreements are exercisable for a total of 155,367 shares at the exercise
price of $4.64 per share; none have been exercised.
77
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(14) STOCK BONUS PLAN, OPTION AGREEMENTS AND OTHER BENEFIT PLANS--(CONTINUED)
The following table presents additional data concerning the Company's
outstanding stock options:
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OPTION PRICE OPTION
OF SHARES PER SHARE PRICE
------------ --------------- -------------
<S> <C> <C> <C>
Options outstanding, September 30, 1993 549,174 $3.11 -$10.98 $2,669,272
Options granted ........................ 113,088 7.00 -8.10 846,671
Options exercised ...................... (45,675) 3.21 -3.78 (154,371)
---------- -------------- ------------
Options outstanding, September 30, 1994 616,587 3.11 -10.98 3,361,572
Options granted ........................ 208,671 4.95 -7.95 1,139,902
Options exercised ...................... (6,695) 3.21 -5.73 (23,958)
---------- -------------- ------------
Options outstanding, September 30, 1995 818,563 3.11 -10.98 4,477,516
Options granted ........................ 121,610 7.24 -8.26 926,638
---------- -------------- ------------
Options outstanding, September 30, 1996 940,173 $3.11 -$10.98 $5,404,154
========== ============
</TABLE>
In 1992, the Company adopted a 401(k) savings plan pursuant to which
eligible employees are permitted to contribute up to 15% of their annual
salary to the savings plan. The Company will provide matching contributions
at a rate of 33% of such contributions, up to a maximum of 2% of an
employee's salary. The amount of such matching by the Company for the years
ended September 30, 1996, 1995 and 1994 totaled approximately $7,000,
$30,000, and $29,000, respectively. Employees are eligible to participate in
the plan after one year of service and become vested in the Company's
contribution after two years participation in the plan at the rate of 25% per
year up to 100%.
In September 1995, the Company's Board of Directors adopted a Profit
Sharing Plan. Under the terms of the plan, the Company, at the discretion of
the Board of Directors, may contribute Class A Common Stock to the plan. The
contributions are allocated to the account of eigible employees based upon
their salaries. Employees become eligible for the plan after one year of
service and become vested at the rate of 20% per year up to 100%. The Board
of Directors authorized a contribution of $100,000 and $75,000 in 1996 and
1995, respectively.
(15) INCOME TAXES
As discussed in Note 1, the Company adopted SFAS No. 109 as of October 1,
1993 resulting in a cumulative adjustment of $195,000 to 1994 earnings and
stockholders' equity.
78
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(15) INCOME TAXES--(CONTINUED)
The Company's effective tax rate differs from the statutory federal income
tax rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------------------------
1996 1995 1994
------------------- ------------------- ---------------------
AMOUNT % AMOUNT % AMOUNT %
--------- -------- --------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Tax at federal income tax rate ... $1,443 34.0% $3,394 34.0% $1,262 35.0%
Increase (decrease) resulting
from:
State tax ....................... 154 3.6 362 3.6 (46) (1.3)
Other, net ...................... 60 1.5 (15) (0.1) (83) (2.3)
-------- -------- --------- -------- --------- --------
Total .......................... $1,657 39.1% $3,741 37.5% $1,133 31.4%
======== ======== ========= ======== ========= ========
</TABLE>
The components of the provision for income taxes for the years ended
September 30, 1996, 1995 and 1994 as computed in accordance with SFAS No.
109, are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
-------------------------------
1996 1995 1994
--------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current--federal . $1,324 $3,590 $1,354
Current--state ... 227 620 (53)
Deferred--federal 90 (400) (151)
Deferred--state .. 16 (69) (17)
--------- --------- ---------
Total ............ $1,657 $3,741 $1,133
========= ========= =========
</TABLE>
The tax effects of significant temporary differences included in the net
deferred tax asset as of September 30, 1996 and 1995 were:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996 1995
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Deferred tax asset:
Non-accrual interest ......... $185 $178
Loan loss and other reserves 431 587
Fixed assets ................. 5 --
Deferrals and amortization .. 19 --
------ -------
Gross deferred tax asset ... 640 765
------ -------
Deferred tax liability:
FHLB Atlanta stock dividends 167 167
Fixed assets ................. -- 5
Deferrals and amortization .. -- 14
Other ........................ 13 13
------ -------
Gross deferred tax liability 180 199
------ -------
Net deferred tax asset ..... $460 $566
====== =======
</TABLE>
79
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(15) INCOME TAXES--(CONTINUED)
The components of deferred income tax provision (benefit) relate to the
following:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------
1996 1995 1994
-------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Differences in book/tax depreciation $(10) $ (21) $ (10)
Delinquent interest .................. (7) (80) --
FHLB Stock dividends ................. -- (144) 23
Loan fees ............................ -- -- 169
Loan loss and other reserves ......... 156 (164) (363)
Deferrals and amortization ........... (33) (60) 13
------ --------- --------
Total deferred taxes ................ $106 $(469) $(168)
====== ========= ========
</TABLE>
(16) COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company enters into instruments that
are not recorded in the consolidated financial statements, but are required
to meet the financing needs of its customers and to reduce its own exposure
to fluctuations in interest rates. These financial instruments include
commitments to extend credit and standby letters of credit. Those instruments
involve, to varying degrees, elements of credit and interest rate risk in
excess of the amount recognized in the consolidated statements of financial
condition. The contract or notional amounts of those instruments reflect the
extent of involvement the Company has in particular classes of financial
instruments.
The Company's exposure to credit loss in the event of nonperformance by
the other party on the financial instrument for commitments to extend credit
and standby letters of credit by the other party is represented by the
contractual amount of those instruments. The Company uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Total commitments to extend credit
at September 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------------------------------------------------------
1996 1995
---------------------------------- -----------------------------------
FIXED VARIABLE FIXED VARIABLE
RATE RATE TOTAL RATE RATE TOTAL
--------- ----------- ---------- --------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commitments to fund loans ... $2,575 $ 7,057 $ 9,632 $3,801 $ 7,140 $10,941
Loans in process ............. 607 1,033 1,640 1,795 6,707 8,502
Letters of credit ............ 518 -- 518 45 -- 45
Commitments to purchase loans -- 12,260 12,260 -- -- --
-------- --------- --------- -------- --------- --------
Total ....................... $3,700 $20,350 $24,050 $5,641 $13,847 $19,488
======== ========= ========= ======== ========= ========
</TABLE>
The Company evaluates each customer's credit worthiness on a case-by-case
basis. The amount of collateral obtained, if deemed necessary by the Company,
upon extension of credit is based on
80
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(16) COMMITMENTS AND CONTINGENCIESS--(CONTINUED)
management's credit evaluation of the customer. Collateral varies but may
include accounts receivable, property, plant and equipment, residential real
estate, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. The Company requires collateral to support those commitments.
The Company is a party to certain other claims and litigation arising in
the ordinary course of business. In the opinion of management, the resolution
of such claims and litigation will not materially affect the Company's
consolidated financial position or results of operations.
(17) RELATED PARTY TRANSACTIONS
The Company employs the services of a law firm, of which the Company's
Chairman of the Board and President is senior managing director and of which
another director of the Company is managing director; and the services of an
insurance company, of which a member of the Board of Directors is a vice
president. For the years ended September 30, 1996, 1995 and 1994, total fees
(a portion of which were capitalized) paid to this law firm totaled
approximately $986,000, $1.1 million, and $803,000, respectively, and amounts
paid to this insurance company totaled approximately $147,000, $129,000, and
$151,000, respectively.
(18) SUBSEQUENT EVENT
On November 15, 1996, the Company acquired Suncoast Savings & Loan
Association, FSA ("Suncoast"). The Company issued one share of its Class A
Common Stock for each share of Suncoast common stock of which 2,199,930 were
outstanding and one share of newly created 8% non-cumulative convertible
preferred stock, Series 1996 for each share of Suncoast preferred stock of
which 920,000 shares were outstanding. The newly created 8% non-cumulative
convertible preferred stock, Series 1996 has substantially the same terms and
conditions as the Suncoast preferred stock. The cost of the acquisition,
which will be accounted for as a purchase was $27.8 million, representing the
fair value of the consideration given to the Suncoast common and preferred
stockholders as well as the option and warrant holders. In addition, the
Company incurred approximately $925,000 of costs directly related to the
merger. The balance sheet and results of operations of Suncoast will be
included with those of BankUnited as of and for periods subsequent to
November 15, 1996.
81
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(18) SUBSEQUENT EVENTS--(CONTINUED)
The unaudited proforma combined condensed statements of financial
condition and operations as of and for the year ended September 30, 1996
after giving effect to certain proforma adjustments are as follows:
Proforma combined condensed Statement of Financial Condition as of
September 30, 1996 (in thousands):
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Loans receivable ................... $ 980,444
Other interest earning assets ..... 195,528
Goodwill and other intangibles .... 9,657
Other assets ....................... 53,282
-------------
$1,238,911
=============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Deposits ........................... $ 804,567
Other liabilities .................. 337,420
Stockholders' equity ............... 96,924
-------------
$1,238,911
=============
</TABLE>
Proforma combined condensed Statement of Operations for the year ended
September 30, 1996 (in thousands except per share data):
Interest income ........................... $81,752
Interest expense .......................... 52,423
Provision for loan losses ................. 45
Non-interest income ....................... 9,193
Non-interest expense ...................... 31,805
Income tax expense ........................ 2,654
----------
Net income before preferred stock
dividends .............................. 4,018
Preferred stock dividends ................. 3,249
----------
Net income after preferred stock
dividends .............................. $ 769
==========
Earnings per share
Primary .................................. $ .12
Fully-diluted ............................ $ .12
The proforma combined condensed statement of operations assumes the
acquisition occurred as of October 1, 1995.
A summary of the terms of the newly created 8% non-cumulative convertible
preferred stock, Series 1996 are as follows:
Authorized shares --1,000,000.
Issued and outstanding shares--920,000 shares as of November 15, 1996.
82
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(18) SUBSEQUENT EVENT--(CONTINUED)
Dividends--non-cumulative cash dividends payable quarterly at the fixed
annual rate of $1.20 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $15.00 per share.
Redemption--not redeemable prior to July, 1998, unless certain criteria
are met, in which case the redemption price would be $15.00 per share,
subsequent to June 30, 1998, redemption is at the option of the Company at a
redemption price of $16.20 per share, declining thereafter at $0.20 per share
during each year through July 1, 2003, and thereafter the redemption price
remains at $15.00 per share.
Voting rights--nonvoting except under certain circumstances.
Convertibility--convertible into 1.67 shares of Class A Common Stock for
each share of 8% non-cumulative convertible preferred stock, Series 1996,
surrendered for conversion, subject to adjustment on the occurrence of
certain events.
As part of the purchase of Suncoast, the Company issued warrants to
Suncoast's warrant holders to purchase 80,000 shares of the newly created 8%
non-cumulative convertible preferred stock, Series 1996, and assumed
Suncoast's outstanding stock options. The warrants are exercisable at a price
of $18.00 for each share of the 8% non-cumulative convertible preferred
stock, Series 1996 or each warrant could be exercised to purchase 1.67
shares, subject to adjustment, of Class A Common Stock at a per share price
of $10.80, also subject to adjustment under certain conditions. The warrants
expire on July 8, 1998. The Company assumed 119,000 of Suncoast's options
with option prices ranging from $3.00 to $7.38 per share of Class A Common
Stock with an aggregate exercise price of $610,000.
83
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(19) BANKUNITED FINANCIAL CORPORATION
The following summarizes the major categories of the Company's (parent
company only) financial statements:
CONDENSED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
----------------------
1996 1995
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Assets:
Cash ............................................................... $ 88 $ 48
FHLB overnight deposits ............................................ 7,889 37
Tax certificates ................................................... 312 457
Investments, net (market value of approximately $10 and $10 at
September 30, 1996 and 1995, respectively) ....................... 10 10
Investments available for sale ..................................... 155 --
Mortgage-backed securities, held to maturity (market value of
approximately $1,727 at September 30, 1995) ...................... -- 1,676
Mortgage-backed securities, available for sale ..................... 1,309 --
Accrued interest receivable ........................................ 132 252
Investment in the Bank ............................................. 59,443 43,062
Other assets ....................................................... 248 236
--------- ----------
Total ............................................................. $69,586 $45,778
========= ==========
Liabilities ......................................................... $ 475 $ 33
--------- ----------
Stockholders' equity:
Preferred stock ................................................... 27 27
Common stock ...................................................... 57 20
Paid-in capital ................................................... 62,055 38,835
Retained earnings ................................................. 7,279 6,838
Net unrealized gains on securities available for sale, net of
taxes ........................................................... (307) 25
--------- ----------
Total stockholders' equity ...................................... 69,111 45,745
--------- ----------
Total liabilities and stockholders' equity ...................... $69,586 $45,778
========= ==========
</TABLE>
84
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(19) BANKUNITED FINANCIAL CORPORATION--(CONTINUED)
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER
30,
------------------------------
1996 1995 1994
--------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest income .............. $ 803 $ 307 $ 296
Interest expense ............. 17 36 24
Equity income of the Bank ... 2,406 6,587 2,443
Operating expenses ........... 491 818 529
-------- --------- --------
Income before income taxes .. 2,701 6,040 2,186
Income tax expense
(benefit) .................... 115 (200) (93)
-------- --------- --------
Net income ................. $2,586 $6,240 $2,279
======== ========= ========
</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
------------------------------------
1996 1995 1994
----------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flow from operating activities:
Net income ........................................... $ 2,586 $ 6,240 $ 2,279
Less: Undistributed income of the Bank ............... (406) (6,587) (901)
Other ................................................ 242 156 (1,682)
---------- ---------- -----------
Net cash provided by (used in) in operating
activities ............................................ 2,422 (191) (304)
---------- ---------- -----------
Cash from investing activities:
Equity contributions to the Bank ..................... (16,000) -- (10,447)
Purchase of investment securities .................... (155) -- (10)
Purchase of mortgage-backed securities ............... -- -- (1,960)
Proceeds from repayments of mortgage-backed
securities ......................................... 368 181 103
Net decrease (increase) in tax certificates ......... 145 732 (379)
---------- ---------- -----------
Net cash provided by (used in) investing activities . (15,642) 913 (12,693)
---------- ---------- -----------
Cash flow from financing activities:
Public offering of Company's 9% Preferred Stock ..... -- -- 10,625
Public offering of Company's Class A Common Stock ... 22,867 -- --
Net proceeds from issuance of common stock .......... 331 222 298
Dividends paid on preferred stock .................... (2,086) (2,010) (1,871)
Dividends paid on common stock ....................... -- -- (137)
---------- ---------- -----------
Net cash provided by (used in) financing activities . 21,112 (1,788) 8,915
Decrease (increase) in cash and cash equivalents .... 7,892 (1,066) (4,082)
Cash and cash equivalents at beginning of year ...... 85 1,151 5,233
---------- ---------- -----------
Cash and cash equivalents at end of year ............. $ 7,977 $ 85 $ 1,151
========== ========== ===========
</TABLE>
85
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(20) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The information set forth below provides disclosure of the estimated fair
value of the Company's financial instruments presented in accordance with the
requirements of SFAS No. 107 (and as amended by SFAS No. 119) issued by the
Financial Accounting Standards Board. Management has made estimates of fair
value discount rates that it believes to be reasonable. However, because
there is no market for many of these financial instruments, management has no
basis to determine whether the fair value presented would be indicative of
the value negotiated in an actual sale. The fair value estimates do not
consider the tax effect that would be associated with the disposition of the
assets or liabilities at their fair value estimates.
Fair values are estimated for loan portfolios with similar financial
characteristics. Loans are segregated by category, such as commercial,
commercial real estate, residential mortgage, second mortgages, and other
installment. Each loan category is further segmented into fixed and
adjustable rate interest terms and by performing and non-performing status.
The fair value of loans, except residential mortgage and adjustable rate
loans, is calculated by discounting scheduled cash flows through the
estimated maturity using estimated market discount rates that reflect the
credit and interest rate risk inherent in the loan. The estimate of average
maturity is based on historical experience with prepayments for each loan
classification, modified, as required, by an estimate of the effect of
current economic and lending conditions.
For residential mortgage loans, fair value is estimated by discounting
contractual cash flows adjusted for national historical prepayment estimates
using discount rates based on secondary market sources adjusted to reflect
differences in servicing and credit costs.
For adjustable-rate loans, the fair value is estimated at book value after
adjusting for credit risk inherent in the loan. The Company's interest rate
risk is considered insignificant since the majority of the Company's
adjustable rate loans are based on the average cost of funds for the Eleventh
District of the Federal Home Loan Bank System ("COFI") or one-year Constant
Maturity Treasuries ("CMT") rates and adjust monthly or at intervals
generally over a period not exceeding one year.
The fair value of the tax certificates is estimated at book value as these
investments historically have had relatively short lives and their yields
approximate market rates. The fair value of mortgage-backed securities and
investment securities is estimated based on bid prices available from
securities dealers.
Under SFAS No. 107, the fair value of deposits with no stated maturity,
such as non-interest-bearing demand deposits, savings and NOW accounts, and
money market accounts, is equal to the amount payable on demand. The fair
value of certificates of deposit is based on the discounted value of
contractual cash flows. The discount rate is estimated using the Company's
current rates for deposits of similar maturities adjusted for insurance
costs.
The fair value of subordinated notes is estimated by discounting
contractual cash flows using estimated market rates. The contract amounts and
related fees of the Company's commitments to extend credit approximate the
fair value of these commitments.
86
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(20) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENT--(CONTINUED)
The following table presents information for the Company's financial
instruments at September 30, 1996 and 1995:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
-------------------------------
CARRYING VALUE FAIR VALUE
---------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Financial assets:
Cash and overnight investments ...... $ 34,136 $ 34,136
Tax certificates and other
investments ............................ 46,784 46,784
Mortgage-backed securities ........... 70,163 69,741
Loans receivable ..................... 646,385 646,547
Other interest-earning assets ....... 12,225 12,225
Financial liabilities:
Deposits ............................. $506,106 $506,025
Advances from the FHLB ............... 237,000 237,218
Subordinated notes ................... 775 859
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1995
------------------------------
CARRYING VALUE FAIR VALUE
--------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Financial assets:
Cash and overnight investments ....... $ 34,730 $ 34,730
Tax certificates and other investments 44,230 44,230
Mortgage-backed securities ............ 52,998 52,734
Loans receivable ...................... 453,350 458,681
Other interest-earning assets ........ 12,325 12,325
Financial liabilities:
Deposits .............................. $310,074 $311,424
Advances from the FHLB ................ 241,000 240,675
Subordinated notes .................... 775 899
</TABLE>
87
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Statement of
Financial Condition as of September 30, 1996, and the Unaudited Pro Forma
Condensed Combined Statement of Operations for the year ended September 30,
1996 give effect to the Merger accounted for as a purchase of Suncoast by the
Company. Under the purchase method of accounting, all assets and liabilities
of Suncoast at September 30, 1996 have been adjusted to their current
estimated fair values and combined with the asset and liability book values
of the Company. The Unaudited Pro Forma Condensed Combined Statement of
Financial Condition assumes the Merger was effective on September 30, 1996.
The Unaudited Pro Forma Condensed Combined Statement of Operations give
effect to the Merger as if the Merger had occurred at the beginning of the
period presented.
The pro forma information is based on the historical consolidated
financial statements of the Company and of Suncoast, as adjusted, as set
forth in the accompanying Notes to the Unaudited Pro Forma Condensed Combined
Financial Statements. Suncoast's fiscal year-end is June 30, and thus
Suncoast's financial statements have been adjusted to reflect an unaudited
fiscal year ending September 30, 1996. The Unaudited Pro Forma Condensed
Combined Financial Statements do not give effect to any anticipated cost
savings or potential revenue enhancements in connection with the Merger.
The information shown below should be read in conjunction with the
consolidated historical financial statements of the Company and of Suncoast,
including the respective notes thereto, which are included or incorporated by
reference in this Annual Report on Form 10-K. The pro forma data is presented
for comparative purposes only and is not necessarily indicative of the
combined financial position or results of operations in the future or of the
combined financial position or results of operations which would have been
realized had the Merger been consummated during the periods or as of the
dates for which the pro forma data is presented.
Pro forma per share amounts for the Company giving effect to the Merger
are based on the exchange ratio of one share of the Company Class A Common
Stock for each share of the Suncoast common stock and the issuance of New
Company Preferred Stock having substantially similar terms as the Suncoast
preferred stock.
88
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
COMBINED
BANKUNITED SUNCOAST ADJUSTMENTS PRO FORMA
------------- ----------- -------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks .......................... $ 5,483 $ 4,588 $ -- $ 10,071
FHLB overnight deposits and federal funds sold .. 28,653 1,430 -- 30,083
Repurchase Agreements ............................ -- 15,000 -- 15,000
Tax certificates, net ............................ 40,088 -- -- 40,088
Investments, available for sale, at market ...... 6,696 -- -- 6,696
Mortgage-backed securities, held to maturity .... 14,698 -- -- 14,698
Mortgage-backed securities, available for sale,
at market ...................................... 55,467 18,196 -- 73,663
Loans receivable, net ............................ 646,385 330,781 (930)(1) 976,236
Mortgage loans held for sale ..................... -- 4,208 -- 4,208
Other interest earning assets .................... 12,225 3,075 -- 15,300
Loan servicing assets ............................ -- 11,454 (1,822)(1) 9,632
Office properties and equipment, net ............. 2,608 6,787 700 (1) 10,095
Real estate owned, net ........................... 632 245 -- 877
Accrued interest receivable ...................... 7,023 3,065 -- 10,088
Cost over fair value of net assets acquired and
other intangible assets ........................ 2,457 -- 7,200 (1) 9,657
Prepaid expenses and other assets ................ 1,945 10,574 -- 12,519
----------- ---------- ------------ ----------
Total assets ................................... $824,360 $409,403 $ 5,148 $1,238,911
=========== ========== ============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits ........................................ $506,106 $298,461 $ -- $ 804,567
Advances from FHLB and other borrowings ........ 237,000 73,310 -- 310,310
Subordinated notes .............................. 775 -- -- 775
Advance payments by borrowers for taxes
and insurance ................................. 4,292 4,063 -- 8,355
Accrued expenses and other liabilities ......... 7,076 8,899 3,200 (3) 17,980
(1,195)(6)
----------- ----------- -------------- ----------
Total liabilities .............................. $755,249 $384,733 $ 2,005 $1,141,987
----------- ----------- -------------- ----------
Stockholders' Equity:
Preferred stock ................................. $ 27 $ 4,600 $ (4,591)(2)$ 36
Class A Common Stock ............................ 54 2,418 (2,396)(2) 76
Class B Common Stock ............................ 3 -- -- 3
Additional paid-in capital ...................... 62,055 17,657 10,125 (2) 89,837
Retained earnings ............................... 7,279 301 (301)(2) 7,279
Net unrealized gains on securities
available for sale ............................ (307) (306) 306 (307)
----------- ----------- ----------- ----------
Total stockholders' equity ..................... 69,111 24,670 3,143 96,924
----------- ----------- ----------- ----------
Total liabilities and stockholders' equity .... $824,360 $409,403 $ 5,148 $1,238,911
=========== =========== ============ ==========
Book value per common share ...................... $ 7.85 $ 7.44
Tangible book value per common share ............. $ 7.42 $ 6.22
Fully converted tangible book value per share ... $ 7.13 $ 6.64
</TABLE>
89
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
COMBINED
BANKUNITED SUNCOAST ADJUSTMENTS(1) PRO FORMA
------------- ----------- --------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
OPERATIONS DATA:
Interest income .............................................. $ 52,132 $28,501 $ 1,119 (1) $ 81,752
Interest expense ............................................. 34,622 17,781 20 (1) 52,423
------------ ---------- -------------- ---------
Net interest income before provision for loan losses ........ 17,510 10,720 1,099 29,329
Provision for loan losses .................................... (120) 165 -- 45
------------ ---------- -------------- ---------
Net interest income after provision for loan losses ......... 17,630 10,555 1,099 29,284
------------ ---------- -------------- ---------
Non-interest income:
Loan servicing income, net .................................. -- 4,109 364 (1) 4,473
Gain on sale of assets ...................................... -- 2,870 -- 2,870
Other ....................................................... 649 1,201 -- 1,850
------------ ---------- -------------- ---------
Total non-interest income .................................. 649 8,180 364 9,193
------------ ---------- -------------- ---------
Non-interest expense:
Employee compensation and benefits .......................... 4,275 7,328 (300)(4) 11,303
Occupancy and equipment ..................................... 1,801 2,874 35 (1) 4,710
SAIF special assessment ..................................... 2,614 2,317 -- 4,931
Other operating expenses .................................... 5,346 5,215 200 (1) 10,861
100 (4)
------------ ---------- -------------- ---------
Total non-interest expenses ................................ 14,036 17,734 35 31,805
------------ ---------- -------------- ---------
Income before income taxes and preferred stock dividends .... 4,243 1,001 1,428 6,672
Provision for income taxes ................................... 1,657 371 626 (6) 2,654
------------ ---------- -------------- ---------
Net income before preferred stock dividends .................. 2,586 630 802 4,018
Preferred stock dividends .................................... 2,145 1,104 -- 3,249
------------ ---------- -------------- ---------
Net income after preferred stock dividends ................... $ 441 $ (474) $ 802 $ 769
============ ========== ============== =========
PER COMMON SHARE DATA:
Primary earnings per common share and common
equivalent share ........................................... $ .10 $ .12
Earnings per common share assuming full dilution ............ .10 .12
Weighted average number of common shares and common
equivalent shares assumed outstanding during the period:
Primary .................................................. 4,558,521 6,695,848
Fully diluted .............................................. 4,558,521 6,695,848
OPERATIONS DATA (EXCLUDING SAIF SPECIAL ASSESSMENT):
SAIF special assessment, net of tax ........................ 1,621 1,437 -- 3,058
============ ========== ============== =========
Net income before preferred stock dividends and excluding
SAIF special assessment .................................... $ 4,207 $ 2,087 $ 802 $ 7,076
============ ========== ============== =========
Net income after preferred stock dividends and excluding SAIF
special assessment ......................................... $ 2,062 $ 963 $ 802 $ 3,827
============ ========== ============== =========
PER COMMON SHARE DATA (EXCLUDING SAIF SPECIAL ASSESSMENT): ..
Primary earnings per common share and common
equivalent share ......................................... $ .45 $ .57
Earnings per common share assuming full dilution ............ .45 .56
Weighted average number of common shares and common
equivalent shares assumed outstanding during the period:
Primary .................................................. 4,558,521 6,695,848
Fully diluted .............................................. 4,558,521 7,498,847
</TABLE>
90
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(1) Adjustments to fair value for Suncoast's assets and liabilities are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
AMORTIZATION ANNUAL IMPACT ON
ADJUSTMENTS PERIOD AND METHOD STATEMENT OF OPERATIONS
-------------- ------------------------ ------------------------
<S> <C> <C> <C>
Commercial loans .................. $(2,000) 18 months/straight line $1,333
Residential loans ................. 1,070 5 years/straight line (214)
-------------- ------------------------
Total loans ..................... (930) 1,119
Deposits premium .................. 200 10 years/straight line (20)
Loan servicing assets ............. (1,822) 5 years/straight line (364)
Land and buildings ................ 700 20 years/straight line (35)
Cost over fair value of net assets
acquired (goodwill) ............. 7,000 25 years/straight line (200)
</TABLE>
(2) The purchase price of $27,590,000 represents the issuance of 1,199,930
shares of BankUnited Class A Common stock at a price of $7.00 per share
(the closing bid price on the day of the Merger Agreement) and the
issuance of 920,000 shares of New BankUnited Preferred stock having an
estimated value of $13.25 per share. Also, $223,000, representing the
fair value of Suncoast's outstanding stock options and warrants which
will be exchanged for BankUnited stock options and warrants having
similar terms and conditions, was credited to paid-in capital.
The following summarizes the entries to Stockholders' Equity (dollars in
thousands):
<TABLE>
<CAPTION>
ENTRY TO
ENTRIES TO ENTRIES TO RECORD STOCK
ELIMINATE SUNCOAST'S RECORD STOCK OPTIONS AND
EQUITY TO BE ISSUED WARRANTS TOTAL
--------------------- --------------- --------------- -----------
<S> <C> <C> <C> <C>
Preferred Stock ................... $ (4,600) $ 9 $ -- $(4,591)
Class A Common Stock .............. (2,418) 22 -- (2,396)
Class B Common Stock .............. -- -- -- --
Additional Paid-in Capital ........ (17,657) 27,559 223 10,125
Retained Earnings ................. (301) -- -- (301)
Net unrealized gains on securities
available for sale .............. 306 -- -- 306
--------------- ----------- --------- ---------
Total Stockholders' Equity ..... $(24,670) $27,590 $223 $ 3,143
=============== =========== ========= =========
</TABLE>
(3) The total purchase price includes $3.2 million of accrued liabilities as
follows:
/bullet/ $1.35 million in severance costs.
/bullet/ $1.85 million for direct acquisition costs such as legal,
accounting, investment banking and other professional fees and
expenses.
(4) The pro forma statements of operations include an annual reduction in
salary expense of $300,000 and an annual increase in professional fees of
$100,000 representing the change in status and compensation of Mr. Finch
in accordance with the terms of his change-of-control agreement.
(5) The pro forma adjustments do not include the effect of any potential
expense reductions, revenue enhancements or restructuring charges.
(6) The statutory income tax rate is assumed to be 38%. Amortization of the
cost over fair value of net assets acquired (goodwill) is not deductible
for tax purposes.
91
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
The information contained under the caption "Election of Directors" to
appear in the Company's definitive proxy statement relating to the Company's
1997 Annual Meeting of Stockholders, which definitive proxy statement will be
filed with the Securities and Exchange Commission not later than 120 days
after the end of the Company's fiscal year covered by this report on Form
10-K (hereinafter referred to as the "Annual Meeting Proxy Statement"), is
incorporated herein by reference. Information concerning the executive
officers of the Company is included in Part I of this Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained under the caption "Executive Compensation" to
appear in the Annual Meeting Proxy Statement is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained under the caption "Security Ownership of Certain
Beneficial Owners and Management" to appear in the Annual Meeting Proxy
Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the captions "Compensation Committee
Interlocks and Insider Participation" and "Certain Relationships and Related
Transactions" to appear in the Annual Meeting Proxy Statement is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
(1) Financial Statements.
The following consolidated financial statements of the Company and the
report of the independent certified public accountants thereon have been
filed with this report:
Report of Independent Certified Public Accountants (Price
Waterhouse LLP).
Consolidated Statements of Financial Condition as of September
30, 1996 and 1995.
Consolidated Statements of Operations for the years September
30, 1996, 1995 and 1994.
Consolidated Statements of Stockholders' Equity for the years
ended September 30, 1996, 1995 and 1994.
92
<PAGE>
Consolidated Statements of Cash Flows for the years ended
September 30, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
(2) Financial Statement Schedules.
Schedules are omitted because the conditions requiring their filing
are not applicable or because the required information is provided in
the Consolidated Financial Statements, including the Notes thereto.
(3) Exhibits.*
(3.1) Articles of Incorporation of the Company.
(3.2) Statement of Designation of Series I Class A Common Stock and
Class B Common Stock of the Company, as amended (Exhibit 4.9 to the
Company's Form S-8 Registration Statement [File No. 333-43211]. as
filed with the Securities and Exchange Commission on December 14,
1996).
(3.3) Bylaws of the Company (Exhibit 4.5 to the Company's Form S-8
Registration Statement [File No. 333-43211], as filed with the
Securities and Exchange Commission on November 14, 1996).
(3.4) Statement of Designation of 8% Noncumulative Convertible
Preferred Stock, Series 1996 (Exhibit 4.8 to the Company's Form S-8
Registration Statement [File No. 333-43211], as filed with the
Securities and Exchange Commission on November 14, 1996).
(4.1) Agreement for Advances and Security Agreement with Blanket
Floating Lien dated as of September 25, 1992, between the Bank and
the FHLB of Atlanta (Exhibit 4.1 to the Bank's Form 10-K for the year
ended September 30, 1992, filed with the Securities and Exchange
Commission as an exhibit to the Company's Form 8-K dated March 25,
1993).
(4.2) Forms of Series 15A-F, Series 18E and Series 20A-F of
Subordinated Notes of the Bank (Exhibit 4.3 to the Company's Form S-4
Registration Statement, File No. 33-55232, as filed with the
Securities and Exchange Commission on December 2, 1992).
(10.1) Non-Statutory Stock Option Plan, as amended (Exhibit 4.9 to
the Company's Form S-8 Registration Statement [File No. 33-76882], as
filed with the Securities and Exchange Commission on March 24,
1994).**
(10.2) 1992 Stock Bonus Plan, as amended. (Exhibit 10.2 to the
Company's Form 10-K Report for the year ended September 30, 1994 [the
"1994 10-K"]).**
(10.3) 1994 Incentive Stock Option Plan. (Exhibit 10.3 to the 1994
10-K).**
(10.4) Profit Sharing Plan of the Bank (Exhibit 10.4 to the Company's
Form 10-K Report for the year ended September 30, 1995.
(10.5) 1996 Incentive Compensation and Stock Award Plan.**
(10.6) Purchase and Assumption Agreement dated March 20, 1995 by and
among the Company, the Bank, SouthTrust Corporation, SouthTrust of
Florida, Inc., and SouthTrust Bank of the Suncoast (Exhibit 10.1 to
the Company's Form 10-Q Report for the quarter ended March 31, 1995
[the "March 31, 1995 10-Q"]).
93
<PAGE>
(10.7) Purchase and Assumption Agreement dated March 20, 1995 by and
among the Company, the Bank, SouthTrust Corporation, SouthTrust of
Florida, Inc., and SouthTrust Bank of Southwest Florida, N.A.
(Exhibit 10.2 to the March 31, 1995 10-Q).
(10.8) First Amendment to Purchase and Assumption Agreement dated
July 27, 1995 by and among the Company, the Bank, SouthTrust
Corporation, SouthTrust of Florida, Inc., and SouthTrust Bank of the
Suncoast (Exhibit 10.1 to the Company's Form 10-Q Report for the
quarter ended June 30, 1995 [the "June 30, 1995 10-Q"]).
(10.9) First Amendment to Purchase and Assumption Agreement dated
July 27, 1995 by and among the Company, the Bank, SouthTrust
Corporation, SouthTrust of Florida, Inc., and SouthTrust of Southwest
Florida, N.A. (Exhibit 10.2 to the June 30, 1995 10-Q).
(10.10) Form of Employment Agreement between the Company and Alfred
R. Camner.
(10.11) Form of Employment Agreement between the Company and Earline
G. Ford.
(10.12) Form of Employment Agreement between the Company and certain
of its senior officers.
(11.1) Statement regarding calculation of earnings per common share.
(12.1) Statement regarding calculation of ratios.
(21.1) Subsidiaries of the Company.
(23.1) Consent of Price Waterhouse LLP.
(24.1) Power of Attorney (set forth on the signature page of this
Annual Report on Form 10-K).
- ----------------------
* Exhibits followed by a parenthetical reference are incorporated herein by
reference from the documents described therein.
** Exhibits 10.1--10.4 are compensatory plans or arrangements.
(B) REPORTS ON FORM 8-K.
During the quarter ended September 30, 1996, the Company filed a Current
Report on Form 8-K dated July 15, 1996 with the Securities and Exchange
Commission.
94
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K
to be signed on its behalf by the undersigned, thereunto duly authorized on
December 16, 1996.
BANKUNITED FINANCIAL CORPORATION
By: /s/ ALFRED R. CAMNER
---------------------------------
Alfred R. Camner
Chairman of the Board,
President and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Alfred R. Camner, Earline G. Ford and Marc
Jacobson and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any or all amendments to
this report on Form 10-K and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or his substitutes, may lawfully
do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on December 16, 1996 on behalf of the Registrant by
the following persons and in the capacities indicated.
<TABLE>
<CAPTION>
/S/ ALFRED R. CAMNER
- -------------------------------- CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE
ALFRED R. CAMNER OFFICER, PRESIDENT AND DIRECTOR
(PRINCIPAL EXECUTIVE OFFICER)
<S> <C>
/s/ EARLINE G. FORD
- -------------------------------- Executive Vice President, Treasurer and
Earline G. Ford Director
/s/ JAMES A. DOUGHERTY Executive Vice President and Director
- --------------------------------
James A. Dougherty
/s/ SAMUEL A. MILNE
- -------------------------------- Executive Vice President and Chief Financial
Samuel A. Milne Officer (Principal Financial Officer and
Principal Accounting Officer)
/s/ MARC D. JACOBSON Director
- --------------------------------
Marc D. Jacobson
/s/ ALLEN M. BERNKRANT Director
- --------------------------------
Allen M. Bernkrant
/s/ LAWRENCE H. BLUM Director
- --------------------------------
Lawrence H. Blum
96
<PAGE>
Director
- --------------------------------
Patricia L. Frost
Director
- --------------------------------
Sandra Goldstein
Director
- --------------------------------
Robert D. Lurie
/s/ ANNE W. SOLLOWAY Director
- --------------------------------
Anne W. Solloway
/s/ CHRISTINA CUERVO MIGOYA Director
- --------------------------------
Christina Cuervo Migoya
/s/ NEIL MESSINGER Director
- --------------------------------
Neil Messinger
Director
- --------------------------------
Bruce Friesner
Director
- --------------------------------
Albert J. Finch
Director
- --------------------------------
Irving P. Cohen
Director
- --------------------------------
Elia J. Giusti
Director
- --------------------------------
Norman E. Mains
/s/ MARC LIPSITZ Director
- --------------------------------
Marc Lipsitz
</TABLE>
96
<PAGE>
BANKUNITED FINANCIAL CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED SEPTEMBER 30, 1996
INDEX TO EXHIBITS*
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. PAGE
- ---------------- -----------------
<S> <C> <C>
3.1 Articles of Incorporation of the Company
10.5 1996 Incentive Compensation and Stock Award Plan
10.10 Form of Employment Agreement between the Company and Alfred R. Camner
10.11 Form of Employment Agreement between the Company and Earline G. Ford
10.12 Form of Employment Agreement between the Company and certain of its senior
officers
11.1 Statement regarding calculation of earnings per common share.
12.1 Statement regarding calculation of ratios
21.1 Subsidiaries of the Company
23.1 Consent of Price Waterhouse LLP
24.1 Power of Attorney (set forth on the signature page of this annual report on
Form 10-K)
</TABLE>
- -------------
* All other exhibits listed under Item 14 of Part IV of the Form 10-K are
incorporated by reference to documents previously filed, as indicated
therein.
97
EXHIBIT 3.1
ARTICLES OF INCORPORATION OF
BANKUNITED FINANCIAL CORPORATION
ARTICLE I
NAME
The name of the corporation is "BANKUNITED FINANCIAL CORPORATION" (the
"Corporation").
ARTICLE II
PRINCIPAL OFFICE
The principal office and mailing address of the Corporation is 255
Alhambra Circle, Coral Gables, Florida 33134.
ARTICLE III
REGISTERED OFFICE AND AGENT
The street address of the Corporation's initial registered office is 255
Alhambra Circle, Coral Gables, Florida 33134. The name of its registered agent
at such address is Nancy L. Ashton.
ARTICLE IV
TERM OF CORPORATE EXISTENCE
The duration of this Corporation is to be perpetual.
ARTICLE V
PURPOSE
The Corporation is a financial institution holding company and may
engage in any activity or business permitted under the laws of the State of
Florida.
ARTICLE VI
CAPITAL STOCK
The total number of shares of all classes of stock that the Corporation
is authorized to issue is 28,000,000 shares, of which 15,000,000 shall be Class
A Common Stock, $.01 par value (the "Class A Common Stock"), 3,000,000 shall be
Class B Common Stock, $.01 par value (the "Class B Common Stock"), and
10,000,000 shall be Preferred Stock, $.01 par value (the "Preferred Stock"). No
holder of the Corporation's stock shall have any preemptive right to acquire the
Corporation's securities.
CLASS A COMMON STOCK. The maximum number of shares of Class A
Common Stock that the Corporation is authorized to have outstanding is
15,000,000 shares at a par value of $.01 per share. The Class A Common
Stock shall be a special class of stock issuable from time to time in
one or more series as specified in Section 607.0602 of the Florida
Business Corporation Act (or in such other manner as may be permitted by
law), as determined from time to time by the Board of Directors and
stated in the resolution or resolutions providing for the issuance of
such series of Class A Common Stock adopted by the Board of Directors
pursuant to authority hereby vested in it, each such series to be
appropriately designated, prior to the issuance of any shares thereof,
by some distinguishing letter, number, or title. The Board of Directors
is hereby expressly granted authority to fix the authorized number of
shares of each series of common stock, and to fix the terms of such
series, including, but not limited to, the following:
(a) the rate or manner of payment of dividends;
1
<PAGE>
(b) whether shares may be redeemed and, if so, the redemption
price and the terms and conditions of redemption;
(c) the amount payable upon shares in the event of voluntary or
involuntary liquidation;
(d) sinking fund provisions, if any, for the redemption or
purchase of shares;
(e) the terms and conditions, if any, on which shares may be
converted;
(f) voting rights, if any; and
(g) the other special rights, if any, and the qualifications,
limitations or restrictions thereof, of the shares of such series.
The designation of each particular series of Class A Common Stock and
its terms in respect of the foregoing particulars shall be fixed and
determined by the Board of Directors in any manner permitted by law and
stated in the resolution or resolutions providing for the issuance of
such shares adopted by the Board of Directors pursuant to authority
hereby vested in it, before any shares of such series are issued. The
Board of Directors may from time to time increase (but not above the
total number of authorized shares of the class) the number of shares of
any series of Class A Common Stock already created by providing that any
unissued Class A Common Stock shall constitute part of such series, or
may decrease (but not below the number of shares thereof then
outstanding) the number of shares of any series of Class A Common Stock
already created by providing that any unissued shares previously
assigned to such series shall no longer constitute part thereof. The
Board of Directors is hereby empowered to classify or reclassify any
unissued Class A Common Stock by fixing or altering the terms thereof in
respect of the above-mentioned particulars and by assigning the same to
an existing or newly created series from time to time before the
issuance of such shares.
For purposes of determining whether a non-voting series of Class
A Common Stock shall be entitled to vote as a class pursuant to Section
607.1004 of the Florida Business Corporation Act (or any successor
section or statute hereinafter enacted) on an amendment to the
Corporation's Articles of Incorporation, an amendment that increases the
total number of authorized shares of Class A Common Stock shall not be
considered to be an adverse change to the terms of any individual series
of Class A Common Stock and shall not require a vote or the consent of
the holders of any such series of Class A Common Stock.
Set forth in Appendix A hereto is the Statement of Designation
setting forth the terms of the Series I Class A Common Stock.
CLASS B COMMON STOCK. The maximum number of shares of Class B
Common Stock that the Corporation is authorized to have outstanding is
3,000,000 shares at a par value of $.01 per share. Holders of Class B
Common Stock are entitled to vote on all questions required by law on
the basis of one vote per share and there shall be no cumulative voting.
The shares of Class B Common Stock shall be convertible into shares of
other classes of capital stock of the Corporation in such manner as may
be provided by the Board of Directors by resolution.
Set forth in Appendix A hereto is the Statement of Designation
setting forth the conversion rights of the Class B Common Stock.
PREFERRED STOCK. The maximum number of shares of Preferred Stock
that the Corporation is authorized to have outstanding is 10,000,000
shares at a par value of $.01 per share. The Preferred Stock may be
issued from time to time in one or more series as specified in Section
607.0602 of the Florida Business Corporation Act (or in such other
manner as may be permitted by law), as determined from time to time by
the Board of Directors and stated in the resolution or resolutions
providing for the issuance of such series of Preferred Stock adopted by
the Board of Directors pursuant to authority hereby vested in
2
<PAGE>
it, each such series to be appropriately designated, prior to the
issuance of any shares thereof, by some distinguishing letter, number,
or title. The Board of Directors is hereby expressly granted authority
to fix the authorized number of shares of each series of Preferred
Stock, and to fix the terms of such series, including, but not limited
to, the following:
(a) the rate or manner of payment of dividends;
(b) whether shares may be redeemed and, if so, the redemption
price and the terms and conditions of redemption;
(c) the amount payable upon shares in the event of voluntary or
involuntary liquidation;
(d) sinking fund provisions, if any, for the redemption or
purchase of shares;
(e) the terms and conditions, if any, on which shares may be
converted;
(f) voting rights, if any; and
(g) the other special rights, if any, and the qualifications,
limitations or restrictions thereof, of the shares of such series.
The designation of each particular series of Preferred Stock and its
terms in respect of the foregoing particulars shall be fixed and
determined by the Board of Directors in any manner permitted by law and
stated in the resolution or resolutions providing for the issuance of
such shares adopted by the Board of Directors pursuant to authority
hereby vested in it, before any shares of such series are issued. The
Board of Directors may from time to time increase (but not above the
total number of authorized shares of the class) the number of shares of
any series of Preferred Stock already created by providing that any
unissued Preferred Stock shall constitute part of such series, or may
decrease (but not below the number of shares thereof then outstanding)
the number of shares of any series of Preferred Stock already created by
providing that any unissued shares previously assigned to such series
shall no longer constitute part thereof. The Board of Directors is
hereby empowered to classify or reclassify any unissued Preferred Stock
by fixing or altering the terms thereof in respect of the
above-mentioned particulars and by assigning the same to an existing or
newly created series from time to time before the issuance of such
shares.
For purposes of determining whether a non-voting series of
Preferred Stock shall be entitled to a vote as a class pursuant to
Section 607.1004 of the Florida Business Corporation Act (or any
successor section or statute hereinafter enacted) on an amendment to the
Corporation's Articles of Incorporation, an amendment that increases the
total number of authorized shares of Preferred Stock shall not be
considered to be an adverse change to the terms of any individual series
of Preferred Stock and shall not require a vote or the consent of the
holders of any such series of Preferred Stock.
Set forth in Appendices B, C, D, E, F and G hereto are the
Statements of Designation setting forth the terms of the Noncumulative
Convertible Preferred Stock, Series A; Noncumulative Convertible
Preferred Stock, Series B; Noncumulative Convertible Preferred Stock,
Series C; Noncumulative Convertible Preferred Stock, Series C-II; 8%
Noncumulative Convertible Preferred Stock, Series 1993; and 9%
Noncumulative Perpetual Preferred Stock, respectively.
ARTICLE VII
DISTRIBUTIONS TO STOCKHOLDERS
The Board of Directors may authorize and the Corporation may make
distributions to its stockholders subject to (a) the other provisions of these
Articles of Incorporation, and (b) except as the following otherwise provides,
the law currently in effect or hereinafter enacted:
3
<PAGE>
No distribution may be made if, after giving it effect:
(i) The Corporation would not be able to pay its debts as they become
due in the usual course of business; or
(ii) The Corporation's total assets would be less than the sum of its
total liabilities plus, unless the Board of Directors determines
otherwise, the amount that would be needed, if the Corporation
were to be dissolved at the time of distribution, to satisfy the
preferential rights upon dissolution of stockholders whose
preferential rights are superior to those receiving the
distribution.
ARTICLE VIII
DIRECTORS
The number of directors constituting the Board of Directors shall be
such number, equal to or greater than one, as may be fixed from time to time in
the bylaws of the Corporation.
Except as may be set forth in Statements of Designation creating series
of Class A Common Stock and Preferred Stock, the Board of Directors shall be
divided into three classes of directors of as nearly equal numbers as is
possible, designated Class I, Class II and Class III, respectively, serving
staggered three-year terms, with the term of a class expiring at each Annual
Meeting of Stockholders. At each Annual Meeting of Stockholders a number of
directors equal to the number of directors of the class whose term expires at
such meeting (or the number of directors properly nominated and qualified for
election) shall be elected to hold office until the third succeeding Annual
Meeting of Stockholders after their election. In all cases, each director shall
serve until a successor has been elected and qualified or until such director's
earlier resignation (including, without limitation, as may be provided by the
terms of an employment agreement), removal from office, death or disability.
ARTICLE IX
LIMITATION OF LIABILITY
The Corporation shall indemnify and may insure its officers and
directors to the fullest extent permitted by law currently in effect or
hereinafter enacted.
ARTICLE X
AMENDMENT
These Articles of Incorporation may be amended in the manner authorized
by law at the time of amendment.
ARTICLE XI
ACTION BY STOCKHOLDERS WITHOUT A MEETING
No action required or permitted to be taken at an Annual Meeting of
Stockholders or at a Special Meeting of Stockholders may be taken without a
meeting. The power of the stockholders to consent in writing, without a meeting,
to the taking of any action is expressly denied hereby.
ARTICLE XII
AFFILIATED TRANSACTIONS AND CONTROL-SHARE ACQUISITIONS
The Corporation shall not be governed by the Affiliated Transactions and
Control-Share Acquisitions sections (Sections 607.0901 through 607.0903) of the
Florida Business Corporation Act or any successor sections or statutes
hereinafter enacted.
4
<PAGE>
ARTICLE XIII
INCORPORATOR
The name and address of the incorporator of the Corporation is Maria E.
Chang, 1221 Brickell Avenue, 25th Floor, Miami, Florida 33131.
The undersigned incorporator has executed these Articles of
Incorporation this 10th day of January, 1995.
/S/ MARIA E. CHANG
-----------------------------
Maria E. Chang, Incorporator
IN WITNESS WHEREOF, I, Nancy L. Ashton, having been named Registered
Agent and to accept service of process for BankUnited Financial Corporation at
the place designated in these Articles of Incorporation, hereby accept the
appointment as Registered Agent and agree to act in this capacity. I further
agree to comply with the provisions of all statutes relating to the proper and
complete performance of my duties, and I am familiar with and accept the
obligations of my position as Registered Agent this 10th day of January, 1995.
/S/ NANCY L. ASHTON
---------------------------------
Nancy L. Ashton, Registered Agent
STATE OF FLORIDA )
)SS:
COUNTY OF DADE )
The foregoing instrument was acknowledged before me this ____ day of
January, 1995 by Nancy L. Ashton, who is personally known to me and who did take
an oath.
------------------------------------
Notary Public
State of Florida
Printed Name:
-----------------------
Commission No.:
-----------------------
My Commission Expires:
5
<PAGE>
APPENDIX A
STATEMENT OF DESIGNATION
OF
SERIES I CLASS A COMMON STOCK
AND
CLASS B COMMON STOCK
OF
BANKUNITED FINANCIAL CORPORATION
WHEREAS, pursuant to Article VI of the Articles of Incorporation of
BankUnited Financial Corporation (the "Corporation") as in effect on the date
hereof and Section 607.0602 of the Florida Business Corporation Act, the Board
of Directors of the Corporation is authorized, within limitations set forth
therein, (i) to divide the Corporation's Class A Common Stock, par value $.01
per share ("Class A Common Stock"), into series and fix and determine the
relative rights and preferences of the shares of any series so established, and
(ii) to fix and determine certain rights of the Corporation's Class B Common
Stock, par value $.01 per share ("Class B Stock"); and
WHEREAS, the Board of Directors desires to (i) establish a series of the
Class A Common Stock, designating such series "Series I Class A Common Stock,"
(ii) allocate 10,000,000 shares of the authorized Class A Common Stock to the
Series I Class A Common Stock, (iii) fix and determine the relative rights and
preferences of the shares of the Series I Class A Common Stock, and (iv) fix and
determine the conversion rights of the Class B Stock;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors (i) hereby
allocates a portion of the Class A Common Stock to a series thereof designated
Series I Class A Common Stock, and fixes and determines the relative rights and
preferences of the Series I Class A Common Stock, as set forth in Section I
below, and (ii) hereby sets forth in Section II below the conversion rights of
the Class B Stock.
I. DESIGNATION, ALLOCATION AND RIGHTS OF SERIES I CLASS A COMMON STOCK.
(1) DESIGNATION AND ALLOCATION. 10,000,000 of the 15,000,000 shares
of Class A Common Stock authorized by the Articles of Incorporation of the
Corporation hereby are determined to be and shall be of a series designated
as Series I Class A Common Stock (herein called "Series I Class A Common
Stock").
(2) DIVIDENDS. The holders of shares of the Series I Class A Common
Stock shall be entitled to receive, when, as, and if declared by the Board
of Directors and out of the assets of the Corporation which are by law
available for the payment of dividends to the holders of common stock, a per
share dividend equal to 110% of the amount per share of any dividend
declared on Class B Stock (the "Dividend Rate"). The Dividend Rate shall be
subject to adjustment as provided by the formula set forth in subsection
I(3) of this resolution.
(3) DIVIDEND RATE ADJUSTMENTS. The Dividend Rate shall be subject
to adjustment from time to time as follows:
(a) If the Corporation shall (i) pay a dividend in and on
shares of its Series I Class A Common Stock or Class B Stock, (ii)
subdivide its outstanding shares of Series I Class A Common Stock or
Class B Stock into a greater number of shares, (iii) combine its
outstanding shares of Series I Class A Common Stock or Class B Stock
into a smaller number of shares, or (iv) issue by reclassification of
its shares of Series I Class A Common Stock or Class B Stock any
shares of its capital stock, then the Dividend Rate in effect
immediately prior thereto shall be adjusted so that the holder of
Series I Class A Common Stock or Class B Stock entitled to receive a
dividend upon his or her Series I Class A Common Stock or Class B
Stock after the record date fixing stockholders to be affected by
such event shall be entitled to receive upon declaration of a
dividend on common stock such dividend which such holder would have
been entitled to receive after the happening of such event had such
dividend been declared and paid immediately prior to such record
date. Such adjustment shall be made whenever any of such events shall
happen, and shall also be effective retroactively as to the happening
of any such event between such record date and the payment of
dividends on the common stock of the Corporation.
A-1
<PAGE>
(b) (i) If the Corporation has issued Series I Class A Common
Stock which is not listed on a national securities exchange or
traded over-the-counter by a nationally recognized securities
firm or association and the Corporation shall issue rights or
warrants to the holders of any of its capital stock entitling
them to subscribe for or purchase shares of common stock at a
price per share less than the Book Value Per Share (as defined
in subsection II(4)(b)(iii) of this resolution) of such common
stock at the record date mentioned below; or
(ii) If the Corporation has issued Series I Class A
Common Stock which is listed on a national securities exchange
or traded over-the-counter by a nationally recognized
securities firm or association, and the Corporation shall
issue rights or warrants to the holders of its capital stock
entitling them to subscribe for or purchase shares of common
stock at a price per share less than the current market price
per share (as defined in subsection II(4)(e) of this
resolution) of such common stock at the record date mentioned
below; then, in either of the above events, the Dividend Rate
shall be adjusted by multiplying the Dividend Rate existing
immediately prior to such event by a fraction as provided
below:
(A) If the Class B Stock may be subscribed for
or purchased at less than the Book Value Per Share or the
current market price per share, as the case may be, then the
numerator of such fraction shall be the number of shares of
Class B Stock outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of
Class B Stock offered for subscriptions or purchase, and the
denominator of which shall be the number of shares of Class B
Stock outstanding on the date of issuance of such rights or
warrants plus the number of shares of Class B Stock which the
aggregate offering price of the total number of shares of
Class B Stock so offered would purchase based on current Book
Value Per Share at the record date mentioned below or current
market price per share (as defined in subsection II(4)(e) of
this resolution), as the case may be.
(B) If the Series I Class A Common Stock may be
subscribed for or purchased at less than the Book Value Per
Share or the current market price per share, as the case may
be, then the numerator of such fraction shall be the number of
shares of Series I Class A Common Stock outstanding on the
date of issuance of such rights or warrants plus the number of
shares of Series I Class A Common Stock which the aggregate
offering price of the total number of shares of Series I Class
A Common Stock so offered would purchase based on Book Value
Per Share at the record date mentioned below or current market
price per share (as defined in subsection II(4)(e) of this
resolution), as the case may be, and the denominator of which
shall be the number of shares of Series I Class A Common Stock
outstanding on the date of issuance of such rights or warrants
plus the number of additional shares of Series I Class A
Common Stock offered for subscription or purchase.
(iii) An adjustment to the Dividend Rate as provided
in subsections I(3)(b)(ii)(A) or (B), above, shall be made
whenever such rights or warrants are issued, and also shall be
effective retroactively as to dividends declared on the common
stock of the Corporation between the record date for the
determination of stockholders entitled to receive such rights
or warrants and the date such rights or warrants are issued.
(c) No adjustment in the Dividend Rate shall be required
unless such adjustment would require an increase or decrease of at
least 2% in such Dividend Rate; provided, however, that any
adjustments which by reason of this subsection I(3)(c) are not
required to be made, and are not made, shall be carried forward and
taken into account in any subsequent adjustment.
(4) VOTING.
(a) Except as otherwise provided in the Articles of
Incorporation of the Corporation, or as provided in any resolution of
the Board of Directors or the stockholders of the Corporation, the
Series I Class A Common Stock, the Class B Stock, and the Preferred
Stock shall vote together as a single class on all matters submitted
to the stockholders of the Corporation for a vote. In any such vote,
each share of Series I Class A Common Stock is entitled to cast 1/10
of the vote that each share of Class B Stock is entitled to cast.
(b) Notwithstanding the provision contained in subsection
I(4)(a) above, in the event of any consolidation of the Corporation
with or merger of the Corporation into another corporation, or in the
event of any sale, conveyance, exchange or transfer (for cash, shares
of stock, securities or other consideration) of
A-2
<PAGE>
all or substantially all of the property or assets of the Corporation
to another corporation, then, in any such consolidation, merger,
sale, conveyance, exchange or transfer, if the consideration per
share (as adjusted consistent with the provisions of Sections I and
II hereof) to be received for the shares of Series I Class A Common
Stock differs in any substantial kind or amount from the per share
(as adjusted consistent with the provisions of Sections I and II
hereof) consideration to be received for Class B Stock, the majority
of the holders of the outstanding Series I Class A Common Stock, by a
separate vote of the holders of the Series I Class A Common Stock,
must approve such consolidation, merger, sale, conveyance, exchange
or transfer; provided, however, that nothing in this subsection
I(4)(b) shall in any way grant any rights to the holders of the
Series I Class A Common Stock in connection with the sale of any
shares of the capital stock of the Corporation by a stockholder of
the Corporation to any person or entity other than the Corporation.
Notwithstanding any other provision of this subsection I(4)(b), the
receipt by the holders of the Series I Class A Common Stock of
limited voting stock in an acquiring company shall not be deemed to
be consideration which differs in any substantial respect from that
received by the holders of the Class B Stock, provided such limited
voting common stock bears substantially the same relative rights and
privileges to the acquiring company's voting stock as the Series I
Class A Common Stock bears to the Class B Stock.
II. CONVERSION RIGHTS OF CLASS B STOCK.
(1) CONVERSION. Subject to and upon compliance with the
provisions of this resolution, the holder of any shares of Class B
Stock may at such holder's option convert any such shares of Class B
Stock into such number of fully paid and non-assessable shares of
Series I Class A Common Stock as are issuable pursuant to the formula
set forth in subsections II(3), (4) and (5) of this resolution.
No adjustment shall be made for dividends on any Series I
Class A Common Stock that shall be issuable because of the conversion
of shares of Class B Stock, but all dividends accrued and unpaid on
any Class B Stock up to and including the dividend payment date
immediately preceding the date of conversion shall constitute a debt
of the Corporation payable to the converting holder.
(2) MECHANICS OF CONVERSION. The surrender of any Class B Stock
for conversion shall be made by the holder thereof to the Corporation
at its principal office and such holder shall give written notice to
the Corporation at said office that such holder elects to convert
such Class B Stock in accordance with the provisions hereof. Such
notice also shall state the name or names (with addresses) in which
the certificate or certificates for Series I Class A Common Stock,
which shall be issuable on such conversion, shall be issued. Subject
to the provisions of subsection II(1) hereof, every such notice of
election to convert shall constitute a contract between the holder of
such shares and the Corporation, whereby such holder shall be deemed
to subscribe for the number of shares of Series I Class A Common
Stock which such holder will be entitled to receive upon such
conversion and, in payment and satisfaction of such subscription, to
surrender such Class B Stock and to release the Corporation from all
obligations thereon, and whereby the Corporation shall be deemed to
agree that the surrender of such Class B Stock and the extinguishment
of its obligations thereon shall constitute full payment for the
Series I Class A Common Stock so subscribed for and to be issued upon
such conversion.
As soon as practicable after the receipt of such notice and
the shares of Class B Stock, the Corporation shall issue and shall
deliver to the person for whose account such shares of Class B Stock
were so surrendered, or on such holder's written order, a certificate
or certificates for the number of full shares of Series I Class A
Common Stock issuable upon the conversion of such shares of Class B
Stock and a check or cash for the payment (if any) to which such
person is entitled pursuant to subsection II(5) hereof, together with
a certificate or certificates representing the shares of Class B
Stock, if any, which are not to be converted, but which constituted
part of the Class B Stock represented by the certificates or
certificates surrendered by such person. Such conversion shall be
deemed to have been effected on the date on which the Corporation
shall have received such notice and such Class B Stock, and the
person or persons in whose name or names any certificate or
certificates for Series I Class A Common Stock shall be issuable upon
such conversion shall be deemed to have become on said date the
holder or holders of record of the shares represented thereby.
(3) BASIC CONVERSION RATE. The initial rate at which holders may
convert Class B Stock into Series I Class A Common Stock ("Conversion
Rate") shall be one share of Series I Class A Common Stock for each
share of Class B Stock surrendered for conversion.
A-3
<PAGE>
(4) CONVERSION RATE ADJUSTMENT. The Conversion Rate shall be
subject to adjustment from time to time as follows:
(a) If the Corporation shall (i) pay a dividend in and on
shares of its Series I Class A Common Stock or its Class B Stock,
(ii) subdivide its outstanding shares of Series I Class A Common
Stock or its Class B Stock into a greater number of shares, (iii)
combine its outstanding shares of Series I Class A Common Stock or
its Class B Stock into a smaller number of shares, or (iv) issue by
reclassification of its shares of Series I Class A Common Stock or
its Class B Stock any shares of its capital stock, then the
Conversion Rate in effect immediately prior thereto shall be adjusted
so that the holder of Class B Stock surrendered for conversion after
the record date fixing stockholders to be affected by such event
shall be entitled to receive upon conversion the number of such
shares of the Corporation which such holder would have been entitled
to receive after the happening of such event had such shares been
converted immediately prior to such record date. Such adjustment, if
applicable, shall be made whenever any of such events shall happen,
and shall also be effective retroactively as to shares converted
between such record date and the date of the happening of any such
event.
(b) (i) If the Series I Class A Common Stock is not
listed on a national securities exchange or traded over-the-counter
by a nationally recognized securities firm or association, and the
Corporation issues rights or warrants (a) to the holders of its
Series I Class A Common Stock entitling them to subscribe for or
purchase shares of Series I Class A Common Stock or (b) to the
holders of its Class B Stock entitling them to subscribe for or
purchase shares of Class B Stock, in either case at a price per share
less than the Book Value Per Share (as defined below) of Series I
Class A Common Stock at the record date mentioned below; or
(ii) If the Series I Class A Common Stock is listed on a
national securities exchange or traded over-the-counter by a
nationally recognized securities firm or association, and the
Corporation issued rights or warrants (a) to the holders of its
Series I Class A Common Stock entitling them to subscribe for or
purchase shares of Series I Class A Common Stock or (b) to the
holders of its Class B Stock entitling them to subscribe for or
purchase shares of Class B Stock, in either case at a price per share
less than the current market price per share of Series I Class A
Common Stock (as defined in subsection II(4)(e) of this resolution)
at the record date mentioned below;
then, in either of the above events in which the Series I Class A
Common Stock rights or warrants are issued at a price per share below
Book Value Per Share or current market price per share, as the case
may be, the number of shares of Series I Class A Common Stock into
which each share of Class B Stock shall thereafter be convertible
shall be determined by multiplying the number of shares of Series I
Class A Common Stock into which such shares of Class B Stock were
theretofore convertible by a fraction, the numerator of which shall
be the number of shares of Series I Class A Common Stock outstanding
on the date of issuance of such rights or warrants plus the number of
additional shares of Series I Class A Common Stock offered for
subscription or purchase, and the denominator of which shall be the
number of shares of Series I Class A Common Stock outstanding on the
date of issuance of such rights or warrants plus the number of shares
of Series I Class A Common Stock which the aggregate offering price
of the total number of shares so offered would purchase based on Book
Value Per Share at the record date mentioned below or current market
price per share (as defined in subsection II(4)(e) of this
resolution), as the case may be. If the Corporation issues Class B
Stock rights or warrants at a price per share below Book Value Per
Share or current market price per share, as the case may be, then the
above formula shall be used except that when calculating the fraction
in such formula, Class B Stock shall be substituted for Series I
Class A Common Stock. Such adjustment shall be made whenever such
rights or warrants are issued, and shall also be effective
retroactively as to shares of Class B Stock converted between the
record date for the determination of stockholders entitled to receive
such rights or warrants and the date such rights or warrants are
issued.
(iii) The term "Book Value Per Share," as used herein, shall
mean such amount which is determined by (a) reducing total
stockholders' equity by the amount contributed to capital in exchange
for all classes of stock other than common stock, adjusted to reflect
any proportion of the Corporation's net income or loss from
operations since payment for such shares of stock other than common
stock (such adjustment arrived at by adding all shares of outstanding
stock, adjusted to reflect any conversion ratios, the resulting
number to be the denominator of a fraction the numerator of which is
to be the number of shares of the Corporation's stock other than
common stock, adjusted to reflect conversion ratios, the resulting
fractions to be multiplied by the net income or loss from the
Corporation's operations since payment for the stock other than
common stock); and (b) dividing the resulting amount by the number of
shares of common stock
A-4
<PAGE>
outstanding, adjusted to compensate for any common stock to common
stock conversion ratio other than one to one.
(c) If the Corporation shall distribute to the holders of
its Series I Class A Common Stock or Class B Stock evidence of its
indebtedness or assets (excluding cash dividends or distributions
made out of current or retained earnings) or rights or warrants to
subscribe other than as referred to in subsection II(4)(b) of this
resolution, then, when such distribution is made to the holders of
Series I Class A Common Stock the number of shares of Series I Class
A Common Stock into which each share of Class B Stock shall
thereafter be convertible shall be determined by multiplying the
number of shares of Series I Class A Common Stock into which such
shares of Class B Stock was theretofore convertible by a fraction,
the numerator of which shall be the Book Value Per Share of Series I
Class A Common Stock at the record date mentioned below or, if the
Series I Class A Common Stock is listed on a national securities
exchange or traded over-the-counter by a nationally recognized
securities firm or association, the market price per share of Series
I Class A Common Stock (as defined in subsection II(4)(e) of this
resolution) on the date of such distribution, and the denominator of
which shall be such Book Value Per Share of the Series I Class A
Common Stock at the record date mentioned below or such current
market price per share of the Series I Class A Common Stock, as the
case may be, less the then fair market value (as determined by the
Board of Directors of the Corporation, whose determination shall be
conclusive) of the portion of the assets, evidence of indebtedness,
subscription rights or warrants so distributed applicable to one
share of the Series I Class A Common Stock. If the Corporation
distributes such evidence of indebtedness or assets to the holders of
the Class B Stock, the above formula shall be used except that when
calculating the fraction in such formula, Class B Stock shall be
substituted for Series I Class A Common Stock. Such adjustment shall
be made whenever any such distribution is made, and shall also be
effective retroactively as to the shares converted between the record
date for the determination of stockholders entitled to receive such
distribution and the date such distribution is made.
(d) In the event of any consolidation of the Corporation
with, or the merger of the Corporation into, another corporation, or
in the event of any sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the Corporation to
another corporation, or in the case of any reorganization of the
Corporation, the holder of each share of Class B Stock then
outstanding shall have the right thereafter to convert such share
into the kind and amount of shares of stock and other securities and
property, including cash, which would have been deliverable to such
holder upon such consolidation, merger, sale, conveyance, exchange,
transfer or reorganization if such holder had converted such holder's
shares of Class B Stock into Series I Class A Common Stock
immediately prior to such consolidation, merger, sale, conveyance,
exchange, transfer or reorganization. In any such event, effective
provision shall be made in the instrument effecting or providing for
such consolidation, merger, sale, conveyance, exchange, transfer or
reorganization so that the provisions set forth herein for the
protection of the conversion rights of the shares of Class B Stock
shall thereafter be applicable, as nearly as may be practicable, in
relation to any shares of stock or other securities or property,
including cash, deliverable after such consolidation, merger, sale,
conveyance, exchange, transfer or reorganization upon the conversion.
The provisions of this subsection II(4)(d) shall similarly apply to
successive consolidations, mergers, sales, conveyances, exchanges,
transfers and reorganizations.
(e) For purposes of computation under Sections I and II of
this resolution, the current market price per share of Series I Class
A Common Stock at any date shall be deemed to be the average of the
daily closing prices for the 20 consecutive business days immediately
prior to the day in question. The closing price for each day shall be
the last reported sales price, regular way, on the principal national
securities exchange upon which the Series I Class A Common Stock is
listed, or in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices, regular way, on
such national securities exchange, or if the Series I Class A Common
Stock is not then listed on a national securities exchange, the
average of the closing prices or, if applicable, closing bid and
asked prices in the over-the-counter market as furnished by the
nationally recognized securities firm or association selected from
time to time by the Corporation for that purpose.
(f) No adjustments in the Conversion Rate shall be required
unless such adjustment would require an increase or decrease of at
least 2% in such Conversion Rate; provided, however, that any
adjustments which by reason of this subsection II(4)(f) are not
required to be made, and are not made, shall be carried forward and
taken into account in any subsequent adjustment. All calculations
under this subsection II(4)(f) shall be made to the nearest cent or
one-hundredth of a share, as the case may be.
A-5
<PAGE>
(5) FRACTIONAL SHARES. No fractional shares or scrip
representing fractional shares shall be issued upon the conversion of
any shares. If more than one share shall be surrendered for
conversion at one time by the same holder, the number of full shares
issuable upon conversion thereof shall be computed on the basis of
the aggregate number of such shares so surrendered. If the conversion
of any shares results in a fraction, an amount equal to such fraction
multiplied by the current market price (determined as provided in
subsection II(4)(e) of
A-6
<PAGE>
this resolution) of the Series I Class A Common Stock on the business
day next preceding the date of conversion shall be paid to such
holder in cash by the Corporation; or if the Series I Class A Common
Stock is not listed on a national securities exchange or traded
over-the-counter by a nationally recognized securities firm, an
amount equal to such fraction multiplied by the Book Value Per Share
of the Class B Stock on the business day next preceding the date of
conversion shall be paid to such holder in cash by the Corporation.
(6) TAX. The issue of stock certificates on conversion of shares
shall be made free of any tax in respect of such issue. The
Corporation shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and
delivery of stock in a name other than that of the holder of the
shares converted, and the Corporation shall not be required to issue
or deliver any such stock certificates unless and until the person or
persons requesting the issuance thereof shall have paid to the
Corporation the amount of any such tax or shall have established to
the satisfaction of the Corporation that such tax has been paid.
(7) POWER RESERVED BY THE BOARD OF DIRECTORS. If in any case a
state of facts occurs wherein in the opinion of the Board of
Directors, the other provisions of this Section II are not strictly
applicable, or if strictly applicable, would not fairly protect the
conversion rights of the Class B Stock in accordance with the
essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such
provisions in accordance with such essential intent and principles so
as to protect such conversion rights as aforesaid.
(8) RESERVATION OF SHARES. The Corporation shall at all times
reserve and keep available out of its authorized Series I Class A
Common Stock the full number of shares of Series I Class A Common
Stock deliverable upon the conversion of all outstanding shares of
Class B Stock and shall take all such corporate action as may be
required from time to time in order that it may validly and legally
issue fully paid and non-assessable shares of Series I Class A Common
Stock upon conversion of the Class B Stock.
(9) STATUS OF CONVERTED SHARES. Shares of Class B Stock
converted shall assume the status of authorized but unissued shares
of Class B Stock of the Corporation.
A-7
<PAGE>
APPENDIX B
STATEMENT OF DESIGNATION
OF
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES A
OF
BANKUNITED FINANCIAL CORPORATION
WHEREAS, pursuant to Article VI of the Articles of Incorporation of
BankUnited Financial Corporation (the "Corporation") and Section 607.0602 of the
Florida Business Corporation Act, the Board of Directors of the Corporation is
authorized to divide the Corporation's authorized Preferred Stock into series
and, within the limitations set forth therein, fix and determine the relative
rights and preferences of the shares of any series so established; and
WHEREAS, the Board of Directors desires to (i) establish a series of
Preferred Stock, designating such series "Noncumulative Convertible Preferred
Stock, Series A," (ii) allocate 55,000 shares of the authorized Preferred Stock
to the Noncumulative Convertible Preferred Stock, Series A, and (iii) fix and
determine the relative rights and preferences of the shares of the Noncumulative
Convertible Preferred Stock, Series A;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
designates the following as the relative rights of the Noncumulative Convertible
Preferred Stock, Series A;
RESOLVED, that 55,000 of the 10,000,000 shares of Preferred Stock authorized
by the Articles of Incorporation of the Corporation be and hereby are determined
to be and shall be a series designated as Noncumulative Convertible Preferred
Stock, Series A (the "Series A Preferred Stock"), and that the following is a
statement fixing and determining the variations in the relative rights and
preferences of the Series A Preferred Stock pursuant to authority vested in the
Board of Directors by the Articles of Incorporation of the Corporation:
1. PARITY. The Series A Preferred Stock is of the same class as and
shall be on a parity with the Corporation's currently outstanding
Noncumulative Convertible Preferred Stock, Series B, C and C-II (the
"Outstanding Parity Stock"), except as provided elsewhere herein.
2. DIVIDENDS. The holders of the Series A Preferred Stock shall be
entitled to receive, when, as, and if declared by the Board of Directors and
out of the assets of the Corporation which are by law available for the
payment of dividends, preferential cash dividends payable quarterly on the
last day of February, May, August and November of each year unless such day
is a non-business day, in which event, on the next business day, at the
fixed annual rate of $1.00 per share and no more.
So long as any Series A Preferred Stock remains outstanding:
(a) no dividend whatsoever shall be declared or paid upon or
set apart for payment, and no distribution shall be ordered or made
in respect of: (i) the Class B Common Stock, par value $.01 per share
(the "Class B Common Stock") or the Corporation's Series I Class A
Common Stock, par value $.01 per share (the "Class A Common Stock")
or any other outstanding common stock of the Corporation or (ii) any
other class of stock or series thereof ranking junior to the Series A
Preferred Stock in the payment of dividends;
(b) no shares of Class B Common Stock or Class A Common Stock
and no shares of any other class of stock or series thereof ranking
junior to the Series A Preferred Stock in the payment of dividends
shall be redeemed or purchased by the Corporation or any subsidiary
thereof; and
(c) no moneys, funds or other assets shall be paid to or made
available for a sinking fund for the redemption or purchase of any
shares of: (i) Class B Common Stock or Class A Common Stock; or (ii)
any other class of stock or series thereof ranking junior to the
Series A Preferred Stock in the payment of dividends;
B-1
<PAGE>
unless, in each instance, full dividends on all outstanding shares of
Series A Preferred Stock for the then current calendar quarter shall
have been paid or declared and set aside for payment.
In addition, so long as any Series A Preferred Stock remains
outstanding, no dividend whatsoever shall be declared or paid upon or
set apart for payment, and no distribution shall be ordered or made
in respect of, any share or shares of any class of stock or series
thereof ranking on a parity with the Series A Preferred Stock
(including the Outstanding Parity Stock) in the payment of dividends,
unless, for the applicable calendar quarter:
(a) full dividends shall be paid or declared and set apart for
payment on all shares of: (i) the Series A Preferred Stock; and (ii)
any class of stock or series thereof ranking on a parity with the
Series A Preferred Stock (including the Outstanding Parity Stock) in
the payment of dividends; or
(b) in the event all such dividends for the applicable
calendar quarter are not or cannot be paid or declared and set apart
for payment in full, a pro rata portion of the full dividends shall
be paid or declared and set apart for payment on all shares of: (i)
the Series A Preferred Stock; and (ii) any class of stock or series
thereof ranking on a parity with the Series A Preferred Stock
(including the Outstanding Parity Stock) in the payment of dividends.
Such pro rata portion shall be calculated based on the ratio that the
total amount available for the payment of all required dividends on
the Series A Preferred Stock and such parity stock for the applicable
calendar quarter bears to the total required dividends on the Series
A Preferred Stock and such parity stock for such calendar quarter.
3. PREFERENCE ON LIQUIDATION. In the event of any dissolution,
liquidation or winding up of the affairs of the Corporation, after payment
or provision for payment of any debts and other liabilities of the
Corporation, the holders of the Series A Preferred Stock shall be entitled
to receive the following amounts out of the net assets of the Corporation,
and before any distribution shall be made to the holders of any common stock
or to the holders of any other class of stock or series thereof ranking
junior to the Series A Preferred Stock in the distribution of assets:
(a) if such dissolution, liquidation or winding up is
voluntary, the applicable redemption price per share determined as
provided in Section 4 of these resolutions;
(b) if such dissolution, liquidation or winding up is
involuntary, $10.00 per share;
and no more. If upon such voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Corporation, the net assets of the
Corporation shall be insufficient to permit payment in full of the amounts
required to be paid to the holders of the Series A Preferred Stock and to
the holders of any class of stock or series thereof ranking on a parity with
the Series A Preferred Stock (including the Outstanding Parity Stock) in
respect of the distribution of assets, then a pro rata portion of the full
amount required to be paid upon such dissolution, liquidation or winding up
shall be paid to: (i) the holders of Series A Preferred Stock; and (ii) the
holders of any class of stock or series thereof ranking on a parity with the
Series A Preferred Stock (including the Outstanding Parity Stock) in respect
of the distribution of assets. Such pro rata portion shall be calculated
based on the ratio that the total amount available for distribution to such
holders bears to the total distribution required to be made on the Series A
Preferred Stock and such parity stock.
Nothing herein contained shall be deemed to prevent redemption of
Series A Preferred Stock by the Corporation in the manner provided in
Section 4 of these resolutions. Neither the merger nor consolidation of the
Corporation into or with any other corporation, nor the merger or
consolidation of any other corporation into or with the Corporation, nor a
sale, transfer or lease of all or any part of the assets of the Corporation
shall be deemed to be a dissolution, liquidation or winding up of the
Corporation within the meaning of this Section 3.
Written notice of any voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Corporation, stating a
payment date and the place where the distribution amounts shall be payable
and containing a statement of or reference to the conversion right set forth
in Section 6 of these resolutions, shall be given by mail, postage prepaid,
at least 30 days but not more than 60 days prior to the payment date stated
therein, to the holders of record of the Series A Preferred Stock at their
respective addresses as the same shall appear on the books of the
Corporation.
B-2
<PAGE>
4. REDEMPTION. The Corporation shall have the right, at its option and by
resolution of the Board of Directors, to redeem at any time and from time to
time the Series A Preferred Stock, in whole or in part, upon payment in cash
in respect of each share redeemed, if redeemed during the twelve month
period ending July 31, 1995, $10.15, or if redeemed after July 31, 1995,
$10.00.
If less than all of the outstanding shares of the Series A Preferred
Stock shall be redeemed, the particular shares to be redeemed shall be
allocated among the respective holders of Series A Preferred Stock pro rata
or by lot, as the Board of Directors may determine.
Notice of any redemption specifying the date fixed for said
redemption and the place where the amount to be paid upon redemption is
payable and containing a statement of or reference to the conversion right
set forth in Section 6 of these resolutions shall be mailed, postage
prepaid, at least 30 days but not more than 60 days prior to said redemption
date to the holders of record of the Series A Preferred Stock to be redeemed
at their respective addresses as the name shall appear on the books of the
Corporation. If such notice of redemption shall have been so mailed, and if
on or before the redemption date specified in such notice all funds
necessary for such redemption shall have been set aside by the Corporation
separate and apart from its other funds, in trust for the account of the
holders of the shares so to be redeemed, so as to be and continue to be
available therefor, then, on and after said redemption date, notwithstanding
that any certificate for shares of the Series A Preferred Stock so called
for redemption shall not have been surrendered for cancellation, the shares
represented thereby so called for redemption shall be deemed to be no longer
outstanding, the right to receive dividends thereon shall cease to accrue,
and all rights with respect to such shares of the Series A Preferred Stock
so called for redemption shall forthwith cease and terminate, except only
the right of the holders thereof to receive out of the funds so set aside in
trust the amount payable on redemption thereof, but without interest.
Shares of Series A Preferred Stock redeemed or otherwise purchased or
acquired by the Corporation shall not be reissued as shares of Series A
Preferred Stock but shall assume the status of authorized but unissued
shares of Preferred Stock of the Corporation.
5. VOTING RIGHTS. The holders of the Series A Preferred Stock shall have
two and one-half votes per share on all matters requiring the
vote of stockholders, and additionally if the voting rights of the
Class B Common Stock are increased, then the voting rights of the
Series A Preferred Stock shall be increased by an amount which will
maintain the two and one-half to one proportion between the voting
rights of the Class B Common Stock and the Series A Preferred Stock
as is hereby established.
Additionally, if at any time the equivalent of six or more full
quarterly dividends (whether or not consecutive) payable on the Series A
Preferred Stock shall not be paid, the number of directors constituting the
Board of Directors of the Corporation shall be increased by two, and the
holders of the Series A Preferred Stock (whether or not the payment of
quarterly dividends shall not be paid on other Preferred Stock outstanding)
shall have the exclusive right, voting together as a class, to elect two
directors to fill such newly-created directorships. This right shall remain
vested until dividends on the Series A Preferred Stock have been paid for
four consecutive quarters, at which time: (i) the right shall terminate
(subject to revesting in the case of any subsequent failure to pay of the
kind described above); (ii) the term of the directors then in office elected
by the holders of the Series A Preferred Stock as a class shall terminate;
and (iii) the number of directors constituting the Board of Directors of the
Corporation shall be reduced by two.
Whenever such right shall vest, it may be exercised initially either
at a special meeting of holders of the Series A Preferred Stock or at any
annual stockholders' meeting, but thereafter it shall be exercised only at
annual stockholders' meetings. Any director who shall have been elected by
the holders of the Series A Preferred Stock as a class pursuant to this
Section 5 shall hold office for a term expiring (subject to the earlier
payment of dividends) at the next annual meeting of stockholders, and during
such term may be removed at any time, either for or without cause, by, and
only by, the affirmative votes of the holders of record of a majority of the
outstanding shares of the Series A Preferred Stock given at a special
meeting of such stockholders called for such purpose, and any vacancy
created by such removal may also be filled at such meeting. Any vacancy
caused by the death or resignation of a director who shall have been elected
by the holders of the Series A Preferred Stock as a class pursuant to this
Section 5 may be filled by the remaining director elected by the holders of
the Series A Preferred Stock then in office.
B-3
<PAGE>
Whenever a meeting of the holders of Series A Preferred Stock is
permitted or required to be held pursuant to this Section 5, such meeting
shall be held at the earliest practicable date and the Secretary of the
Corporation shall call such meeting, providing written notice to all holders
of record of Series A Preferred Stock in accordance with law, upon the
earlier of the following:
(a) as soon as reasonably practicable following the occurrence
of the event or events permitting or requiring such meeting
hereunder; or
(b) within 20 days following receipt by said Secretary of a
written request for such a meeting, signed by the holders of record
of at least 20% of the shares of Series A Preferred Stock then
outstanding.
If such meeting shall not be called by the proper corporate
officer within 20 days after the receipt of such request by the
Secretary of the Corporation, or within 25 days after the mailing of
the same within the United States of America by registered mail
addressed to the Secretary of the Corporation at its principal
office, then the holders of record of at least 20% of the shares of
Series A Preferred Stock then outstanding may designate one of their
members to call such a meeting at the expense of the Corporation, and
such meeting may be called by such person in the manner and at the
place provided in this Section 5. Any holder of Series A Preferred
Stock so designated to call such meeting shall have access to the
stock books of the Corporation for the purpose of causing a meeting
of such stockholders to be so called.
Notwithstanding any provision of this Section 5, no special
meeting of the holders of shares of Series A Preferred Stock: (i)
shall be held during the 90 day period next preceding the date fixed
for the annual meeting of stockholders of the Corporation; or (ii)
shall be required to be called or held in violation of any law, rule
or regulation.
Any meeting of the holders of all outstanding Series A
Preferred Stock entitled to vote as a class for the election of
directors shall be held at the place at which the last annual meeting
of stockholders was held. At such meeting, the presence in person or
by proxy of the holders of a majority of the outstanding shares of
the Series A Preferred Stock shall be required to constitute a
quorum; in the absence of a quorum, a majority of the holders
present, in person or by proxy, shall have the power to adjourn the
meeting from time to time without notice, other than an announcement
at the meeting, until a quorum shall be present.
6. CONVERTIBILITY. Shares of the Series A Preferred Stock (hereinafter
in this Section 6 called the "Shares") shall be convertible into Class B
Common Stock on the following terms and conditions:
(a) Subject to and upon compliance with the provisions of this
Section 6, the holder of any Shares may, at such holder's option,
convert any such Shares into such number of fully paid and
non-assessable shares of Class B Common Stock as are issuable
pursuant to the formula set forth in subsections (c) and (d) of this
Section 6. No adjustment shall be made for dividends on any Class B
Common Stock that shall be issuable upon the conversion of such
Shares.
(b) The surrender of any Shares for conversion shall be made
by the holder thereof to the Corporation at its principal office and
such holder shall give written notice to the Corporation at said
office that such holder elects to convert such Shares in accordance
with the provisions thereof and this Section 6. Such notice also
shall state the name or names (with addresses) in which the
certificate or certificates for Class B Common Stock, which shall be
issuable on such conversion, shall be issued. Subject to the
provisions of subsection (a) of this Section 6, every such notice of
election to convert shall constitute a contract between the holder of
such shares and the Corporation, whereby such holder shall be deemed
to subscribe for the number of shares of Class B Common Stock which
such holder will be entitled to receive upon such conversion and, in
payment and satisfaction of such subscription, to surrender such
Shares and to release the Corporation from all obligations thereon,
and whereby the Corporation shall be deemed to agree that the
surrender of such Shares and the extinguishment of its obligations
thereon shall constitute full payment for the Class B Common Stock so
subscribed for and to be issued upon such conversion.
B-4
<PAGE>
As soon as practicable after the receipt of such notice and
Shares, the Corporation shall issue and shall deliver to the person
for whose account such Shares were so surrendered, or on such
holder's written order, a certificate or certificates for the number
of full shares of Class B Common Stock issuable upon the conversion
of such Shares and a check or cash for the payment (if any) to which
such person is entitled pursuant to subsection (e) of this Section 6,
together with a certificate or certificates representing the Shares,
if any, which are not to be converted, but which constituted part of
the Shares represented by the certificate or certificates surrendered
by such person. Such conversion shall be deemed to have been effected
on the date on which the Corporation shall have received such notice
and such Shares, and the person or persons in whose name or names any
certificate or certificates for Class B Common Stock shall be
issuable upon such conversion shall be deemed to have become on said
date the holder or holders of record of the shares represented
thereby.
(c) The Conversion Rate shall be 1.495919425 shares of Class B
Common Stock for each share of Series A Preferred Stock surrendered
for conversion.
(d) The Conversion Rate shall be subject to adjustment from
time to time as follows:
(1) If the Corporation shall (i) pay a dividend in
shares of its Class B Common Stock, (ii) subdivide its
outstanding shares of Class B Common Stock into a greater
number of shares, (iii) combine its outstanding shares of
Class B Common Stock into a smaller number of shares, or (iv)
issue by reclassification of its shares of Class B Common
Stock any shares of its capital stock, then the Conversion
Rate in effect immediately prior thereto shall be adjusted so
that the holder of a Share surrendered for conversion after
the record date fixing stockholders to be affected by such
event shall be entitled to receive upon conversion the number
of such shares of the Corporation which such holder would have
been entitled to receive after the happening of such event had
such shares been converted immediately prior to such record
date. Such adjustment shall be made whenever any of such
events shall happen, and shall also be effective retroactively
as to shares converted between such record date and the date
of the happening of any such event.
(2) If the Corporation shall issue rights or warrants
to the holders of its Class B Common Stock entitling them to
subscribe for or purchase shares of Class B Common Stock, at a
price per share less than the current market price per share
of the Class A Common Stock (as defined in subsection (d)(5)
of this Section 6) at the record date mentioned below, then
the number of shares of Class B Common Stock into which each
share shall thereafter be convertible shall be determined by
multiplying the number of shares of Class B Common Stock into
which such share was theretofore convertible by a fraction,
the numerator of which shall be the number of shares of the
Class B Common Stock outstanding on the date of issuance of
such rights or warrants plus the number of additional shares
of the Class B Common Stock offered for subscription or
purchase, and the denominator of which shall be the number of
shares of the Class B Common Stock outstanding on the date of
issuance of such rights or warrants plus the number of shares
of the Class B Common Stock which the aggregate offering price
of the total number of shares so offered would purchase based
on current market price per share (as defined in subsection
(d)(5) of this Section 6). Such adjustment shall be made
whenever such rights or warrants are issued, and shall also be
effective retroactively as to shares converted between the
record date for the determination of stockholders entitled to
receive such rights or warrants and the date such rights or
warrants are issued.
(3) If the Corporation shall distribute to the holders
of its Class B Common Stock evidence of its indebtedness or
assets (excluding cash dividends or distributions made out of
current or retained earnings) or rights or warrants to
subscribe other than as referred to in subsection (d)(2) of
this Section 6, then in each such case the number of shares of
Class B Common Stock into which each share shall thereafter be
convertible shall be determined by multiplying the number of
shares of Class B Common Stock into which such share was
theretofore convertible by a fraction, the numerator of which
shall be the current market price per share of Class A Common
Stock (as defined in subsection (d)(5) of Section 6) on the
<PAGE>
date of such distribution, and the denominator of which shall
be such current market price per share of the Class A Common
Stock, as the case may be, less the then fair market value (as
determined by the Board of Directors of the Corporation, whose
determination
B-5
<PAGE>
shall be conclusive) of the portion of the assets, evidence of
indebtedness, subscription rights or warrants so distributed
applicable to one share of Class B Common Stock. Such
adjustment shall be made whenever any such distribution is
made, and shall also be effective retroactively as to the
shares converted between the record date for the determination
of stockholders entitled to receive such distribution and the
date such distribution is made.
(4) In the event of any consolidation of the
Corporation with or merger of the Corporation into another
corporation, or in the event of any sale, conveyance, exchange
or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or
assets of the Corporation to another corporation, or in the
case of any reorganization of the Corporation, the holder of
each share then outstanding shall have the right thereafter to
convert such shares into the kind and amount of shares of
stock and other securities and property, including cash, which
would have been deliverable to such holder upon such
consolidation, merger, sale, conveyance, exchange, transfer or
reorganization if such holder had converted such holder's
shares into Class B Common Stock immediately prior to such
consolidation, merger, sale, conveyance, exchange, transfer or
reorganization. In any such event, effective provision shall
be made in the instrument effecting or providing for such
consolidation, merger, sale, conveyance, exchange, transfer or
reorganization so that the provisions set forth herein for the
protection of the conversion rights of the Shares shall
thereafter be applicable, as nearly as may be practicable, in
relation to any shares of stock or other securities or
property including cash, deliverable after such consolidation,
merger, sale, conveyance, exchange, transfer or reorganization
upon the conversion of the Series A Preferred Stock, or such
other securities as shall have been issued to the holders
thereof in lieu thereof or in exchange therefor. The
provisions of this subsection (d)(4) shall similarly apply to
successive consolidations, mergers, sales, conveyances,
exchanges, transfers and reorganizations.
(5) For purposes of computation under subsections
(d)(2) and (d)(3) of this Section 6, the current market price
per share of Class A Common Stock at any date shall be deemed
to be the average of the daily closing prices for the 20
consecutive business days immediately prior to the day in
question, if the Class B Common Stock is convertible into
Class A Common Stock on a one-for-one basis, and if the Class
B Common Stock is not convertible into Class A Common Stock on
a one-for-one basis, then the current market price per share
of Class A Common Stock at any date shall be deemed to be such
average multiplied by the then current conversion rate of
Class B Common Stock into Class A Common Stock. The closing
price for each day shall be the last reported sales price,
regular way, on the principal national securities exchange
upon which the Class A Common Stock is listed, or in case no
such reported sales take place on such day, the average of the
reported closing bid and asked prices, regular way, on such
national securities exchange, or if the Class A Common Stock
is not then listed on a national securities exchange, the
average of the closing prices or, if applicable, closing bid
and asked prices in the over-the-counter market as furnished
by the nationally recognized securities firm or association
selected from time to time by the Corporation for that
purpose.
(6) No adjustment in the Conversion Rate shall be
required unless such adjustment would require an increase or
decrease of at least 2% in the Conversion Rate; provided,
however, that any adjustments which by reason of this
subsection (d)(6) are not required to be made, and are not
made, shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this subsection
(d)(6) shall be made to the nearest cent or one-hundredth of a
share, as the case may be.
(e) Receipt by a holder of Series A Preferred Stock of a
notice of redemption pursuant to Section 4 of these resolutions shall
not terminate the conversion rights set forth in this Section 6, but
rather such conversion rights shall continue until the redemption
date set forth in the notice of redemption.
(f) No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of any shares. If more
than one share shall be surrendered for conversion at one time by the
same holder, the
B-6
<PAGE>
number of full shares issuable upon conversion thereof shall be
computed on the basis of the aggregate number of such shares so
surrendered. If the conversion of any shares results in a fraction,
an amount equal to such fraction multiplied by the current market
price (determined as provided in subsection (d)(5) of this Section 6)
of the Class A Common Stock on the business day next preceding the
date of conversion shall be paid to such holder in cash by the
Corporation.
(g) The issue of stock certificates on conversion of shares
shall be made free of any tax in respect of such issue. The
Corporation shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and
delivery of stock in a name other than that of the holder of the
shares converted, and the Corporation shall not be required to issue
or deliver any such stock certificates unless and until the person or
persons requesting the issuance thereof shall have paid to the
Corporation the amount of any such tax or shall have established to
the satisfaction of the Corporation that such tax has been paid.
(h) If in any case a state of facts occurs wherein in the
opinion of the Board of Directors, the other provisions of this
Section 6 are not strictly applicable, or if strictly applicable,
would not fairly protect the conversion rights of the Series A
Preferred Stock in accordance with the essential intent and
principles of such provisions, then the Board of Directors shall make
an adjustment in the application of such provisions in accordance
with such essential intent and principles so as to protect such
conversion rights as aforesaid.
(i) The Corporation shall at all times reserve and keep
available out of its authorized Class B Common Stock the full number
of shares of Class B Common Stock deliverable upon the conversion of
all outstanding shares of Series A Preferred Stock and shall take all
such corporate action as may be required from time to time in order
that it may validly and legally issue fully paid and non-assessable
shares of Class B Common Stock upon conversion of the Series A
Preferred Stock.
(j) Shares of Series A Preferred Stock converted shall not be
reissued as shares of Series A Preferred Stock but shall assume the
status of authorized but unissued shares of Preferred Stock of the
Corporation.
B-7
<PAGE>
APPENDIX C
STATEMENT OF DESIGNATION
OF
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES B
OF
BANKUNITED FINANCIAL CORPORATION
WHEREAS, pursuant to Article VI of the Articles of Incorporation of
BankUnited Financial Corporation (the "Corporation"), and Section 607.0602 of
the Florida Business Corporation Act, the Board of Directors of the Corporation
is authorized to divide the Corporation's authorized Preferred Stock into series
and, within the limitations set forth therein, fix and determine the relative
rights and preferences of the shares of any series so established; and
WHEREAS, the Board of Directors of the Corporation desires to (i) establish
a second series of its class of Preferred Stock, designating such series
"Noncumulative Convertible Preferred Stock, Series B," (ii) allocate 200,000
shares of the authorized Preferred Stock to the Noncumulative Convertible
Preferred Stock, Series B, and (iii) fix and determine the relative rights and
preferences of the shares of the Noncumulative Convertible Preferred Stock,
Series B;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
designates the following as the relative rights of the Noncumulative Convertible
Preferred Stock, Series B:
RESOLVED, that 200,000 of the 10,000,000 shares of the class of Preferred
Stock authorized by the Articles of Incorporation of the Corporation be and
hereby are determined to be and shall be of a series designated as Noncumulative
Convertible Preferred Stock, Series B (the "Series B Preferred Stock") and that
the following is a statement fixing and determining the variations in the
relative rights and preferences of the Series B Preferred Stock pursuant to
authority vested in the Board of Directors by the Articles of Incorporation of
the Corporation:
1. PARITY. The Series B Preferred Stock is of the same class as and shall be
on a parity with the Corporation's currently outstanding Noncumulative
Convertible Preferred Stock, Series A, C and C-II (the "Outstanding Parity
Stock"), except as provided elsewhere herein.
2. DIVIDENDS. The holders of the Series B Preferred Stock shall be entitled
to receive, when, as, and if declared by the Board of Directors and out of
the assets of the Corporation which are by law available for the payment of
dividends, preferential cash dividends payable quarterly on the last day of
February, May, August and November of each year unless such day is a
non-business day, in which event on the next business day, at the fixed
annual rate of $0.7375 per share and no more.
So long as any Series B Preferred Stock remains outstanding:
(a) no dividend whatsoever shall be declared or paid upon or set
apart for payment, and no distribution shall be ordered or made in
respect of: (i) the Class B Common Stock, par value $.01 per share
("Class B Common Stock") or the Corporation's Series I Class A Common
Stock, par value $.01 per share (the "Class A Common Stock") or any
other outstanding common stock of the Corporation, or (ii) any other
class of stock or series thereof ranking junior to the Series B
Preferred Stock in the payment of dividends;
(b) no shares of the Class B Common Stock or the Class A Common Stock
and no shares of any other class of stock or series thereof ranking
junior to the Series B Preferred Stock in the payment of dividends
shall be redeemed or purchased by the Corporation or any subsidiary
thereof; and
(c) no moneys, funds or other assets shall be paid to or made
available for a sinking fund for the redemption or purchase of any
shares of: (i) the Class B Common Stock or the Class A Common Stock,
or (ii) any other class of stock or series thereof ranking junior to
the Series B Preferred Stock in the payment of dividends;
C-1
<PAGE>
unless, in each instance, full dividends on all outstanding shares of
Series B Preferred Stock for the then current calendar quarter shall
have been paid or declared and set aside for payment.
In addition, so long as any Series B Preferred Stock remains
outstanding, no dividend whatsoever shall be declared or paid upon or
set apart for payment, and no distribution shall be ordered or made
in respect of, any share or shares of any class of stock or series
thereof ranking on a parity with the Series B Preferred Stock
(including the Outstanding Parity Stock) in the payment of dividends,
unless, for the applicable calendar quarter:
(a) full dividends shall be paid or declared and set apart for
payment on all shares of: (i) the Series B Preferred Stock, and (ii)
any class of stock or series thereof ranking on a parity with the
Series B Preferred Stock (including the Outstanding Parity Stock) in
the payment of dividends; or
(b) in the event all such dividends for the applicable calendar
quarter are not or cannot be paid or declared and set apart for
payment in full, a pro rata portion of the full dividends shall be
paid or declared and set apart for payment on all shares of: (i) the
Series B Preferred Stock, and (ii) any class of stock or series
thereof ranking on a parity with the Series B Preferred Stock
(including the Outstanding Parity Stock) in the payment of dividends.
Such pro rata portion shall be calculated based on the ratio that the
total amount available for the payment of all required dividends on
the Series B Preferred Stock and such parity stock for the applicable
calendar quarter bears to the total required dividends on the Series
B Preferred Stock and such parity stock for such calendar quarter.
3. PREFERENCE ON LIQUIDATION. In the event of any dissolution, liquidation
or winding up of the affairs of the Corporation, after payment or provision
for payment of any debts and other liabilities of the Corporation, the
holders of the Series B Preferred Stock shall be entitled to receive the
following amounts out of the net assets of the Corporation, and before any
distribution shall be made to the holders of any common stock or to the
holders of any other class of stock or series thereof ranking junior to the
Series B Preferred Stock in the distribution of assets:
(a) if such dissolution, liquidation or winding up is voluntary, the
applicable redemption price per share determined as provided in
Section 4 of these resolutions;
(b) if such dissolution, liquidation or winding up is involuntary,
$7.375 per share;
and no more. If upon such voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Corporation, the net
assets of the Corporation shall be insufficient to permit payment in
full of the amounts required to be paid to the holders of the Series
B Preferred Stock and to the holders of any class of stock or series
thereof ranking on a parity with the Series B Preferred Stock
(including the Outstanding Parity Stock) in respect of the
distribution of assets, then a pro rata portion of the full amount
required to be paid upon such dissolution, liquidation or winding up
shall be paid to: (i) the holders of Series B Preferred Stock, and
(ii) the holders of any class of stock or series thereof ranking on a
parity with the Series B Preferred Stock (including the Outstanding
Parity Stock) in respect of the distribution of assets. Such pro rata
portion shall be calculated based on the ratio that the total amount
available for distribution to such holders bears to the total
distribution required to be made on the Series B Preferred Stock and
such parity stock.
Nothing herein contained shall be deemed to prevent redemption
of Series B Preferred Stock by the Corporation in the manner provided
in Section 4 of these resolutions. Neither the merger nor
consolidation of the Corporation into or with any other corporation,
nor the merger or consolidation of any other corporation into or with
the Corporation, nor a sale, transfer or lease of all or any part of
the assets of the Corporation shall be deemed to be a dissolution,
liquidation or winding up of the Corporation within the meaning of
this Section 3.
Written notice of any voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Corporation, stating
a payment date and the place where the distribution amounts shall be
payable and containing a statement of or reference to the conversion
right set forth in Section 6 of these resolutions, shall be given by
mail, postage prepaid, at least 30 days but not more than 60 days
prior to the payment date stated
C-2
<PAGE>
therein, to the holders of record of the Series B Preferred Stock at
their respective addresses as the same shall appear on the books of
the Corporation.
4. REDEMPTION. the Corporation shall have the right, at its option and by
resolution of its Board of Directors, to redeem at any time and from time to
time the Series B Preferred Stock, in whole or in part, upon payment in cash
in respect of each share redeemed at the then applicable redemption price
set forth below:
<TABLE>
<S> <C>
If redeemed during the twelve month period ending January 31, 1995 $7.67
If redeemed during the twelve month period ending January 31, 1996 $7.59625
If redeemed during the twelve month period ending January 31, 1997 $7.5225
If redeemed during the twelve month period ending January 31, 1998 $7.44875
If redeemed after January 31, 1998 $7.375
</TABLE>
If less than all of the outstanding shares of the Series B Preferred
Stock shall be redeemed, the particular shares to be redeemed shall be
allocated among the respective holders of Series B Preferred Stock, pro rata
or by lot, as the Board of Directors may determine.
Notice of any redemption specifying the date fixed for said
redemption and the place where the amount to be paid upon redemption is
payable and containing a statement of or reference to the conversion right
set forth in Section 6 of these resolutions shall be mailed, postage
prepaid, at least 30 days but not more than 60 days prior to said redemption
date to the holders of record of the Series B Preferred Stock to be redeemed
at their respective addresses as the same shall appear on the books of the
Corporation. If such notice of redemption shall have been so mailed, and if
on or before the redemption date specified in such notice, all funds
necessary for such redemption shall have been set aside by the Corporation
separate and apart from its other funds, in trust for the account of the
holders of the shares so to be redeemed, so as to be and continue to be
available therefor, then, on and after said redemption date, notwithstanding
that any certificate for shares of the Series B Preferred Stock so called
for redemption shall not have been surrendered for cancellation, the shares
represented thereby so called for redemption shall be deemed to be no longer
outstanding and all rights with respect to such shares of the Series B
Preferred Stock so called for redemption shall forthwith cease and
terminate, except only the right of the holders thereof to receive out of
the funds so set aside in trust the amount payable on redemption thereof,
but without interest.
Shares of Series B Preferred Stock redeemed or otherwise purchased or
acquired by the Corporation shall not be reissued as shares of Series B
Preferred Stock but shall assume the status of authorized but unissued
shares of Preferred Stock of the Corporation.
5. VOTING RIGHTS. The holders of the Series B Preferred Stock shall have two
and one-half votes per share on all matters requiring the vote of
stockholders, and additionally, if the voting rights of the Class B Common
Stock are increased, then the voting rights of the Series B Preferred Stock
shall be increased by an amount which will maintain the two and one-half to
one proportion between the voting rights of the Class B Common Stock and the
Series B Preferred Stock as is hereby established.
Additionally, if at any time the equivalent of six or more full
quarterly dividends (whether or not consecutive) payable on the Series B
Preferred Stock shall not be paid, the number of directors constituting the
Board of Directors of the Corporation shall be increased by two, and the
holders of the Series B Preferred Stock (whether or not the payment of
quarterly dividends shall not be paid on other Preferred Stock outstanding)
shall have the exclusive right, voting together as a class, to elect two
directors to fill such newly created directorships. This right shall remain
vested until dividends on the Series B Preferred Stock have been paid for
four consecutive quarters, at which time: (i) the right shall terminate
(subject to revesting in the case of any subsequent failure to pay of the
kind described above); (ii) the term of the directors then in office elected
by the holders of the Series B Preferred Stock as a class shall terminate;
and (iii) the number of directors constituting the Board of Directors of the
Corporation shall be reduced by two.
C-3
<PAGE>
Whenever such right shall vest, it may be exercised initially either
at a special meeting of holders of the Series B Preferred Stock or at any
annual stockholders' meeting, but thereafter it shall be exercised only at
annual stockholders' meetings. Any director who shall have been elected by
the holders of the Series B Preferred Stock as a class pursuant to this
Section 5 shall hold office for a term expiring at the next annual meeting
of stockholders, and during such term may be removed at any time, either for
or without cause, by, and only by, the affirmative votes of the holders of
record of a majority of the outstanding shares of the Series B Preferred
Stock given at a special meeting of such stockholders called for such
purpose, and any vacancy created by such removal may also be filled at such
meeting. Any vacancy caused by the death or resignation of a director who
shall have been elected by the holders of the Series B Preferred Stock as a
class pursuant to this Section 5 may be filled only by the remaining
director elected by the holders of the Series B Preferred Stock then in
office.
Whenever a meeting of the holders of Series B Preferred Stock is
permitted or required to be held pursuant to this Section 5, such meeting
shall be held at the earliest practicable date and the Secretary of the
Corporation shall call such meeting, providing written notice to all holders
of record of Series B Preferred Stock, in accordance with law, upon the
earlier of the following:
(a) as soon as reasonably practicable following the occurrence of the
event or events permitting or requiring such meeting hereunder; or
(b) within 20 days following receipt by said Secretary of a written
request for such a meeting, signed by the holders of record of at
least 20% of the shares of Series B Preferred Stock then outstanding.
If such meeting shall not be called by the proper corporate
officer within 20 days after the receipt of such request by the
Secretary of the Corporation, or within 25 days after the mailing of
the same within the United States of America by registered mail
addressed to the Secretary of the Corporation at its principal
office, then the holders of record of at least 20% of the shares of
Series B Preferred Stock then outstanding may designate one of their
members to call such a meeting at the expense of the Corporation, and
such meeting may be called by such person in the manner and at the
place provided in this Section 5. Any holder of Series B Preferred
Stock so designated to call such meeting shall have access to the
stock books of the Corporation for the purpose of causing a meeting
of such stockholders to be so called.
Notwithstanding any provision of this Section 5 to the
contrary, no special meeting of the holders of shares of Series B
Preferred Stock: (i) shall be held during the 90-day period next
preceding the date fixed for the annual meeting of stockholders of
the Corporation; or (ii) shall be required to be called or held in
violation of any law, rule or regulation.
Any meeting of the holders of all outstanding Series B
Preferred Stock entitled to vote as a class for the election of
directors shall be held at the place at which the last annual meeting
of stockholders was held. At such meeting, the presence in person or
by proxy of the holders of a majority of the outstanding shares of
the Series B Preferred Stock shall be required to constitute a
quorum; in the absence of a quorum, a majority of the holders
present, in person or by proxy, shall have the power to adjourn the
meeting from time to time without notice, other than an announcement
at the meeting, until a quorum shall be present.
6. CONVERTIBILITY. Shares of the Series B Preferred Stock (hereinafter in
this Section 6 called the "Shares") shall be convertible into Class B Common
Stock on the following terms and conditions:
(a) Subject to and upon compliance with the provisions of this
Section 6, the holder of any Shares may at such holder's option
convert any such Shares into such number of fully paid and
non-assessable shares of Class B Common Stock as are issuable
pursuant to the formula set forth in subsections (c) and (d) of this
Section 6. No adjustment shall be made for dividends on any Class B
Common Stock that shall be issuable upon the conversion of such
Shares.
(b) The surrender of any Shares for conversion shall be made by the
holder thereof to the Corporation at its principal office and such
holder shall give written notice to the Corporation at said office
that such holder elects to convert such Shares in accordance with the
provisions thereof and this Section 6. Such notice also
C-4
<PAGE>
shall state the name or names (with addresses) in which the
certificate or certificates for the Class B Common Stock, which shall
be issuable on such conversion, shall be issued. Subject to the
provisions of subsection (a) of this Section 6, every such notice of
election to convert shall constitute a contract between the holder of
such shares and the Corporation, whereby such holder shall be deemed
to subscribe for the number of shares of Class B Common Stock which
such holder will be entitled to receive upon such conversion and, in
payment and satisfaction of such subscription, to surrender such
Shares and to release the Corporation from all obligations thereon,
and whereby the Corporation shall be deemed to agree that the
surrender of such Shares and the extinguishment of its obligations
thereon shall constitute full payment for the Class B Common Stock so
subscribed for and to be issued upon such conversion.
As soon as practicable, after the receipt of such notice and
Shares, the Corporation shall issue and shall deliver to the person
for whose account such Shares were so surrendered, or on such
holder's written order, a certificate or certificates for the number
of full shares of Class B Common Stock issuable upon the conversion
of such Shares and a check or cash for the payment (if any) to which
such person is entitled pursuant to subsection (e) of this Section 6,
together with a certificate or certificates representing the Shares,
if any, which are not to be converted, but which constituted part of
the Shares represented by the certificate or certificates surrendered
by such person. Such conversion shall be deemed to have been effected
on the date on which the Corporation shall have received such notice
and such Shares, and the person or persons in whose name or names any
certificate or certificates for Class B Common Stock shall be
issuable upon such conversion shall be deemed to have become on said
date the holder or holders of record of the shares represented
thereby.
(c) The Conversion Rate shall be 1.495919425 shares of Class B Common
Stock for each share of Series B Preferred Stock surrendered for
conversion.
(d) The Conversion Rate shall be subject to adjustment from time to
time as follows:
(1) If the Corporation shall (i) pay a dividend in shares of
its Class B Common Stock, (ii) subdivide the outstanding shares of
Class B Common Stock into a greater number of shares, (iii) combine
its outstanding shares of the Class B Common Stock into a smaller
number of shares, or (iv) issue by reclassification of its shares of
Class B Common Stock any shares of its capital stock, then the
Conversion Rate in effect immediately prior thereto shall be adjusted
so that the holder of a Share surrendered for conversion after the
record date fixing stockholders to be affected by such event shall be
entitled to receive upon conversion the numbers of such shares of the
Corporation which such holder would have been entitled to receive
after the happening of such event had such shares been converted
immediately prior to such record date. Such adjustment shall be made
whenever any of such events shall happen, and shall also be effective
retroactively as to shares converted between such record date and the
date of the happening of any such event.
(2) If the Corporation shall issue rights or warrants to the
holders of its Class B Common Stock entitling them to subscribe for
or purchase shares of Class B Common Stock, at a price per share less
than the current market price per share of the Class A Common Stock
(as defined in subsection (d)(5) of this Section 6) at the record
date mentioned below, then the number of shares of Class B Common
Stock into which each share shall thereafter be convertible shall be
determined by multiplying the number of shares of Class B Common
Stock into which such share was theretofore convertible by a
fraction, the numerator of which shall be the number of shares of the
Class B Common Stock outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of the Class
B Common Stock offered for subscription or purchase, and the
denominator of which shall be the number of shares of the Class B
Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of shares of the Class B Common Stock which
the aggregate offering price of the total number of shares so offered
would purchase based on current market price per share (as defined in
subsection (d)(5) of this Section 6). Such adjustment shall be made
whenever such rights or warrants are issued, and shall also be
effective retroactively as to shares converted between the record
date for the determination of stockholders entitled to receive such
rights or warrants and the date such rights or warrants are issued.
(3) If the Corporation shall distribute to the holders of the Class B
Common Stock evidence of its indebtedness or assets (excluding cash
dividends or distributions made out of current or retained earnings)
or
C-5
<PAGE>
rights or warrants to subscribe other than as referred to in
subsection (d)(2) of this Section 6, then in each such case the
number of shares of the Class B Common Stock into which each share
shall thereafter be convertible shall be determined by multiplying
the number of shares of the Class B Common Stock into which such
share was theretofore convertible by a fraction, the numerator of
which shall be the current market price per share of the Class A
Common Stock (as defined in subsection (d)(5) of this Section 6) on
the date of such distribution, and the denominator of which shall be
such current market price per share of the Class A Common Stock, as
the case may be, less the then fair market value (as determined by
the Board of Directors of the Corporation, whose determination shall
be conclusive) of the portion of the assets, evidence of
indebtedness, subscription rights or warrants so distributed
applicable to one share of the Class B Common Stock. Such adjustment
shall be made whenever any such distribution is made, and shall also
be effective retroactively as to the shares converted between the
record date for the determination of stockholders entitled to receive
such distribution and the date such distribution is made.
(4) In the event of any consolidation of the Corporation with
or merger of the Corporation into another corporation, or in the
event of any sale, conveyance, exchange or transfer (for cash, shares
of stock, securities or other consideration) of all or substantially
all of the property or assets of the Corporation to another
corporation, or in the case of any reorganization of the Corporation,
the holder of each share then outstanding shall have the right
thereafter to convert such shares into the kind and amount of shares
of stock and other securities and property, including cash, which
would have been deliverable to such holder upon such consolidation,
merger, sale, conveyance, exchange, transfer or reorganization if
such holder had converted such holder's shares into the Class B
Common Stock immediately prior to such consolidation, merger, sale,
conveyance, exchange, transfer or reorganization. In any such event,
effective provision shall be made in the instrument effecting or
providing for such consolidation, merger, sale, conveyance, exchange,
transfer or reorganization so that the provisions set forth herein
for the protection of the conversion rights of the Shares shall
thereafter be applicable, as nearly as may be practicable, in
relation to any shares of stock or other securities or property
including cash, deliverable after such consolidation, merger, sale,
conveyance, exchange, transfer or reorganization upon the conversion
of the Series B Preferred Stock, or such other securities as shall
have been issued to the holders thereof in lieu thereof or in
exchange therefor. The provisions of this subsection (d)(4) shall
similarly apply to successive consolidations, mergers, sales,
conveyances, exchanges, transfers and reorganizations.
(5) For purposes of computation under subsections (d)(2) and
(d)(3) of this Section 6, the current market price per share of the
Class A Common Stock at any date shall be deemed to be the average of
the daily closing prices for the 20 consecutive business days
immediately prior to the day in question, if the Class B Common Stock
is convertible into Class A Common Stock on a one-for-one basis, and
if the Class B Common Stock is not convertible into Class A Common
Stock on a one-for-one basis, then the current market price per share
of Class A Common Stock at any date shall be deemed to be such
average multiplied by the then current conversion rate of the Class B
Common Stock into the Class A Common Stock. The closing price for
each day shall be the last reported sales price, regular way, on the
principal national securities exchange upon which the Class A Common
Stock is listed, or in case no such reported sale take place on such
day, the average of the reported closing bid and asked prices,
regular way, on such national securities exchange, or if the Class A
Common Stock is not then listed on a national securities exchange,
the average of the closing prices or, if applicable, closing bid and
asked prices in the over-the-counter market as furnished by the
nationally recognized securities firm or association selected from
time to time by the Corporation for that purpose.
(6) No adjustment in the Conversion Rate shall be required
unless such adjustment would require an increase or decrease of at
least 2% in the Conversion Rate; provided, however, that any
adjustments which by reason of this subsection (d)(6) are not
required to be made, and are not made, shall be carried forward and
taken into account in any subsequent adjustment. All calculations
under this subsection (d)(6) shall be made to the nearest cent or
one-hundredth of a share, as the case may be.
(e) Receipt by a holder of Series B Preferred Stock of a notice of
redemption pursuant to Section 4 of these resolutions shall not
terminate the conversion rights set forth in this Section 6, but
rather such conversion rights shall continue until the redemption
date set forth in the notice of redemption.
C-6
<PAGE>
(f) No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of any shares. If more than one
share shall be surrendered for conversion at one time by the same
holder, the number of full shares issuable upon conversion thereof
shall be computed on the basis of the aggregate number of such shares
so surrendered. If the conversion of any shares results in a
fraction, an amount equal to such fraction multiplied by the current
market price (determined as provided in subsection (d)(5) of this
Section 6) of the Class A Common Stock on the business day next
preceding the date of conversion shall be paid to such holder in cash
by the Corporation.
(g) The issue of stock certificates on conversion of shares shall be
made free of any tax in respect of such issue. The Corporation shall
not, however, be required to pay any tax which may be payable in
respect to any transfer involved in the issue and delivery of stock
in a name other than that of the holder of the shares converted, and
the Corporation shall not be required to issue or deliver any such
stock certificates unless and until the person or persons requesting
the issuance thereof shall have paid to the Corporation the amount of
any such tax or shall have established to the satisfaction of the
Corporation that such tax has been paid.
(h) If in any case a state of facts occurs wherein the opinion of the
Board of Directors and the other provisions of this Section 6 are not
strictly applicable, or if strictly applicable, would not fairly
protect the conversion rights of the Series B Preferred Stock in
accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make an adjustment in
the application of such provisions in accordance with such essential
intent and principles so as to protect such conversion rights as
aforesaid.
(i) The Corporation shall at all times reserve and keep available out
of its authorized Class B Common Stock the full number of shares of
the Class B Common Stock deliverable upon the conversion of all
outstanding shares of Series B Preferred Stock and shall take all
such corporate action as may be required from time to time in order
that it may validly and legally issue fully paid and non-assessable
shares of Class B Common Stock upon conversion of the Series B
Preferred Stock.
(j) Shares of Series B Preferred Stock converted shall not be
reissued as shares of Series B Preferred Stock but shall assume the
status of authorized but unissued shares of Preferred Stock of
the Corporation.
C-7
<PAGE>
APPENDIX D
STATEMENT OF DESIGNATION
OF
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES C
OF
BANKUNITED FINANCIAL CORPORATION
WHEREAS, pursuant to Article VI of the Articles of Incorporation of
BankUnited Financial Corporation (the "Corporation") and Section 607.0602 of the
Florida Business Corporation Act, the Board of Directors of the Corporation is
authorized to divide the Corporation's authorized Preferred Stock into series
and, within the limitations set forth therein, fix and determine the relative
rights and preferences of the shares of any series so established;
WHEREAS, the Board of Directors desires to (i) establish a series of the
Preferred Stock, designating such series "Noncumulative Convertible Preferred
Stock, Series C," (ii) allocate 363,636 shares of the authorized Preferred Stock
to the Noncumulative Convertible Preferred Stock, Series C, and (iii) fix and
determine the relative rights and preferences of the Noncumulative Convertible
Preferred Stock, Series C;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby allocates
a portion of the Preferred Stock to a series designated Noncumulative
Convertible Preferred Stock, Series C and fixes and determines the relative
rights and preferences of the Noncumulative Convertible Preferred Stock, Series
C, as set forth below:
1. DESIGNATION AND ALLOCATION. Of the 10,000,000 shares of Preferred Stock
authorized by the Articles of Incorporation of the Corporation, 363,636 shares
are hereby determined to be and shall be of a series designated as Noncumulative
Convertible Preferred Stock, Series C ("Series C Preferred Stock").
2. PARITY. The Series C Preferred Stock is of the same class as and shall be
on a parity with the Corporation's currently outstanding Noncumulative
Convertible Preferred Stock, Series A, B and C-II (the "Outstanding Parity
Stock"), except as may be provided elsewhere herein.
3. DIVIDENDS. The holders of the Series C Preferred Stock shall be entitled
to receive, when, as, and if declared by the Board of Directors and out of the
assets of the Corporation which are by law available for the payment of
dividends, preferential cash dividends payable quarterly on the last day of
February, May, August and November of each year unless such day is a
non-business day, in which event on the next business day, at the fixed annual
rate of $0.55 per share and no more.
So long as any Series C Preferred Stock remains outstanding:
(a) no dividend whatsoever shall be declared or paid upon or set
apart for payment, and no distribution shall be ordered or made in respect of:
(i) the Corporation's Series I Class A Common Stock, par value $.01 per share
(the "Class A Common Stock"), or the Class B Common Stock, par value $.01 per
share (the "Class B Common Stock"), or any other outstanding common stock of the
Corporation, or (ii) any other class of stock or series thereof ranking junior
to the Series C Preferred Stock in the payment of dividends; and
(b) no shares of the Class A Common Stock or the Class B Common Stock
and no shares of any other class of stock or series thereof ranking junior to
the Series C Preferred Stock in the payment of dividends shall be redeemed or
purchased by the Corporation or any subsidiary thereof; and
(c) no moneys, funds or other assets shall be paid to or made
available for a sinking fund for the redemption or purchase of any shares of:
(i) the Class A Common Stock or the Class B Common Stock; or (ii) any other
class of stock or series thereof ranking junior to the Series C Preferred Stock
in the payment of dividends;
unless, in each instance, full dividends on all outstanding shares of Series C
Preferred Stock for the then current calendar quarter shall have been paid or
declared and set aside for payment.
D-1
<PAGE>
In addition, so long as any Series C Preferred Stock remains outstanding, no
dividend whatsoever shall be declared or paid upon or set apart for payment, and
no distribution shall be ordered or made in respect of, any share or shares of
any class of stock or series thereof ranking on a parity with the Series C
Preferred Stock (including the Outstanding Parity Stock) in the payment of
dividends, unless, for the applicable calendar quarter:
(a) full dividends shall be paid or declared and set apart for
payment on all shares of: (i) the Series C Preferred Stock; and (ii) any class
of stock or series thereof ranking on a parity with the Series C Preferred Stock
(including the Outstanding Parity Stock) in the payment of dividends; or
(b) in the event all such dividends for the applicable calendar
quarter are not or cannot be paid or declared and set apart for payment in full,
a pro rata portion of the full dividends shall be paid or declared and set apart
for payment on all shares of: (i) the Series C Preferred Stock; and (ii) any
class of stock or series thereof ranking on a parity with the Series C Preferred
Stock (including the Outstanding Parity Stock) in the payment of dividends. Such
pro rata portion shall be calculated based on the ratio that the total amount
available for the payment of all required dividends on the Series C Preferred
Stock and such parity stock for the applicable calendar quarter bears to the
total required dividends on the Series C Preferred Stock and such parity stock
for such calendar quarter.
4. PREFERENCE ON LIQUIDATION. In the event of any dissolution, liquidation
or winding up of the affairs of the Corporation, after payment or provision for
payment of any debts and other liabilities of the Corporation, the holders of
the Series C Preferred Stock shall be entitled to receive the following amounts
out of the net assets of the Corporation, and before any distribution shall be
made to the holders of any common stock or to the holders of any other class of
stock or series thereof ranking junior to the Series C Preferred Stock in the
distribution of assets:
(a) if such dissolution, liquidation or winding up is voluntary, the
applicable redemption price per share determined as provided in section 5 of
these resolutions;
(b) if such dissolution, liquidation or winding up is involuntary,
$5.50 per share;
and no more. If upon such voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Corporation the net assets of the Corporation
shall be insufficient to permit payment in full of the amounts required to be
paid to the holders of the Series C Preferred Stock and to the holders of any
class of stock or series thereof ranking on a parity with the Series C Preferred
Stock (including the Outstanding Parity Stock) in respect of the distribution of
assets, then a pro rata portion of the full amount required to be paid upon such
dissolution, liquidation or winding up shall be paid to: (i) the holders of
Series C Preferred Stock; and (ii) the holders of any class of stock or series
thereof ranking on a parity with the Series C Preferred Stock (including the
Outstanding Parity Stock) in respect of the distribution of assets. Such pro
rata portion shall be calculated upon the ratio that the total amount available
for distribution to such holders bears to the total distribution required to be
made on the Series C Preferred Stock and such parity stock.
Neither the merger nor consolidation of the Corporation into or with any
other corporation, nor the merger or consolidation of any other corporation into
or with the Corporation, nor a sale, transfer or lease of all or any part of the
assets of the Corporation shall be deemed to be a dissolution, liquidation or
winding up of the Corporation within the meaning of this section 4.
Written notice of any voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Corporation, stating a payment date and the
place where the distribution amounts shall be payable, shall be given by mail,
postage prepaid, at least 30 days but not more than 60 days prior to the payment
date stated therein, to the holders of record of the Series C Preferred Stock at
their respective addresses as the same shall appear on the books of the
Corporation.
5. REDEMPTION. The Corporation shall have the right, at its option and by
resolution of its Board of Directors, to redeem at any time and from time to
time the Series C Preferred Stock in whole or in part, upon payment in cash in
respect of each share redeemed at the redemption price of $5.50.
If less than all of the outstanding shares of the Series C Preferred Stock
shall be redeemed, the particular shares to be redeemed shall be allocated among
the respective holders of Series C Preferred Stock pro rata or by lot, as the
Board of Directors may determine.
D-2
<PAGE>
Notice of any redemption specifying the date fixed for said redemption and
the place where the amount to be paid upon redemption is payable and containing
a statement of, or reference to, the conversion right set forth in section 7 of
these resolutions shall be mailed, postage prepaid, at least 30 days but not
more than 60 days prior to said redemption date to the holders of record of the
Series C Preferred Stock, to be redeemed at their respective addresses as the
same shall appear on the books of the Corporation. If such notice of redemption
shall have been so mailed, and if on or before the redemption date specified in
such notice, all funds necessary for such redemption shall have been set aside
by the Corporation separate and apart from its other funds, in trust for the
account of the holders of the shares so to be redeemed, so as to be and continue
to be available therefor, then, on and after said redemption date,
notwithstanding that any certificate for shares of the Series C Preferred Stock
so called for redemption shall not have been surrendered for cancellation, the
shares represented thereby so called for redemption shall be deemed to be no
longer outstanding, the right to receive dividends thereon shall cease, and all
rights with respect to such shares of the Series C Preferred Stock so called for
redemption shall forthwith cease and terminate, except only the right of the
holders thereof to receive out of the funds so set aside in trust the amount
payable on redemption thereof, but without interest.
Shares of Series C Preferred Stock redeemed or otherwise purchased or
acquired by the Corporation shall not be reissued as shares of Series C
Preferred Stock but shall assume the status of authorized but unissued shares of
Preferred Stock of the Corporation.
6. VOTING RIGHTS. Except as may be otherwise provided by applicable law, the
Series C Preferred Stock shall be non-voting.
7. CONVERTIBILITY. Shares of the Series C Preferred Stock (hereinafter in
this section 7 called the "Shares") shall be convertible into the Corporation's
Class A Common Stock on the following terms and conditions:
(a) CONVERSION. Subject to and upon compliance with the provisions of
this section 7, the holder of any Shares may, at such holder's option, convert
any such Shares into such number of fully paid and non-assessable shares of the
Class A Common Stock as are issuable pursuant to the formula set forth in
subsections 7(b), (c) and (d) of this section 7 by surrendering any Shares for
conversion to the Corporation at its principal office and by furnishing written
notice to the Corporation at said office that such holder elects to convert in
accordance with the provisions hereof. Such notice also shall state the name or
names (with addresses) in which the certificate or certificates for Class A
Common Stock which shall be issuable on such conversion shall be issued. Every
such notice of election to convert shall constitute a contract between the
holder and the Corporation, whereby such holder shall be deemed to subscribe for
the number of shares of Class A Common Stock which such holder will be entitled
to receive upon such conversion and, in payment and satisfaction of such
subscription, to surrender such Shares and to release the Corporation from all
obligations thereon, and whereby the Corporation shall be deemed to agree that
the surrender of such Shares and the extinguishment of its obligations thereon
shall constitute full payment for the Class A Common Stock so subscribed for and
to be issued upon such conversion.
As soon as practicable after the receipt of such notice and Shares, the
Corporation shall issue and shall deliver to the holder for whose account such
Shares were so surrendered, or on such holder's written order, a certificate or
certificates for the number of full shares of Class A Common Stock issuable upon
the conversion of such Shares and a check or cash for the payment (if any) to
which such person is entitled pursuant to subsection 7(d) hereof, together with
a certificate or certificates representing the Shares, if any, which are not to
be converted, but which constituted part of the Shares represented by the
certificate or certificates surrendered by such holder. Such conversion shall be
deemed to have been effected on the date on which the Corporation shall have
received such notice and such Shares, and the person or persons in whose name or
names any certificate or certificates for Class A Common Stock shall be issuable
upon such conversion shall be deemed to have become on said date the holder or
holders of record of the shares represented thereby.
(b) BASIC CONVERSION RATE. The rate at which the holder of any Shares
may convert such Shares into Class A Common Stock (the "Conversion Rate") shall
be 1.45475 shares of Class A Common Stock for each Share which is surrendered
for conversion, subject to adjustment as provided in subsection 7(c)
hereinbelow.
(c) CONVERSION RATE ADJUSTMENT. The Conversion Rate shall be subject
to adjustment from time to time as follows:
(1) If the Corporation shall (i) pay a stock dividend in and
on shares of its Class A Common Stock, (ii) subdivide its outstanding shares of
Class A Common Stock into a greater number of shares, (iii) combine its
outstanding
D-3
<PAGE>
shares of Class A Common Stock into a smaller number of shares, or (iv) issue by
reclassification of its shares of Class A Common Stock any shares of its capital
stock, then the Conversion Rate in effect immediately prior thereto shall be
adjusted so that the holder of any Shares surrendered for conversion after the
record date fixing stockholders to be affected by such event shall be entitled
to receive upon conversion the number of such shares of Class A Common Stock
which such holder would have been entitled to receive after the happening of
such event had such Shares been converted immediately prior to such record date.
Such adjustment, if applicable, shall be made whenever any of such events shall
happen, and shall also be effective retroactively as to the Shares converted
between such record date and the date of the happening of any such event.
(2) In the event of any consolidation of the Corporation with
or merger of the Corporation into another corporation, or in the event of any
sale, conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets of
the Corporation to another corporation, or in the case of any reorganization of
the Corporation, the Corporation or the surviving entity shall have the right to
require that if the holder of such Shares shall thereafter convert such Shares
such conversion shall be into the kind and amount of shares of stock and other
securities and property, including cash, which would have been deliverable to
such holder upon such consolidation, merger, sale, conveyance, exchange,
transfer or reorganization if such holder had converted such holder's Shares
into Class A Common Stock immediately prior to such consolidation, merger, sale,
conveyance, exchange, transfer or reorganization. In any such event, effective
provision shall be made in the instrument effecting or providing for such
consolidation, merger, sale, conveyance, exchange, transfer or reorganization so
that the provisions set forth herein for the conversion rights of the holder of
Shares shall thereafter be applicable, as nearly as may be practicable, in
relation to any shares of stock or other securities or property, including cash,
deliverable after such consolidation, merger, sale, conveyance, exchange,
transfer or reorganization upon the conversion. The provisions of this
subsection 7(c)(2) shall similarly apply to successive consolidations, mergers,
sales, conveyances, exchanges, transfers and reorganizations.
The Corporation shall provide written notice of any action contemplated
pursuant to this subsection 7(c)(2) at least 10 days prior to the record date of
such action, to the holders of record of the Series C Preferred Stock to their
respective addresses as the same shall appear on the books of the Corporation.
The Corporation shall also provide the holders of record of the Series C
Preferred Stock with written notice at least 10 days prior to the record date
set for the consideration of any other extraordinary business matters (provided,
however, that any routine business matters including, but not limited to, the
setting of record dates for (i) the declaration of regular dividends and (ii)
annual stockholders' meetings that do not require the filing of a preliminary
proxy statement with the Securities and Exchange Commission or its successor
shall be excluded from such notice provisions).
(3) No adjustment in the Conversion Rate shall be required
unless such adjustment would require an increase or decrease of at least 2% in
such Conversion Rate; provided, however, that any adjustments which by reason of
this subsection 7(c)(3) are not required to be made, and are not made, shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this subsection 7(c)(3) shall be made to the nearest cent or
one-hundredth of a share, as the case may be.
(d) FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any Shares. If more
than one Share shall be surrendered for conversion at one time by the same
holder, the number of full shares issuable upon conversion thereof shall be
computed on the basis of the aggregate face amount of such Shares so
surrendered. If the conversion of any Shares results in a fraction, an amount
equal to such fraction multiplied by the Conversion Rate, subject to adjustment
as provided in subsection (c) hereof, shall be paid to such holder in cash by
the Corporation.
(e) TAX. The Corporation shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issue and delivery of
stock in the name other than that of the holder of the Shares converted, and the
Corporation shall not be required to issue or deliver any such stock
certificates unless and until the person or persons requesting the issuance
thereof shall have paid to the Corporation the amount of any such tax or shall
have established to the satisfaction of the Corporation that such tax has been
paid.
(f) RESERVATION OF SHARES. The Corporation shall at all times reserve
and keep available out of its authorized Class A Common Stock the full number of
shares of Class A Common Stock deliverable upon the conversion of all
outstanding Shares and shall take all such corporate action as may be required
from time to time in order that it may validly and legally issue fully paid and
non-assessable shares of Class A Common Stock upon conversion of the Shares.
D-4
<PAGE>
APPENDIX E
STATEMENT OF DESIGNATION
OF
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES C-II
OF
BANKUNITED FINANCIAL CORPORATION
WHEREAS, pursuant to Article VI of the Articles of Incorporation of the
Corporation, the Board of Directors of the Corporation is authorized to divide
the Corporation's authorized Preferred Stock, $.01 par value (the "Preferred
Stock"), into series and, within the limitations set forth therein, fix and
determine the relative rights and preferences of the shares of any series so
established;
WHEREAS, the Board of Directors desires to (i) establish a series of the
Preferred Stock, designating such series "Noncumulative Convertible Preferred
Stock, Series C-II," (ii) allocate 222,223 shares of the authorized Preferred
Stock to the Noncumulative Convertible Preferred Stock, Series C-II, and (iii)
fix and determine the relative rights and preferences of the Noncumulative
Convertible Preferred Stock, Series C-II;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby allocates
a portion of the Preferred Stock to a series designated Noncumulative
Convertible Preferred Stock, Series C-II (the "Series C-II Preferred Stock"),
and fixes and determines the relative rights and preferences of the Series C-II
Preferred Stock, as set forth below:
1. DEFINITIONS
(a) Articles of Incorporation - the Articles of Incorporation, as
amended, of the Corporation as filed with the Florida Secretary of State.
(b) Board of Directors - the Board of Directors of the
Corporation.
(c) The Corporation - BankUnited Financial Corporation.
(d) Common Stock - the Corporation's Series I Class A Common Stock,
$.01 par value, and Class B Common Stock, $.01 par value.
(e) Dividend Payment Date - the last day of each quarter during which
a dividend on the Series C-II Preferred Stock is declared by the Board of
Directors, unless such day is a non-business day, in which event such Dividend
Payment Date shall be the next business day.
(f) Dividend Payment Period - a Dividend Period for which a dividend
on the Series C-II Preferred Stock is declared by the Board of Directors.
(g) Dividend Period - a quarterly period for which a dividend is due
and payable on the Series C-II Preferred Stock when, as and if declared by the
Board of Directors, commencing on and including the first day of a quarter for
which a dividend is due and payable and ending on and including the last day of
such quarter, unless such day is a non- business day, in which event on the next
business day.
(h) Junior Stock - the Common Stock and such other classes and/or
series of equity securities which, as designated by the Board of Directors in
its sole discretion, rank junior to the Series C-II Preferred Stock with respect
to any one or more of the following: (i) dividend rights, (ii) rights upon
liquidation, dissolution or winding up of the Corporation, (iii) redemption
rights or (iv) any other rights specified by the Board of Directors.
(i) Parity Stock - any classes and/or series of equity securities
which, as designated by the Board of Directors in its sole discretion, rank on a
parity with the Series C-II Preferred Stock with respect to any one or more of
the following: (i) dividend rights, (ii) rights upon liquidation, dissolution or
winding up of the Corporation, (iii) redemption rights
E-1
<PAGE>
or (iv) any other rights specified by the Board of Directors, whether or not the
dividend rates, dividend periods, or liquidation prices per share thereof are
different from those of the Series C-II Preferred Stock.
(j) Passed Dividend - a dividend for a Dividend Period which the
Board of Directors omits or fails to declare or determines not to declare
whether or not dividends are declared on any future Dividend Payment Periods.
(k) Preferred Stock - the Corporation's Preferred Stock, $.01 par
value.
(l) Senior Stock - any classes and/or series of equity securities of
the Corporation in which, as designated by the Board of Directors in its sole
discretion, the holders of such classes and/or series shall be entitled to any
one or more of the following: (i) dividend rights, (ii) rights upon liquidation,
dissolution or winding up of the Corporation, (iii) redemption rights or (iv)
any other rights specified by the Board of Directors, in preference or priority
to the holders of Series C-II Preferred Stock.
(m) Series A Preferred Stock - the Corporation's Noncumulative
Convertible Preferred Stock, Series A.
(n) Series B Preferred Stock - the Corporation's Noncumulative
Convertible Preferred Stock, Series B.
(o) Series C Preferred Stock - the Corporation's Noncumulative
Convertible Preferred Stock, Series C.
2. DESIGNATION AND ALLOCATION. Of the 10,000,000 shares of Preferred Stock
authorized by the Articles of Incorporation of the Corporation, 222,223 shares
are hereby determined to be and shall be of a series designated as Noncumulative
Convertible Preferred Stock, Series C-II.
3. RANK. The Series C-II Preferred Stock shall rank, with respect to
dividend rights and rights upon liquidation, dissolution or winding up of the
Corporation, senior to the Common Stock. The Series C-II Preferred Stock shall
rank, as to dividend rights, rights upon liquidation and dissolution or winding
up of the Corporation, on a parity with the Series A, Series B and Series C
Preferred Stock.
The Series C-II Preferred Stock shall be subject to the future
authorization and issuance of additional classes and/or series of equity
securities ranking junior to, on a parity with, or senior to the Series C-II
Preferred Stock with respect to any one or more of the following: (i) dividend
rights, (ii) rights upon liquidation, dissolution or winding up of the
Corporation, (iii) redemption rights or (iv) any other rights specified by the
Board of Directors, including, without limitation, series of Preferred Stock
that are cumulative as to dividends. The Board of Directors shall, in its sole
discretion, determine whether any such additional classes and/or series of
equity securities shall be designated as Junior Stock, Parity Stock or Senior
Stock.
4. DIVIDENDS
(a) RATE AND PAYMENTS. Holders of shares of the Series C-II Preferred
Stock shall be entitled to receive, when, as, and if declared by the Board of
Directors out of the funds legally available for payment, noncumulative cash
dividends, payable quarterly, from the date of issue thereof at the annual rate
of 8.9% ($0.801 per share). Dividends on the Series C-II Preferred Stock, when
declared by the Board of Directors, shall be payable quarterly on each Dividend
Payment Date.
The amount of dividends payable for any period other than a full
Dividend Payment Period shall be computed on the basis of a 365-day year and the
actual number of days elapsed in the period. Dividends payable for each full
Dividend Period shall be computed by dividing the annual dividend rate by four.
Each declared dividend shall be payable to holders of record as they
appear at the close of business on the stock books of the Corporation on such
record dates, not more than 20 calendar days and not less than 10 calendar days
preceding the payment dates therefor, as are determined by the Board of
Directors.
(b) NONCUMULATIVE DIVIDENDS. Dividends on the shares of Series C-II
Preferred Stock shall be noncumulative, that is, if the Board of Directors omits
or fails to declare or determines, in its sole discretion, not to declare a
dividend for any Dividend Period, then the Corporation shall have no obligation
to pay such Passed Dividend and the
E-2
<PAGE>
holders of the Series C-II Preferred Stock will have no right to, or a prior
claim or preference to, the Passed Dividend, whether or not funds are or
subsequently become available for the payment of such Passed Dividend.
The Board of Directors may determine, in its sole discretion, that
the Corporation shall pay less than the stated amount of dividends on the Series
C-II Preferred Stock for any Dividend Period notwithstanding that funds are or
subsequently become available for the payment of such dividend. Any portion of a
dividend for a Dividend Period not declared shall be deemed a Passed Dividend
and treated as described above.
(c) PARITY AND JUNIOR STOCK RIGHTS. No full dividends shall be
declared and paid, or declared and set apart for payment, on any stock ranking,
as to dividend rights, on a parity with the Series C-II Preferred Stock, unless
full dividends shall have been or contemporaneously are declared and paid, or
declared and set apart for payment, on all shares of the Series C-II Preferred
Stock.
If at any time with respect to any Dividend Period, dividends are
declared in part and paid in part, or declared in part and set apart for payment
in part, on the Series C-II Preferred Stock, a pro rata portion shall be
declared and paid, or declared and set apart for payment, on all shares of the
Series C-II Preferred Stock together with any stock ranking, as to dividend
rights, on a parity with the Series C-II Preferred Stock. Such pro rata portion
shall be calculated based on the ratio that the total amount available for the
payment of dividends on the Series C-II Preferred Stock plus such stock ranking,
as to dividend rights, on a parity with the Series C-II Preferred Stock bears to
the total payment of full dividends on the Series C-II Preferred Stock together
with such stock ranking, as to dividend rights, on a parity with the Series C-II
Preferred Stock.
Unless full dividends have been declared and paid, or declared and
set apart for payment, on all outstanding shares of Series C-II Preferred Stock
for the applicable Dividend Period, the Corporation shall not (i) declare any
dividends on any stock ranking, as to dividend rights, junior to the Series C-II
Preferred Stock (other than in other Junior Stock), (ii) redeem, purchase or
otherwise acquire any stock ranking, as to dividend rights, on a parity with or
junior to the Series C-II Preferred Stock, for any consideration except by
conversion into or exchange for Junior Stock or (iii) pay or make available any
monies, funds or other assets for any sinking fund for the redemption or
purchase of any stock ranking, as to dividend rights, on a parity with or junior
to the Series C-II Preferred Stock.
Holders of the Series C-II Preferred Stock shall not be entitled to
any dividends, whether payable in cash, property or stock, in excess of the
dividends actually declared by the Board of Directors.
Except as expressly otherwise limited herein, and to the extent
permitted by applicable law, the Board of Directors: (i) may declare and the
Corporation may pay or set apart for payment dividends on any Junior Stock or
Parity Stock, (ii) may make any payment on account of or set apart payment for a
sinking fund or other similar fund or agreement for the purchase or other
acquisition, redemption, retirement or other requirement of, or with respect to,
any Junior Stock or Parity Stock or any warrants, rights, calls or options
exercisable or exchangeable for or convertible into any Junior Stock or Parity
Stock, (iii) may make any distribution with respect to any Junior Stock or
Parity Stock or any warrants, rights, calls or options exercisable or
exchangeable for or convertible into any Junior Stock or Parity Stock, whether
directly or indirectly, and whether in cash, obligations or securities of the
Corporation or other property and (iv) may purchase or otherwise acquire, redeem
or retire any Junior Stock or Parity Stock or any warrants, rights, calls or
options exercisable or exchangeable for or convertible into any Junior Stock or
Parity Stock; and the holders of the Series C-II Preferred Stock shall not be
entitled to share or participate therein.
5. PREFERENCE ON LIQUIDATION. In the event of any liquidation, dissolution
or winding up of the Corporation, voluntary or involuntary, after payment or
provision for payment of any debts and other liabilities of the Corporation as
required by law, the holders of the Series C-II Preferred Stock shall be
entitled to receive $9.00 per share out of the assets of the Corporation
available for distribution to stockholders, before any distribution of assets is
made to the holders of any stock ranking junior to the Series C-II Preferred
Stock in the distribution of assets. If, upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation legally available for distribution to stockholders shall be
insufficient to permit payment in full of the amounts required to be paid to the
holders of the Series C-II Preferred Stock together with the holders of any
stock ranking on a parity with the Series C-II Preferred Stock in the
distribution of assets, then a pro rata portion of the full amount required to
be paid upon such liquidation, dissolution or winding up shall be paid to the
holders of the Series C-II Preferred Stock together with any stock ranking on a
parity with the Series C-II Preferred Stock in the distribution of assets. Such
pro rata portion shall be calculated based on the ratio that
E-3
<PAGE>
the total amount available for distribution to such holders bears to the total
distribution required to be made on the Series C-II Preferred Stock together
with any stock ranking on a parity with the Series C-II Preferred Stock in the
distribution of assets. After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of the Series C-II
Preferred Stock will not be entitled to any further participation in any
distribution of assets of the Corporation.
Neither the merger nor consolidation of the Corporation into or with
any other entity or entities, nor the merger or consolidation of any other
entity or entities into or with the Corporation, nor a sale, transfer, lease or
exchange (for cash, securities or other consideration) of all or any part of the
assets of the Corporation shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section 5, unless such
sale, transfer, lease or exchange shall be in connection with and intended to be
a plan of complete liquidation, dissolution or winding up of the Corporation.
Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, stating a payment date and the
place where the distribution amounts shall be payable, shall be given by mail,
postage prepaid, at least 30 days but not more than 60 days prior to the payment
date stated therein, to the holders of record of the Series C-II Preferred Stock
at their respective addresses as the same shall appear on the books of the
Corporation.
6. OPTIONAL REDEMPTION. The Series C-II Preferred Stock is redeemable at the
option of the Corporation for cash, in whole or in part, at any time and from
time to time upon payment in cash with respect to each share redeemed at $9.00
per share plus any dividends that have been declared but are unpaid as of the
date of redemption to the extent that the Corporation has funds legally
available therefor.
Subject to any limitations provided herein and to the extent
permitted by law, the Corporation may, at its option, redeem the Series C-II
Preferred Stock at any time without regard to whether or not shares of any other
series of Preferred Stock are also being redeemed. If less than all of the
outstanding shares of Series C-II Preferred Stock shall be redeemed, the
particular shares to be redeemed shall be allocated among the respective holders
of the Series C-II Preferred Stock, pro rata or by lot, as the Board of
Directors may determine. The Corporation may, in its sole discretion, also
determine to redeem other series of Preferred Stock without redeeming any shares
of the Series C-II Preferred Stock.
Notice of any redemption specifying the date fixed for said
redemption and the place where the amount to be paid upon redemption is payable
shall be mailed, postage prepaid, at least 30 days but not more than 60 days
prior to said redemption date, to the holders of record of the Series C-II
Preferred Stock to be redeemed at their respective addresses as the same shall
appear on the books of the Corporation. If such notice of redemption shall have
been so mailed, unless default shall be made by the Corporation in providing for
the payment of the redemption price, and if on or before the redemption date
specified in such notice all funds necessary for such redemption shall have been
set aside by the Corporation separate and apart from its other funds, in trust
for the account of the holders of the shares so to be redeemed, so as to be and
continue to be available therefor, then, on and after said redemption date,
notwithstanding that any certificate for shares of the Series C-II Preferred
Stock so called for redemption shall not have been surrendered for cancellation,
the shares represented thereby so called for redemption shall be deemed to be no
longer outstanding, the right to receive dividends thereon shall cease, and all
rights with respect to such shares of the Series C-II Preferred Stock so called
for redemption shall forthwith cease and terminate, except only the right of the
holders thereof to receive out of the funds so set aside in trust the amount
payable on redemption thereof, including any dividends that have been declared
but are unpaid as of the date of redemption.
Shares of Series C-II Preferred Stock redeemed or otherwise purchased
or acquired by the Corporation shall not be reissued as shares of Series C-II
Preferred Stock, but shall assume the status of authorized but unissued shares
of Preferred Stock of the Corporation, without designation as to series until
such shares are once more designated as part of a particular series by the Board
of Directors.
7. VOTING RIGHTS. Except as required by applicable law, the holders of the
Series C-II Preferred Stock will not be entitled to vote for any purpose.
8. SINKING FUND. No sinking fund shall be provided for the purchase or
redemption of shares of the Series C-II Preferred Stock.
E-4
<PAGE>
9. CONVERTIBILITY. Shares of the Series C-II Preferred Stock (hereinafter in
this section 9 called the "Shares") shall be convertible into the Corporation's
Class A Common Stock on the following terms and conditions:
(a) CONVERSION. Subject to and upon compliance with the provisions of
this section 9, the holder of any Shares may at such holder's option, convert
any such Shares into such number of fully paid and non-assessable shares of the
Class A Common Stock as are issuable pursuant to the formula set forth in
subsections 9(b), (c) and (d) of this section 9 by surrendering any Shares for
conversion to the Corporation at its principal office and by furnishing written
notice to the Corporation at said office that such holder elects to convert in
accordance with the provisions hereof. Such notice also shall state the name or
names (with addresses) in which the certificate or certificates for Class A
Common Stock which shall be issuable on such conversion shall be issued. Every
such notice of election to convert shall constitute a contract between the
holder and the Corporation, whereby such holder shall be deemed to subscribe for
the number of shares of Class A Common Stock which such holder will be entitled
to receive upon such conversion and, in payment and satisfaction of such
subscription, to surrender such Shares and to release the Corporation from all
obligations thereon, and whereby the Corporation shall be deemed to agree that
the surrender of such Shares and the extinguishment of its obligations thereon
shall constitute full payment for the Class A Common Stock so subscribed for and
to be issued upon such conversion.
As soon as practicable after the receipt of such notice and Shares,
the Corporation shall issue and shall deliver to the holder for whose account
such Shares were so surrendered, or on such holder's written order, a
certificate or certificates for the number of full shares of Class A Common
Stock issuable upon the conversion of such Shares and a check or cash for the
payment (if any) to which such person is entitled pursuant to subsection 9(d)
hereof, together with a certificate or certificates representing the Shares, if
any, which are not to be converted, but which constituted part of the Shares
represented by the certificate or certificates surrendered by such holder. Such
conversion shall be deemed to have been effected on the date on which the
Corporation shall have received such notice and such Shares, and the person or
persons in whose name or names any certificate or certificates for Class A
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder or holders of record of the shares represented
thereby.
(b) BASIC CONVERSION RATE. The rate at which the holder of any Shares
may convert such Shares into Class A Common Stock (the "Conversion Rate") shall
be 1.3225 shares of Class A Common Stock for each Share which is surrendered for
conversion, subject to adjustment as provided in subsection 9(c) hereinbelow.
(c) CONVERSION RATE ADJUSTMENT. The Conversion Rate shall be
subject to adjustment from time to time as follows:
(1) If the Corporation shall (i) pay a stock dividend in and
on shares of its Class A Common Stock, (ii) subdivide its outstanding shares of
Class A Common Stock into a greater number of shares, (iii) combine its
outstanding shares of Class A Common Stock into a smaller number of shares, or
(iv) issue by reclassification of its shares of Class A Common Stock any shares
of its capital stock, then the Conversion Rate in effect immediately prior
thereto shall be adjusted so that the holder of any Shares surrendered for
conversion after the record date fixing stockholders to be affected by such
event shall be entitled to receive upon conversion the number of such shares of
Class A Common Stock which such holder would have been entitled to receive after
the happening of such event had such Shares been converted immediately prior to
such record date. Such adjustment, if applicable, shall be made whenever any of
such events shall happen, and shall also be effective retroactively as to the
Shares converted between such record date and the date of the happening of any
such event.
(2) In the event of any consolidation of the Corporation with
or merger of the Corporation into another corporation, or in the event of any
sale, conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets of
the Corporation to another corporation, or in the case of any reorganization of
the Corporation, the Corporation or the surviving entity shall have the right to
require that if the holder of such Shares shall thereafter convert such Shares
such conversion shall be into the kind and amount of shares of stock and other
securities and property, including cash, which would have been deliverable to
such holder upon such consolidation, merger, sale, conveyance, exchange,
transfer or reorganization if such holder had converted such holder's Shares
into Class A Common Stock immediately prior to such consolidation, merger, sale,
conveyance, exchange, transfer or reorganization. In any such event, effective
provision shall be made in the instrument effecting or providing for such
consolidation, merger, sale, conveyance, exchange, transfer or reorganization so
that the provisions set forth herein for the conversion rights of the holder of
Shares shall thereafter be applicable, as nearly as may be practicable, in
relation to any shares of stock or other securities or property, including cash,
deliverable after such consolidation, merger, sale, conveyance,
E-5
<PAGE>
exchange, transfer or reorganization upon the conversion. The provisions of this
subsection 9(c)(2) shall similarly apply to successive consolidations, mergers,
sales, conveyances, exchanges, transfers and reorganizations.
The Corporation shall provide written notice of any action
contemplated pursuant to this subsection 9(c)(2) at least 10 days prior to the
record date of such action, to the holders of record of the Series C-II
Preferred Stock to their respective addresses as the same shall appear on the
books of the Corporation. The Corporation shall also provide the holders of
record of the Series C-II Preferred Stock with written notice at least 10 days
prior to the record date set for the consideration of any other extraordinary
business matters (provided, however, that any routine business matters
including, but not limited to, the setting of record dates for (i) the
declaration of regular dividends and (ii) annual stockholders' meetings that do
not require the filing of a preliminary proxy statement with the Securities and
Exchange Commission or its successor shall be excluded from such notice
provisions).
(3) No adjustment in the Conversion Rate shall be required
unless such adjustment would require an increase or decrease of at least 2% in
such Conversion Rate; provided, however, that any adjustments which by reason of
this subsection 9(c)(3) are not required to be made, and are not made, shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this subsection 9(c)(3) shall be made to the nearest cent or
one-hundredth of a share, as the case may be.
(d) FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any Shares. If more
than one Share shall be surrendered for conversion at one time by the same
holder, the number of full shares issuable upon conversion thereof shall be
computed on the basis of the aggregate face amount of such Shares so
surrendered. If the conversion of any Shares results in a fraction, an amount
equal to such fraction multiplied by the Conversion Rate, subject to adjustment
as provided in subsection (c) hereof, shall be paid to such holder in cash by
the Corporation.
(f) TAX. The Corporation shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issue and delivery of
stock in the name other than that of the holder of the Shares converted, and the
Corporation shall not be required to issue or deliver any such stock
certificates unless and until the person or persons requesting the issuance
thereof shall have paid to the Corporation the amount of any such tax or shall
have established to the satisfaction of the Corporation that such tax has been
paid.
(g) RESERVATION OF SHARES. The Corporation shall at all times reserve
and keep available out of its authorized Class A Common Stock the full number of
shares of Class A Common Stock deliverable upon the conversion of all
outstanding Shares and shall take all such corporate action as may be required
from time to time in order that it may validly and legally issue fully paid and
non-assessable shares of Class A Common Stock upon conversion of the Shares.
11. NO OTHER RIGHTS. The shares of Series C-II Preferred Stock shall not
have any preferences, voting powers or relative, participating, optional or
other special rights except as set forth above and in the Articles of
Incorporation or as otherwise required by law.
12. AMENDMENTS. The Board of Directors reserves the right to amend these
resolutions in accordance with applicable law.
E-6
<PAGE>
APPENDIX F
STATEMENT OF DESIGNATION
OF
8% NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES 1993
OF
BANKUNITED FINANCIAL CORPORATION
BankUnited Financial Corporation (the "Corporation"), a corporation
organized and existing under the Florida Business Corporation Act, in accordance
with the provisions of Section 607.0602 thereof and Article VI the Corporation's
Articles of Incorporation, DOES HEREBY CERTIFY:
That pursuant to authority conferred upon the Board of Directors by the
Articles of Incorporation of the Corporation, said Board of Directors acting at
a meeting thereof adopted resolutions providing for the issuance of 1,610,000
shares of the Corporation's Preferred Stock, $.01 par value, designated "8%
Noncumulative Convertible Preferred Stock, Series 1993," which resolutions are
as follows:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Articles of Incorporation, the Board of
Directors does hereby provide for and authorize the issuance of 1,610,000
shares of the Preferred Stock, $.01 par value, of the Corporation, of the
presently authorized but unissued shares of Preferred Stock (the "Preferred
Stock") to be designated "8% Noncumulative Convertible Preferred Stock,
Series 1993" (the "Series 1993 Preferred Stock"). The voting powers,
designations, preferences, and relative, participating, optional or other
special rights of the Series 1993 Preferred Stock authorized hereunder and
the qualifications, limitations and restrictions of such preferences and
rights are as follows:
1. DIVIDENDS.
(a) The holders of the Series 1993 Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of
Directors out of funds of the Corporation legally available for
payment, noncumulative cash dividends, payable quarterly in arrears,
at the rate of $.80 per share per annum. Dividends, when declared on
the Series 1993 Preferred Stock, shall have accrued from the date of
issuance or thereafter, from the most recent date on which dividends
were payable and be payable quarterly on March 31, June 30, September
30 and December 31 of each year (each a "Dividend Payment Date"),
commencing on September 30, 1993; PROVIDED, HOWEVER, that if any such
day is a non-business day, the Dividend Payment Date will be the next
business day. Each declared dividend shall be payable to holders of
record as they appear at the close of business on the stock books of
the Corporation on such record dates, not more than 30 calendar days
and not less than 10 calendar days preceding the Dividend Payment
Date therefor, as determined by the Board of Directors (each of such
dates a "Record Date"). Quarterly dividend periods (each a "Dividend
Period") shall commence on and include the first day of January,
April, July and October of each year and shall end on and include the
day next preceding the next following Dividend Payment Date.
(b) No full dividends shall be declared or paid or set apart
for payment on any series of Preferred Stock or other capital stock
of any series ranking, as to dividends or liquidation preference, on
a parity ("Parity Stock") with the Series 1993 Preferred Stock during
any calendar quarter unless full dividends on the Series 1993
Preferred Stock for the Dividend Period ending during such calendar
quarter have been or contempo raneously are declared and paid or
declared and a sum sufficient for the payment thereof is set apart
for such payment. When dividends are not so paid in full (or a sum
sufficient for such full payment is not so set apart) upon the Series
1993 Preferred Stock and any other Parity Stock, dividends upon the
Series 1993 Preferred Stock and dividends on such other Parity Stock
payable during such calendar quarter shall be declared pro rata so
that the amount of such dividends so payable per share on the Series
1993 Preferred Stock and such other Parity Stock shall in all cases
bear to each other the same ratio that full dividends for the
then-current calendar quarter on the shares of Series 1993 Preferred
Stock (which shall not include any accumulation in respect of unpaid
dividends for prior Dividend Periods) and full dividends, including
required or permitted accumulations,
F-1
<PAGE>
if any, on shares of such other Parity Stock, bear to each other. If
full dividends on the Series 1993 Preferred Stock have not been
declared and paid or set apart for payment for the Dividend Payment
Date falling in the then-current Dividend Period, then, with respect
to such then-current Dividend Period, the following restrictions
shall be applicable: (i) no dividend or distribution, other than in
shares of capital stock ranking junior to the Series 1993 Preferred
Stock as to dividends or liquidation preference ("Junior Stock"), may
be declared, set aside or paid on any shares of Junior Stock, (ii)
the Corporation may not repurchase, redeem or otherwise acquire any
shares of its Junior Stock (except by conversion into or exchange for
Junior Stock) and (iii) the Corporation may not, directly or
indirectly, repurchase, redeem or otherwise acquire (except by
conversion into or exchange for Junior Stock) any shares of any class
or series of Junior Stock or warrants, calls, options or other rights
to acquire capital stock of the Corporation or other security
exercisable or exchangeable into capital stock of the Corporation,
otherwise than pursuant to pro rata offers to purchase or a
concurrent redemption of all, or a pro rata portion, of the
outstanding shares of Series 1993 Preferred Stock. Holders of the
Series 1993 Preferred Stock shall not be entitled to any dividends,
whether payable in cash, property or stock, in excess of declared
noncumulative dividends, as herein provided, on the Series 1993
Preferred Stock. No interest or sum of money in lieu of interest
shall be payable in respect of any declared dividend payment or
payments on the Series 1993 Preferred Stock which may be in arrears.
As used herein, the phrase "set apart" in respect of the payment of
dividends shall require deposit of any funds in a bank or trust
company in a separate deposit account maintained for the benefit of
the holders of the Series 1993 Preferred Stock.
2. REDEMPTION.
(a) The shares of Series 1993 Preferred Stock shall be
redeemable by the Corporation, in whole or in part, at any time and
from time to time from and after July 1, 1998. The shares of Series
1993 Preferred Stock shall be redeemable by the Corporation, in
whole, or in part, at any time and from time to time prior to July 1,
1998 only if the Corporation's Series I Class A Common Stock, $.01
par value (the "Class A Common Stock"), shall have a closing bid
price which is at least 140% of the Conversion Price (as defined
below) for any 20 consecutive trading days ending within five trading
days of the giving of notice of redemption as provided for below. The
Series 1993 Preferred Stock shall be redeemable by the Corporation at
a price of $10.00 per share until June 30, 1998 and thereafter at the
following per share prices during the twelve month period beginning
July 1:
YEAR REDEMPTION PRICE
---- ----------------
1998............................... $10.40
1999............................... 10.32
2000............................... 10.24
2001............................... 10.16
2002............................... 10.08
2003 and thereafter................ 10.00
plus, in each case, an amount equal to all accrued but unpaid
dividends (whether or not declared) for the then-current Dividend
Period immediately preceding the date fixed for redemption (the
"Redemption Date"). For purposes of this Section 2, the Conversion
Price shall not give effect to adjustment for missed dividend
payments pursuant to Section 3(d)(v) hereof.
(b) The Series 1993 Preferred Stock shall be redeemable by the
Corporation, in accordance with applicable law, in whole or in part,
upon not less than 30 nor more than 60 calendar days' prior written
notice by mail.
(c) In the event that fewer than all the outstanding shares of
the Series 1993 Preferred Stock are to be redeemed as permitted by
this Section (2), the number of shares to be redeemed shall be
determined by the Board of Directors and the shares to be redeemed
shall be determined by lot or PRO RATA as may be determined by the
Board of Directors or by such other method as may be approved by the
Board of Directors that is required to conform to any rule or
regulation of any stock exchange or automated quotation system upon
which the shares of the Series 1993 Preferred Stock may at the time
be listed.
F-2
<PAGE>
(d) Notice of redemption of the Series 1993 Preferred Stock,
specifying the Redemption Date and place of redemption, shall be
given by first class mail to each holder of record of the shares to
be redeemed, at his or her address of record, not less than 30 nor
more than 60 calendar days prior to the Redemption Date. In the event
of a redemption prior to July 1, 1998, such notice shall be given not
more than five business days following the expiration of the 20
consecutive trading day period specified in Section 2(a). Each such
notice shall also specify the redemption price applicable to the
shares to be redeemed. If less than all the shares owned by such
holder are then to be redeemed, the notice shall also specify the
number of shares thereof which are to be redeemed and the fact that a
new certificate or certificates representing any unredeemed shares
shall be issued without cost to such holder.
(e) Notice of redemption of shares of the Series 1993
Preferred Stock having been given as provided in Section 2(d), then
unless the Corporation shall have defaulted in providing for the
payment of the redemption price and all accrued and unpaid dividends
(whether or not declared) for the then-current Dividend Period
immediately preceding the Redemption Date, all rights of the holders
thereof (except the right to receive the redemption price and all
accrued and unpaid dividends, whether or not declared, for the
then-current Dividend Period immediately preceding the Redemption
Date) shall cease with respect to such shares and such shares shall
not, after the Redemption Date, be deemed to be outstanding and shall
not have the status of Preferred Stock. In case fewer than all the
shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
(f) Any shares of Series 1993 Preferred Stock which shall at
any time have been redeemed or converted shall, after such redemption
or conversion, have the status of authorized but unissued shares of
Preferred Stock, without designation as to series until such shares
are once more designated as part of a particular series by the Board
of Directors.
(g) The Corporation, directly or indirectly, shall not
purchase or otherwise acquire any shares of the Series 1993 Preferred
Stock; provided, however, that the foregoing shall not prevent the
purchase or acquisition of shares of the Series 1993 Preferred Stock
pursuant to a purchase or exchange offer made on the same terms to
all holders of all outstanding shares of the Series 1993 Preferred
Stock or pursuant to the exercise of the conversion right provided in
Section 3 hereof.
(h) Shares of the Series 1993 Preferred Stock are not
subject or entitled to the benefit of a sinking fund.
(i) Notwithstanding the foregoing, if notice of redemption
shall have been given pursuant to this Section 2 and any holder of
the Series 1993 Preferred Stock shall, prior to the close of business
on the date three business days next preceding the Redemption Date,
give written notice to the Corporation pursuant to Section 3 hereof
of the conversion of any or all of the shares held by the holder
(accompanied by a certificate or certificates for such shares, duly
endorsed or assigned to the Corporation), then the redemption shall
not become effective as to such shares and the conversion shall
become effective as provided in Section 3 below.
3. CONVERSION.
(a) Subject to and upon compliance with the provisions of this
Section 3, the holder of any shares of the Series 1993 Preferred
Stock shall have the right, at his or her option, at any time, to
convert the shares into a number of fully paid and nonassessable
shares (calculated as to each conversion to the nearest 1/100th of a
share) of the Corporation's Series I Class A Common Stock, $.01 par
value (the "Class A Common Stock"), equal to $10.00 for each share
surrendered for conversion divided by the Conversion Price (as
defined in Section 3(d) below); PROVIDED, HOWEVER, that if the
Corporation shall have called the Series 1993 Preferred Stock for
redemption, such right shall terminate on the close of business on
the third business day preceding the Redemption Date unless the
Corporation has defaulted in making the payment due on the Redemption
Date.
(b) (i) In order to exercise the conversion privilege, the
holder of each share of the Series 1993 Preferred Stock to be
converted shall surrender the certificate representing such
share
F-3
<PAGE>
to the Corporation's transfer agent for the Series 1993
Preferred Stock with the Notice of Election to Convert on the
back of said certificate duly completed and signed. Unless the
shares issuable on conversion are to be issued in the same
name as the name in which the shares of the Series 1993
Preferred Stock are registered, each share surrendered for
conversion shall be accompanied by instruments of transfer, in
form satisfactory to the Corporation, duly executed by the
holder or his or her duly authorized attorney and by funds in
an amount sufficient to pay any transfer or similar tax. The
holders of shares of the Series 1993 Preferred Stock at the
close of business on a Record Date shall be entitled to
receive any dividend declared payable on those shares for the
corresponding Dividend Period on the applicable Dividend
Payment Date, notwithstanding the conversion of the shares
after the Record Date.
(ii) As promptly as practicable after the surrender by
a holder of the certificates for shares of the Series 1993
Preferred Stock in accordance with Section 3, the Corporation
shall issue and shall deliver at the office of the transfer
agent to the holder, or on his or her written order, a
certificate or certificates for the number of full shares of
Class A Common Stock issuable upon the conversion of those
shares in accordance with the provisions of this Section 2,
and any fractional interest in respect of a share of Class A
Common Stock arising upon the conversion shall be settled as
provided in Section 3(c) below.
(iii) Each conversion shall be deemed to have been
effected immediately prior to the close of business on the
date on which all of the conditions specified in Section 3(b)
hereof shall have been satisfied, and, the person or persons
in whose name or names any certificate or certificates for
shares of Class A Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder or
holders of record of the shares of Class A Common Stock
represented by those certificates at such time on such date
and such conversion shall be at the Conversion Price in effect
at such time on such date, unless the stock transfer books of
the Corporation shall be closed on that date, in which event
such person or persons shall be deemed to have become such
holder or holders of record at the close of business on the
next succeeding day on which such stock transfer books are
open, but such conversion shall be at the Conversion Price in
effect on the date upon which all of the conditions specified
in Section 3(b) hereof shall have been satisfied. All shares
of Class A Common Stock delivered upon conversion of the
Series 1993 Preferred Stock will upon delivery be duly and
validly issued and fully paid and nonassessable, free of all
liens and charges and not subject to any preemptive rights.
Upon the surrender of certificates representing shares of the
Series 1993 Preferred Stock to be converted, the shares shall
no longer be deemed to be outstanding and all rights of a
holder with respect to the shares surrendered for conversion
shall immediately terminate except the right to receive the
Class A Common Stock or other securities, cash or other assets
as herein provided.
(c) No fractional shares or securities representing fractional
shares of Class A Common Stock shall be issued upon conversion of the
Series 1993 Preferred Stock. Any fractional interest in a share of
Class A Common Stock resulting from conversion of a share of the
Series 1993 Preferred Stock shall be paid in cash (computed to the
nearest cent) based on the Current Market Price (as defined in
Section 3(d)(iv) below) of the Class A Common Stock on the Trading
Day (as defined in Section 3(d)(iv) below) next preceding the day of
conversion. If more than one share shall be surrendered for
conversion at one time by the same holder, the number of whole shares
of Class A Common Stock issuable upon the conversion shall be
computed on the basis of the aggregate Liquidation Preference (as
such term is defined in Section 6 below) of the shares of the Series
1993 Preferred Stock so surrendered.
(d) The "Conversion Price" per share of the Series 1993
Preferred Stock shall be $10.00, subject to adjustment from time to
time as follows:
(i) In case the Corporation shall (1) pay a dividend
or make a distribution on its Class A Common Stock in shares
of its Class A Common Stock, (2) subdivide its outstanding
Class A Common Stock into a greater number of shares, or (3)
combine its outstanding Class A
F-4
<PAGE>
Common Stock into a smaller number of shares, the Conversion
Price in effect immediately prior to such event shall be
proportionately adjusted so that the holder of any share of
the Series 1993 Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number and kind of
shares of Class A Common Stock of the Corporation which he
would have been entitled to receive had the share been
converted immediately prior to the happening of such event. An
adjustment made pursuant to this Section 3(d)(i) shall become
effective immediately after the Record Date in the case of a
dividend or distribution except as provided in Section
3(d)(viii) below, and shall become effective immediately after
the effective date in the case of a subdivision or
combination. If any dividend or distribution is not paid or
made, the Conversion Price then in effect shall be
appropriately readjusted.
(ii) In case the Corporation shall issue rights or
warrants to all holders of its Class A Common Stock entitling
them (for a period expiring within 45 days after the record
date mentioned below) to subscribe for or purchase Class A
Common Stock at a price per share less than the Current Market
Price (as defined in Section 3(d)(iv) below) of the Class A
Common Stock at the record date for the determination of
stockholders entitled to receive the rights or warrants, the
Conversion Price in effect immediately prior to the issuance
of such rights or warrants shall be adjusted so that it shall
equal the price determined by multiplying the Conversion Price
in effect immediately prior to the date of issuance of the
rights or warrants by a fraction of which the numerator shall
be the number of shares of Class A Common Stock outstanding on
the date of the issuance of the rights or warrants plus the
number of shares of Class A Common Stock which the aggregate
offering price of the total number of shares of Class A Common
Stock so offered for subscription or purchase would purchase
at the Current Market Price at that record date, and of which
the denominator shall be the number of shares of Class A
Common Stock outstanding on the date of issuance of the rights
or warrants plus the number of additional shares of Class A
Common Stock for subscription or purchase. The adjustment
provided for in this Section 3(d)(ii) shall be made
successively whenever any such rights or warrants are issued,
and shall become effective immediately, except as provided in
Section 3(d)(viii) below after such record date. In
determining whether any rights or warrants entitle the holder
of the Class A Common Stock to subscribe for or purchase
shares of Class A Common Stock at less than the Current Market
Price, and in determining the aggregate offering price of the
shares of Class A Common Stock so offered, there shall be
taken into account any consideration received by the
Corporation for such rights or warrants, the value of such
consideration, if other than cash, to be determined by the
Board (whose determination, if made in good faith, shall be
conclusive). If any or all of such rights or warrants are not
so issued or expire or terminate without having been
exercised, the Conversion Price then in effect shall be
appropriately readjusted.
(iii) In case the Corporation shall distribute to all
holders of its Class A Common Stock any shares of capital
stock of the Corporation (other than Class A Common Stock) or
evidences of indebtedness or assets (excluding cash dividends
or distributions paid from retained earnings of the
Corporation) or rights or warrants to subscribe for or
purchase any of its securities (excluding those referred to in
Section 3(d)(ii) above), then, in each such case, the
Conversion Price shall be adjusted so that it shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the date of the distribution by a
fraction, the numerator of which shall be the Current Market
Price of the Class A Common Stock on the record date mentioned
below less the then fair market value (as determined by the
Board, whose determination, if made in good faith, shall be
conclusive) of that portion of the capital stock or assets or
evidences of indebtedness so distributed, or of the rights or
warrants so distributed, applicable to one share of Class A
Common Stock, and the denominator of which shall be the
Current Market Price of the Class A Common Stock on the record
date. Such adjustment shall become effective immediately,
except as provided in Section 3(d)(viii) below, after the
record date for the determination of stockholders entitled to
receive such distribution. If any such distribution is not
made or if any or all of such rights or warrants expire or
<PAGE>
terminate without having been exercised, the Conversion Price
then in effect shall be appropriately readjusted.
Notwithstanding the foregoing, in the event that the
Corporation shall distribute rights or warrants (other than
those
F-5
<PAGE>
referred to in Section 3(d)(ii) above) ("Rights") pro rata to
holders of Class A Common Stock, the Corporation may, in lieu
of making any adjustment pursuant to this Section 3(d)(iii),
make proper provision so that each holder of the Series 1993
Preferred Stock who converts such Series 1993 Preferred Stock
(or any portion thereof) after the record date for such
distribution and prior to the expiration or redemption of the
Rights shall be entitled to receive upon such conversion, in
addition to the shares of Class A Common Stock issuable upon
such conversion (the "Conversion Shares"), a number of Rights
to be determined as follows: (1) if such conversion occurs on
or prior to the date for the distribution to the holders of
Rights of separate certificates evidencing such Rights (the
"Distribution Date"), the same number of Rights to which a
holder of a number of shares of Class A Common Stock equal to
the number of Conversion Shares is entitled at the time of
such conversion in accordance with the terms and provisions of
and applicable to the Rights; and (2) if such conversion
occurs after the Distribution Date, the same number of shares
of Class A Common Stock into which the number of shares of
this Series 1993 Preferred Stock so converted was convertible
immediately prior to the Distribution Date would have been
entitled on the Distribution Date in accordance with the terms
and provisions of and applicable to the Rights.
(iv) For the purpose of any computation under this
Section 3, the "Current Market Price" of the Class A Common
Stock at any date shall be the average of the last reported
sale prices per share for the ten consecutive Trading Days (as
defined below) preceding the date of such computation. The
last reported sale price for each day shall be (1) the last
reported sale price of the Class A Common Stock on the Nasdaq
National Market, or any similar system of automated
dissemination of quotations of securities prices then in
common use, if so quoted, or (2) if not quoted as described in
clause (1), the mean between the high bid and low asked
quotations for the Class A Common Stock as reported by the
National Quotation Bureau Incorporated if at least two
securities dealers have inserted both bid and asked quotations
for the Class A Common Stock on at least five of the ten
preceding days, or (3) if the Class A Common Stock is listed
or admitted for trading on any national securities exchange,
the last sale price, or the closing bid price if no sale
occurred, of the Class A Common Stock on the principal
securities exchange on which the Class A Common Stock is
listed. If the Class A Common Stock is quoted on a national
securities or central market system, in lieu of a market or
quotation system described above, the last reported sale price
shall be determined in the manner set forth in clause (2) of
the preceding sentence if bid and asked quotations are
reported but actual transactions are not, and in the manner
set forth in clause (3) of the preceding sentence if actual
transactions are reported. If none of the conditions set forth
above is met, he last reported sale price of the Class A
Common Stock on any day or the average of such last reported
sale prices for any period shall be the fair market value of
such class of stock as determined by a member firm of the New
York Stock Exchange, Inc. selected by the Corporation. As used
herein, the term "Trading Days" means (1) if the Class A
Common Stock is quoted on the Nasdaq National Market or any
similar system of automated dissemination of quotations of
securities prices, days on which trades may be made on such
system, or (2) if not quoted as described in clause (1), days
on which quotations are reported by the National Quotation
Bureau Incorporated, or (3) if the Class A Common Stock is
listed or admitted for trading on any national securities
exchange, days on which such national securities exchange is
open for business.
(v) In the event that the Corporation shall fail to
declare and pay a dividend on the Series 1993 Preferred Stock
for more than three Dividend Periods (a "Dividend Default") in
any five-year period, then the Conversion Price shall be
reduced by an amount equal to 75% of the first three missed
dividend payments and 100% of any dividend which is not
declared and paid for any subsequent Dividend Period.
Notwithstanding the foregoing, if at any time subsequent to an
adjustment in the Conversion Price pursuant to this Section
3(d)(v), the Corporation declares and pays dividends on the
Series 1993 Preferred Stock for each Dividend Period in the
five-year period commencing on the date of the adjustment,
then no further adjustment in the Conversion Price pursuant to
this Section 3(d)(v) shall be made until a new Dividend
Default shall have occurred.
F-6
<PAGE>
(vi) No adjustment in the Conversion Price shall be
required unless such adjustment would require a change of at
least one percent in the Conversion Price; PROVIDED, HOWEVER,
that any adjustments which by reason of this Section 3(d)(vi)
are not required to be made shall be carried forward and taken
into account in any subsequent adjustment; and PROVIDED,
FURTHER, that adjustment shall be required and made in
accordance with the provisions of this Section 3(d) (other
than this Section 3(d)(vi)) not later than three years of the
date of the event requiring the adjustment. All calculations
under this Section 3(d) shall be made to the nearest cent or
the nearest one hundredth of a share, as the case may be.
Notwithstanding anything in this Section 3(d) to the contrary,
the Corporation shall be entitled to make such reductions in
the Conversion Price, in addition to those required by this
Section 3(d), as it, in its discretion, shall determine to be
advisable in order that any stock dividend, subdivision or
combination of shares, distribution of capital stock or rights
or warrants to purchase stock or securities, or distribution
of evidence of indebtedness or assets (other than cash
dividends or distributions paid from retained earnings)
hereinafter made by the Corporation to its stockholders shall
be a tax free distribution for federal income tax purposes.
(vii) Whenever the Conversion Price is adjusted, as
herein provided, the Corporation shall promptly file with its
transfer agent an officers' certificate setting forth the
Conversion Price after the adjustment and setting forth a
brief statement of the facts requiring the adjustment, which
certificate shall be conclusive evidence of the correctness of
the adjustment. Promptly after delivery of the certificate,
the Corporation shall prepare a notice of the adjustment of
the Conversion Price setting forth the adjusted Conversion
Price and the date on which the adjustment becomes effective
and shall mail the notice of such adjustment of the Conversion
Price to the holders of the Series 1993 Preferred Stock at
their addresses as shown on the stock books of the
Corporation.
(viii) In any case in which this Section 3(d) provides
that an adjustment shall become effective immediately after a
record date for an event, the Corporation may defer until the
occurrence of the event (1) issuing to the holder of any share
of the Series 1993 Preferred Stock converted after the record
date and before the occurrence of the event, the additional
shares of Class A Common Stock issuable upon the conversion by
reason of the adjustment required by the event over and above
the Class A Common Stock issuable upon such conversion before
giving effect to the adjustment and (2) paying to the holder
any amount in cash in lieu of any fractional share pursuant to
Section 3(c) above.
(e) If:
(i) the Corporation shall authorize the granting to
the holders of the Class A Common Stock or rights or warrants
to subscribe for or purchase any shares of any class or any
other rights or warrants; or
(ii) there shall be any reclassification of the Class
A Common Stock (other than a subdivision or combination of the
outstanding Class A Common Stock and other than a change in
the par value, or from par value to no par value, or from no
par value to par value), or any consolidation, merger, or
statutory share exchange to which the Corporation is a party,
and for which approval of any stockholders of the Corporation
is required, or any sale or transfer of all or substantially
all the assets of the Corporation; or
(iii) there shall be a voluntary or an involuntary
dissolution, liquidation or winding up of the Corporation;
then the Corporation shall cause to be filed with the transfer
agent, and shall cause to be mailed to the holders of shares
of the Series 1993 Preferred Stock at their addresses as shown
on the stock books of the Corporation, at least 15 days prior
to the applicable date hereinafter specified, a notice stating
(1) the date on which a record is to be taken for the purpose
of the dividend, distribution or rights or
F-7
<PAGE>
warrants, or, if a record is not to be taken, the date as of
which the holders of Class A Common Stock of record to be
entitled to the dividend, distribution or rights or warrants
are to be determined or (2) the date on which the
reclassification, consolidation, merger, statutory share
exchange, sale, transfer, dissolution, liquidation or winding
up is expected to become effective, and the date as of which
it is expected that holders of Class A Common Stock of record
shall be entitled to exchange their shares of Class A Common
Stock for securities or other property deliverable upon the
reclassification, consolidation, merger, statutory share
exchange, sale, transfer, dissolution, liquidation or winding
up. Failure to give any such notice or any defect in the
notice shall not affect the legality or validity of the
proceedings described in this Section 3(e).
(f) (i) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, out
of the aggregate of its authorized but unissued shares of
Class A Common Stock or its issued shares of Class A Common
Stock held by its treasury, or both, for the purpose of
effective conversions of the Series 1993 Preferred Stock the
full number of shares of Class A Common Stock deliverable upon
the conversion of all outstanding shares of the Series 1993
Preferred Stock not theretofore converted. For purposes of
this Section 3(f), the number of shares of Class A Common
Stock which shall be deliverable upon the conversion of all
outstanding shares of the Series 1993 Preferred Stock shall be
computed as if at the time of computation all the outstanding
shares were held by a single holder.
(ii) Before taking any action which would cause an
adjustment reducing the Conversion Price below the then par
value (if any) of the shares of Class A Common Stock
deliverable upon conversion of the Series 1993 Preferred
Stock, the Corporation will take any corporate action which
may, in the opinion of its counsel, be necessary in order that
the Corporation may validly and legally issue fully paid and
nonassessable shares of Class A Common Stock at the adjusted
Conversion Price.
(iii) The Corporation will endeavor to list the shares
of Class A Common Stock or other securities required to be
delivered upon conversion of the Series 1993 Preferred Stock,
prior to the delivery, upon each national securities exchange
or the Nasdaq National Market, if any, upon which the
outstanding Class A Common Stock or other securities are
listed at the time of delivery.
(iv) Prior to the delivery of any Class A Common Stock
or other securities which the Corporation shall be obligated
to deliver upon conversion of the Series 1993 Preferred Stock,
the Corporation will endeavor, in good faith and as
expeditiously as possible, to take all reasonable measures to
comply with all federal and state laws and regulations
thereunder requiring the registration of those securities
with, or any approval of or consent to the delivery thereof
by, any governmental authority.
(g) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Class A Common Stock or other securities on
conversion of the Series 1993 Preferred Stock pursuant hereto;
PROVIDED, HOWEVER, that the Corporation shall not be required to pay
any tax which may be payable in respect of any transfer involved in
the issue or delivery of shares of Class A Common Stock or other
securities in a name other than that of the holder of the Series 1993
Preferred Stock to be converted and no such issue or delivery shall
be made unless and until the person requesting the issue or delivery
has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that the tax has
been paid.
(h) In case of any reclassification or similar change of
outstanding shares of Class A Common Stock (other than change in par
value, or as a result of subdivision or combination), or in case of
any consolidation of the Corporation with, or merger of the
Corporation with or into, any other entity that results in a
reclassification, change, conversion, exchange or cancellation of
outstanding shares of Class A Common Stock or any sale or transfer of
all or substantially all of the assets of the Corporation, each
holder of shares of the Series 1993 Preferred Stock then outstanding
shall have the right thereafter to convert the shares of the
F-8
<PAGE>
Series 1993 Preferred Stock held by the holder into the kind and
amount of securities, cash and other property which the holder would
have been entitled to receive upon such reclassification, change,
consolidation, merger, sale or transfer if the holder had held the
Class A Common Stock issuable upon the conversion of the shares of
the Series 1993 Preferred Stock immediately prior to the
reclassification, change, consolidation, merger, sale or transfer.
4. PREEMPTIVE RIGHTS. Shares of the Series 1993 Preferred Stock are
not entitled to any preemptive rights to acquire any unissued shares of any
capital stock of the Corporation, now or hereafter authorized, or any other
securities of the Corporation, whether or not convertible into shares of
capital stock of the Corporation or carrying a right to subscribe to or
acquire any such shares of capital stock.
5. VOTING. Except as required by law, the shares of the Series
1993 Preferred Stock shall not have any voting powers, either general or
special, except as follows:
(a) So long as any shares of the Series 1993 Preferred Stock
are outstanding, if the Corporation shall have failed to declare and
pay dividends on all outstanding shares of the Series 1993 Preferred
Stock for six Dividend Periods, whether or not consecutive, the
number of directors of the Corporation shall automatically be
increased by two and the holders of the Series 1993 Preferred Stock
shall have the right, voting together as a class and separately from
all other classes and series, to elect such two additional directors.
The right of the holders of the Series 1993 Preferred Stock to elect
such members of the Board of Directors as aforesaid shall continue
until dividends have been declared and paid on the Series 1993
Preferred Stock for four consecutive Dividend Periods. If at any time
thereafter should the Corporation fail to declare and pay dividends
on all outstanding shares of the Series 1993 Preferred Stock for four
Dividend Periods, whether or not consecutive, the voting right
described in this Section 5(a) shall vest until dividends shall have
been declared and paid on the Series 1993 Preferred Stock for four
consecutive Dividend Periods. Whenever the voting right described in
this Section 5(a) shall have vested in the holders of the Series 1993
Preferred Stock, the right may be exercised initially either at a
special meeting of the holders of the Series 1993 Preferred Stock,
called as hereinafter provided, or at any annual meeting of
stockholders held for the purpose of electing directors and
thereafter at each successive annual meeting.
(b) At any time when the voting right of the Series 1993
Preferred Stock provided in Section 5(a) above shall have become
operative and shall not have been exercised, or for the purpose of
the removal of a director as set forth in Section 5(d) below, a
proper officer of the Corporation shall, upon the written request of
the holders of record of at least 10% of the shares of the Series
1993 Preferred Stock then outstanding addressed to the Secretary of
the Corporation, call a special meeting of the holders of the Series
1993 Preferred Stock for the purpose of electing the additional
directors to be elected by the holders of the Series 1993 Preferred
Stock or removing any such director, as the case may be. Such meeting
shall be held at the earliest practicable date upon the notice (and
at the place) required for annual meetings of stockholders. Such
notice shall comply with the requirements of all applicable laws and
shall set forth the purposes of such meeting. If such meeting shall
not be called by the proper officer of the Corporation within 20 days
after the personal service of such written request upon the Secretary
of the Corporation, or within 20 days after mailing the same within
the United States by registered or certified mail enclosed in a
postage-paid envelope addressed to the Secretary of the Corporation
at its principal office, then the holders of record of at least 10%
of the shares of the Series 1993 Preferred Stock then outstanding may
designate in writing one of their number to call such meeting at the
expense of the Corporation, and such meeting may be called by the
person so designated upon the notice (and at the place) required for
annual meetings of stockholders.
(c) Unless otherwise required by law, directors elected by the
holders of the Series 1993 Preferred Stock shall not become members
of any of the three classes of directors otherwise required by the
Articles of Incorporation and Bylaws of the Corporation with respect
to the remaining directors elected by other classes or series of
stock entitled to vote therefor, but shall, subject to Section 5(e)
below, serve until the next annual meeting or until their respective
successors shall be elected and shall qualify. All rights of the
holders of the Series 1993 Preferred Stock to elect such directors
shall continue in effect until the Corporation has declared and paid
dividends for four consecutive Dividend Periods as provided in
Section 5(b) above. At such time as such condition has been met, the
voting rights of the holders of the Series 1993 Preferred Stock
shall, without
F-9
<PAGE>
further action, terminate, subject to revesting in the event of each
and every subsequent failure of the Corporation to declare and pay
such dividends for the requisite number of Dividend Periods described
above.
(d) The term of office of all directors elected by the holders
of the Series 1993 Preferred Stock in office at any time when the
aforesaid voting right is vested in such holders shall terminate upon
the election of their successors at any meeting of stockholders held
for the purpose of selecting directors, provided, however, without
further action, and unless required by law, any director that shall
have been elected by holders of the Series 1993 Preferred Stock as
provided herein may be removed at any time, either with or without
cause, by affirmative vote of the holders of record of a majority of
outstanding shares of the Series 1993 Preferred Stock, voting
separately as one class, at a duly held meeting of the holders of the
Series 1993 Preferred Stock called pursuant to the provisions set
forth in Section 5(b).
(e) Upon the later of any termination of the aforesaid voting
right in accordance with the foregoing provisions or the expiration
of the minimum term of office required by law, the term of office of
all directors elected by the holders of the Series 1993 Preferred
Stock pursuant thereto then in office shall, without further action,
thereupon terminate unless otherwise required by law. Upon such
termination, the number of directors constituting the Board of
Directors of the Corporation shall, without further action, be
reduced by two, subject always to the increase of the number of
directors pursuant to the provisions of this Section 5(e) in the case
of the future right of such holders of the Series 1993 Preferred
Stock to elect directors as provided herein.
(f) Unless otherwise required by law, in case of any vacancy
occurring among the directors so elected, the remaining director may
appoint a successor to hold office for the unexpired term of the
director whose place shall be vacant, and if all directors so elected
shall cease to serve as directors before their term shall expire, the
holders of the Series 1993 Preferred Stock then outstanding may, at a
meeting of such holders duly held, elect successors to hold office
for the unexpired terms of the directors whose places shall be
vacant.
(g) The directors elected by the holders of the Series 1993
Preferred Stock in accordance with the provisions of this Section 5
shall be entitled to one vote per director on any matter, and
otherwise to same rights and privileges as all other directors of the
Corporation.
(h) So long as any shares of the Series 1993 Preferred Stock
are outstanding, the Articles of Incorporation and Bylaws of the
Corporation shall contain provisions ensuring that the number of
directors of the Corporation shall at all times be such that the
exercise by the holder of shares of the Series 1993 Preferred Stock
of the right to elect directors under the circumstances provided in
this Section 5 will not contravene any provisions of the
Corporation's Articles of Incorporation or Bylaws.
(i) Unless the vote or consent of the holders of a greater
number of shares is required by law, the consent of the holders of at
least a majority of all of the shares of the Series 1993 Preferred
Stock at the time outstanding given in person or by proxy, either in
writing or by a vote at a meeting called for that purpose, on which
matter the holders of shares of the Series 1993 Preferred Stock shall
vote together as a separate class, shall be necessary to authorize,
effect or validate any amendment, alteration or repeal of any of the
provisions of the Articles of Incorporation of the Corporation or of
any certificate, amendatory or supplemental thereto, which amendment,
alteration or repeal would, if effected, adversely affect the powers,
preferences, rights or privileges of the Series 1993 Preferred Stock.
(j) Unless the vote or consent of the holders of a greater
number of shares is required by law, the consent of the holders of at
least 66-2/3% of all of the shares of the Series 1993 Preferred Stock
at the time outstanding given in person or by proxy, either in
writing or by a vote at a meeting called for that purpose, on which
matter the holders of shares of the Series 1993 Preferred Stock shall
vote together as a separate class, shall be necessary to create,
authorize, issue or increase the authorized or issued amount of any
class or series of any equity securities of the Corporation, or any
warrants, options or other rights convertible or exchangeable into
any class or series of any equity securities of the Corporation,
ranking senior to the Series 1993 Preferred Stock either as to
payment of dividends or rights upon liquidation.
F-10
<PAGE>
(k) Notwithstanding anything to the contrary set forth herein,
the creation or issuance of Parity Stock or Junior Stock with respect
to the payment of dividends or rights upon liquidation, a merger,
consolidation, reorganization or other business combination in which
the Corporation is not the surviving entity, or an amendment that
increases the number of authorized shares of Preferred Stock or
increases the number of authorized shares of a series of Preferred
Stock constituting Junior Stock or Parity Stock shall not be
considered to be an adverse change to the terms of the Series 1993
Preferred Stock and shall not require a vote or the consent of the
holders of the Series 1993 Preferred Stock.
6. LIQUIDATION RIGHTS.
(a) Upon the voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the holders of the shares of the
Series 1993 Preferred Stock shall be entitled to receive out of the
assets of the Corporation available for distribution to stockholders
under applicable law, before any payment or distribution of assets
shall be made on the Class A Common Stock or on any other class or
series of capital stock of the Corporation ranking junior to the
Series 1993 Preferred Stock upon liquidation, the amount of $10.00
per share, in the event of an involuntary liquidation and the
applicable redemption price as set forth in Section 2 hereof, in the
event of a voluntary liquidation (the "Liquidation Preference"), plus
a sum equal to all dividends accrued on such shares (whether or not
declared) for and unpaid for the then current Dividend Period. The
sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all the
property and assets of the Corporation shall not be deemed a
dissolution, liquidation or winding up of the Corporation for the
purposes of this Section 6, nor shall the merger or consolidation of
the Corporation into or with any other corporation or association or
the merger or consolidation of any other corporation or association
into or with the Corporation, be deemed to be a dissolution,
liquidation or winding up of the Corporation for the purposes of this
Section 6.
(b) After the payment in cash (in New York Clearing House
funds or its equivalent) to the holders of the shares of the Series
1993 Preferred Stock of the full preferential amounts for the shares
of the Series 1993 Preferred Stock, as set forth in Section 6(a)
above, the holders of the Series 1993 Preferred Stock as such shall
have no further right or claim to any of the remaining assets of the
Corporation.
(c) In the event the assets of the Corporation available for
distribution to the holders of shares of the Series 1993 Preferred
Stock upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation shall be insufficient to pay in full
all amounts to which such holders are entitled pursuant to Section
6(a) above, no distribution shall be made on account of any shares of
any other series of Preferred Stock or any other class of capital
stock of the Corporation ranking on a parity with the shares of the
Series 1993 Preferred Stock upon such liquidation, dissolution or
winding up unless proportionate amounts shall be paid on account of
the shares of the Series 1993 Preferred Stock, ratably, in proportion
to the full amounts to which holders of all such shares which are on
a parity with the shares of the Series 1993 Preferred Stock are
respectively entitled upon such dissolution, liquidation or winding
up.
7. RANK. The Series 1993 Preferred Stock shall rank senior as to
payment of dividends and rights upon liquidation to all classes and
series of capital stock of the Corporation outstanding as of May 24,
1993. Unless the Corporation shall have obtained the consent of the
holders as provided in Section 6 above, the Corporation shall not
issue any other series of Preferred Stock ranking senior to the
Series 1993 Preferred Stock as to the payment of dividends or rights
upon liquidation or any other series of any equity securities ranking
senior to the Series 1993 Preferred Stock as to the payment of
dividends or rights upon liquidation. The Corporation may issue
shares of Preferred Stock or other capital stock ranking junior to or
on a parity with the Series 1993 Preferred Stock as to the payment of
dividends or rights upon liquidation. For purposes of this statement
of designation, any capital stock of any series or class of the
Corporation shall be deemed to rank:
F-11
<PAGE>
(a) senior to the shares of the Series 1993 Preferred Stock,
as to dividends or upon liquidation, if the holders of such series or
class shall be entitled to the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the
holders of the shares of the Series 1993 Preferred Stock;
(b) on a parity with shares of the Series 1993 Preferred
Stock, as to dividends or upon liquidation, whether or not the
dividend rates, dividend payment dates or redemption or liquidation
prices per share or sinking fund provisions, if any, be different
from those of the Series 1993 Preferred Stock, if the holders of such
stock shall be entitled to the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in proportion to their respective
dividend rates or liquidation prices, without preference or priority,
one over the other, as between the holders of such stock and the
holders of shares of the Series 1993 Preferred Stock; and
(c) junior to shares of the Series 1993 Preferred Stock, as to
dividends or upon liquidation, if such stock shall be Class A Common
Stock or if the holders of shares of the Series 1993 Preferred Stock
shall be entitled to receipt of dividends or of amounts distributable
upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of shares
of such series or class.
8. REPORTS AND NOTICES. So long as any shares of the Series 1993
Preferred Stock shall be outstanding, the Corporation shall provide to the
holder or holders of such shares copies of all annual, quarterly and other
reports of the Corporation and copies of all stockholder notices of the
Corporation when and as furnished to the holders of the Class A Common
Stock.
F-12
<PAGE>
APPENDIX G
STATEMENT OF DESIGNATION
OF
9% NONCUMULATIVE PERPETUAL Preferred Stock
OF
BANKUNITED FINANCIAL CORPORATION
BankUnited Financial Corporation (the "Corporation"), a corporation
organized and existing under the Florida Business Corporation Act, in accordance
with the provisions of Section 607.0602 thereof and Article VI of the
Corporation's Articles of Incorporation, DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Articles of Incorporation of the Corporation, said Board of Directors acting at
a meeting thereof adopted resolutions providing for the issuance of 2,300,000
shares of the Corporation's Preferred Stock, $.01 par value, designated "9%
Noncumulative Perpetual Preferred Stock," which resolutions are as follows:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Articles of Incorporation, the Board of
Directors does hereby provide for and authorize the issuance of 2,300,000
shares of the Preferred Stock, $.01 par value, of the Corporation, of the
presently authorized but unissued shares of Preferred Stock (the "Preferred
Stock") to be designated "9% Noncumulative Perpetual Preferred Stock" (the
"Perpetual Preferred Stock"). The voting powers, designations, preferences,
and relative, participating, optional or other special rights of the
Perpetual Preferred Stock authorized hereunder and the qualifications,
limitations and restrictions of such preferences and rights are as follows:
1. DIVIDENDS.
(a) The holders of the Perpetual Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of
Directors out of funds of the Corporation legally available for
payment, noncumulative cash dividends, payable quarterly in arrears,
at the rate of $.90 per share per annum. Dividends, when declared on
the Perpetual Preferred Stock, shall have accrued from the date of
issuance or thereafter, from the most recent date on which dividends
were payable and shall be payable quarterly on March 31, June 30,
September 30 and December 31 of each year (each a "Dividend Payment
Date"), commencing on March 31, 1994; PROVIDED, HOWEVER, that if any
such day is a non-business day, the Dividend Payment Date will be the
next business day. Each declared dividend shall be payable to holders
of record as they appear at the close of business on the stock books
of the Corporation on such record dates, not more than 30 calendar
days and not less than 10 calendar days preceding the Dividend
Payment Date therefor, as determined by the Board of Directors (each
of such dates a "Record Date"). Quarterly dividend periods (each a
"Dividend Period") shall commence on and include the first day of
January, April, July and October of each year and shall end on and
include the day next preceding the next following Dividend Payment
Date.
(b) No full dividends shall be declared or paid or set apart
for payment on any series of Preferred Stock or other capital stock
of any series ranking, as to dividends or liquidation preference, on
a parity ("Parity Stock") with the Perpetual Preferred Stock during
any calendar quarter unless full dividends on the Perpetual Preferred
Stock for the Dividend Period ending during such calendar quarter
have been or contemporaneously are declared and paid or declared and
a sum sufficient for the payment thereof is set apart for such
payment. When dividends are not so paid in full (or a sum sufficient
for such full payment is not so set apart) upon the Perpetual
Preferred Stock and any other Parity Stock, dividends upon the
Perpetual Preferred Stock and dividends on such other Parity Stock
payable during such calendar quarter shall be declared pro rata so
that the amount of such dividends so payable per share on the
Perpetual Preferred Stock and such other Parity Stock shall in all
cases bear to each other the same ratio that full dividends for the
then-current calendar quarter on the shares of Perpetual Preferred
Stock (which shall not include any accumulation in respect of unpaid
dividends for prior Dividend Periods) and full dividends, including
required or permitted accumulations, if any, on shares
G-1
<PAGE>
of such other Parity Stock, bear to each other. If full dividends on
the Perpetual Preferred Stock have not been declared and paid or set
aside for payment for the Dividend Payment Date falling in the
then-current Dividend Period, then, with respect to such then-current
Dividend Period, the following restrictions shall be applicable: (i)
no dividend or distribution, other than in shares of capital stock
ranking junior to the Perpetual Preferred Stock as to dividends or
liquidation preference ("Junior Stock"), may be declared, set aside
or paid on any shares of Junior Stock, (ii) the Corporation may not
repurchase, redeem or otherwise acquire any shares of its Junior
Stock (except by conversion into or exchange for Junior Stock) and
(iii) the Corporation may not, directly or indirectly, repurchase,
redeem or otherwise acquire (except by conversion into or exchange
for Junior Stock) any shares of any class or series of Junior Stock
or warrants, calls, options or other rights to acquire capital stock
of the Corporation or other security exercisable or exchangeable into
capital stock of the Corporation, otherwise than pursuant to pro rata
offers to purchase or a concurrent redemption of all, or a pro rata
portion, of the outstanding shares of Perpetual Preferred Stock.
Holders of the Perpetual Preferred Stock shall not be entitled to any
dividends, whether payable in cash, property or stock, in excess of
declared noncumulative dividends, as herein provided, on the
Perpetual Preferred Stock. No interest or sum of money in lieu of
interest shall be payable in respect of any declared dividend payment
or payments on the Perpetual Preferred Stock which may be in arrears.
As used herein, the phrase "set apart" in respect of the payment of
dividends shall require deposit of any funds in a bank or trust
Corporation in a separate deposit account maintained for the benefit
of the holders of the Perpetual Preferred Stock.
2. REDEMPTION.
(a) The shares of Perpetual Preferred Stock shall be
redeemable by the Corporation, in whole or in part, at any time and
from time to time from and after September 30, 1998 at a price of
$10.00 per share plus an amount equal to all accrued but unpaid
dividends (whether or not declared) for the then current Dividend
Period immediately preceding the date fixed for redemption (the
"Redemption Date").
(b) The Perpetual Preferred Stock shall be redeemable by the
Corporation, in accordance with applicable law, in whole or in part,
upon not less than 30 nor more than 60 calendar days' prior written
notice by mail.
(c) In the event that fewer than all the outstanding shares of
the Perpetual Preferred Stock are to be redeemed as permitted by this
Section 2, the number of shares to be redeemed shall be determined by
the Board of Directors and the shares to be redeemed shall be
determined by lot or PRO RATA as may be determined by the Board of
Directors or by such other method as may be approved by the Board of
Directors that is required to conform to any rule or regulation of
any stock exchange or automated quotation system upon which the
shares of the Perpetual Preferred Stock may at the time be listed.
(d) Notice of redemption of the Perpetual Preferred Stock,
specifying the Redemption Date and place of redemption, shall be
given by first class mail to each holder of record of the shares to
be redeemed, at his or her address of record, not less than 30 nor
more than 60 calendar days prior to the Redemption Date. If less than
all the shares owned by such holder are then to be redeemed, the
notice shall also specify the number of shares thereof which are to
be redeemed and the fact that a new certificate or certificates
representing any unredeemed shares shall be issued without cost to
such holder.
(e) Notice of redemption of shares of the Perpetual Preferred
Stock having been given as provided in Section 2(d), then unless the
Corporation shall have defaulted in providing for the payment of the
redemption price and all accrued and unpaid dividends (whether or not
declared) for the then-current Dividend Period immediately preceding
the Redemption Date, all rights of the holders thereof (except the
right to receive the redemption price and all accrued and unpaid
dividends, whether or not declared, for the then-current Dividend
Period immediately preceding the Redemption Date) shall cease with
respect to such shares and such shares shall not, after the
Redemption Date, be deemed to be outstanding and shall not have the
status of Perpetual Preferred Stock. In case fewer than all the
shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
G-2
<PAGE>
(f) Any shares of Perpetual Preferred Stock which shall at any
time have been redeemed shall, after such redemption, have the status
of authorized but unissued shares of Preferred Stock, without
designation as to series until such shares are once more designated
as part of a particular series by the Board of Directors.
(g) The Corporation, directly or indirectly, shall not
purchase or otherwise acquire any shares of the Perpetual Preferred
Stock; provided, however, that the foregoing shall not prevent the
purchase or acquisition of shares of the Perpetual Preferred Stock
pursuant to a purchase or exchange offer made on the same terms to
all holders of all outstanding shares of the Perpetual Preferred
Stock.
(h) Shares of the Perpetual Preferred Stock are not subject
or entitled to the benefit of a sinking fund.
3. PREEMPTIVE RIGHTS. Holders of the Perpetual Preferred Stock are
not entitled to any preemptive rights to acquire any unissued shares of any
capital stock of the Corporation, now or hereafter authorized, or any other
securities of the Corporation, whether or not convertible into shares of
capital stock of the Corporation or carrying a right to subscribe to or
acquire any such shares of capital stock.
4. VOTING. Except as required by law, the shares of the
Perpetual Preferred Stock shall not have any voting powers, either general
or special, except as follows:
(a) So long as any shares of the Perpetual Preferred Stock are
outstanding, if the Corporation shall have failed to declare and pay
dividends on all outstanding shares of the Perpetual Preferred Stock
for six Dividend Periods, whether or not consecutive, the number of
directors of the Corporation shall automatically be increased by two
and the holders of the Perpetual Preferred Stock shall have the
right, voting separately as a class (together with the holders of
shares of Parity Stock, if any, upon which like voting rights have
been conferred and are exercisable), to elect such two additional
directors. The right of the holders of the Perpetual Preferred Stock
(and Parity Stock, if any, with parity voting rights) to elect such
members of the Board of Directors as aforesaid shall continue until
dividends have been declared and paid on the Perpetual Preferred
Stock for four consecutive Dividend Periods. If at any time
thereafter should the Corporation fail to declare and pay dividends
on all outstanding shares of the Perpetual Preferred Stock for four
Dividend Periods, whether or not consecutive, the voting right
described in this Section 4(a) shall vest until dividends shall have
been declared and paid on the Perpetual Preferred Stock for four
consecutive Dividend Periods. Whenever the voting right described in
this Section 4(a) shall have vested in the holders of the Perpetual
Preferred Stock, the right may be exercised initially either at a
special meeting of the holders of the Perpetual Preferred Stock (and
Parity Stock, if any, with parity voting rights), called as
hereinafter provided, or at any annual meeting of stockholders held
for the purpose of electing directors and thereafter at each
successive annual meeting.
(b) At any time when the voting right of the Perpetual
Preferred Stock provided in Section 4(a) above shall have become
operative and shall not have been exercised, or for the purpose of
the removal of a director as set forth in Section 4(d) below, a
proper officer of the Corporation shall, upon the written request of
the holders of record of at least 10% of the shares of the Perpetual
Preferred Stock (and Parity Stock, if any, with parity voting rights)
then outstanding addressed to the Secretary of the Corporation, call
a special meeting of the holders of the Perpetual Preferred Stock
(and Parity Stock, if any, with parity voting rights) for the purpose
of electing the additional directors to be elected by such holders or
removing any such director, as the case may be. Such meeting shall be
held at the earliest practicable date upon the notice (and at the
place) required for annual meetings of stockholders. Such notice
shall comply with the requirements of all applicable laws and shall
set forth the purposes of such meeting. If such meeting shall not be
called by the proper officer of the Corporation within 20 days after
the personal service of such written request upon the Secretary of
the Corporation, or within 20 days after mailing the same within the
United States by registered or certified mail enclosed in a
postage-paid envelope addressed to the Secretary of the Corporation
at its principal office, then the holders of record of at least 10%
of the shares of the Perpetual Preferred Stock (and Parity Stock, if
any, with parity voting rights) then outstanding may designate in
writing one of their members to call such meeting at the expense of
the Corporation, and such meeting may be called by the person so
designated upon the notice (and at the place) required for annual
meetings of stockholders.
G-3
<PAGE>
(c) Unless otherwise required by law, directors elected by the
holders of the Perpetual Preferred Stock (and Parity Stock, if any,
with parity voting rights) shall not become members of any of the
three classes of directors otherwise required by the Articles of
Incorporation and Bylaws of the Corporation with respect to the
remaining directors elected by other classes or series of stock
entitled to vote therefor, but shall, subject to Section 4(e) below,
serve until the next annual meeting or until their respective
successors shall be elected and shall qualify. All rights of the
holders of the Perpetual Preferred Stock (and Parity Stock, if any,
with parity voting rights) to elect such directors shall continue in
effect until the Corporation has declared and paid dividends for four
consecutive Dividend Periods as provided in Section 4(b) above. At
such time as such condition has been met, the voting rights of such
holders shall, without further action, terminate, subject to
revesting in the event of each and every subsequent failure of the
Corporation to declare and pay such dividends for the requisite
number of Dividend Periods described above.
(d) The term of office of all directors elected by the holders
of the Perpetual Preferred Stock (and Parity Stock, if any, with
parity voting rights) in office at any time when the aforesaid voting
right is vested in such holders shall terminate upon the election of
their successors at any meeting of stockholders held for the purpose
of selecting directors; provided, however, without further action,
and unless required by law, any director that shall have been elected
by such holders as provided herein may be removed at any time, either
with or without cause, by affirmative vote of the holders of record
of a majority of outstanding shares of the Perpetual Preferred Stock
(and Parity Stock, if any, with parity voting rights), voting
separately as one class, at a duly held meeting of such holders
called pursuant to the provisions set forth in Section 4(b).
(e) Upon the later of any termination of the aforesaid voting
right in accordance with the foregoing provisions or the expiration
of the minimum term of office required by law, the term of office of
all directors elected by the holders of the Perpetual Preferred Stock
(and Parity Stock, if any, with parity voting rights) pursuant
thereto then in office shall, without further action, thereupon
terminate unless otherwise required by law. Upon such termination,
the number of directors constituting the Board of Directors of the
Corporation shall, without further action, be reduced by two, subject
always to the increase of the number of directors pursuant to the
provisions of this Section 4(e) in the case of the future right of
such holders to elect directors as provided herein.
(f) Unless otherwise required by law, in case of any vacancy
occurring among the directors so elected, the remaining director may
appoint a successor to hold office for the unexpired term of the
director whose place shall be vacant, and if all directors so elected
shall cease to serve as directors before their term shall expire, the
holders of the Perpetual Preferred Stock then outstanding (and any
Parity Stock, if any, with parity voting rights) may, at a meeting of
such holders duly held, elect successors to hold office for the
unexpired terms of the directors whose places shall be vacant.
(g) The directors elected by the holders of the Perpetual
Preferred Stock (and any Parity Stock, if any, with parity voting
rights) in accordance with the provisions of this Section 4 shall be
entitled to one vote per director on any matter, and otherwise to
same rights and privileges as all other directors of the Corporation.
(h) So long as any shares of the Perpetual Preferred Stock are
outstanding, the Articles of Incorporation and Bylaws of the
Corporation shall contain provisions ensuring that the number of
directors of the Corporation shall at all times be such that the
exercise by the holders of shares of the Perpetual Preferred Stock of
the right to elect directors under the circumstances provided in this
Section 4 will not contravene any provisions of the Corporation's
Articles of Incorporation or Bylaws.
(i) Unless the vote or consent of the holders of a greater
number of shares is required by law, the consent of the holders of at
least a majority of all of the shares of the Perpetual Preferred
Stock at the time outstanding given in person or by proxy, either in
writing or by a vote at a meeting called for that purpose, on which
matter the holders of shares of the Perpetual Preferred Stock shall
vote together as a separate class, shall be necessary to authorize,
effect or validate any amendment, alteration or repeal of any of the
provisions of the Articles of Incorporation of the Corporation or of
any certificate, amendatory or supplemental thereto, which amendment,
alteration or repeal would, if effected, adversely affect the powers,
preferences, rights or privileges of the Perpetual Preferred Stock.
G-4
<PAGE>
(j) Unless the vote or consent of the holders of a greater
number of shares is required by law, the consent of the holders of at
least 66-2/3% of all of the shares of the Perpetual Preferred Stock
at the time outstanding given in person or by proxy, either in
writing or by a vote at a meeting called for that purpose, on which
matter the holders of shares of the Perpetual Preferred Stock shall
vote together as a separate class (together with the holders of
shares of Parity Stock, if any, upon which like voting rights have
been conferred and are exercisable), shall be necessary to create,
authorize, issue or increase the authorized or issued amount of any
class or series of any equity securities of the Corporation, or any
warrants, options or other rights convertible or exchangeable into
any class or series of any equity securities of the Corporation,
ranking senior to the Perpetual Preferred Stock either as to payment
of dividends or rights upon liquidation.
(k) Notwithstanding anything to the contrary set forth herein,
the creation or issuance of Parity Stock or Junior Stock with respect
to the payment of dividends or rights upon liquidation, a merger,
consolidation, reorganization or other business combination in which
the Corporation is not the surviving entity, or an amendment that
increases the number of authorized shares of Preferred Stock or
increases the number of authorized shares of a series of Preferred
Stock constituting Junior Stock or Parity Stock shall not be
considered to be an adverse change to the terms of the Perpetual
Preferred Stock and shall not require a vote or the approval of the
holders of the Perpetual Preferred Stock.
5. LIQUIDATION RIGHTS.
(a) Upon the voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the holders of the shares of the
Perpetual Preferred Stock shall be entitled to receive out of the
assets of the Corporation available for distribution to stockholders
under applicable law, before any payment or distribution of assets
shall be made on any class or series of capital stock of the
Corporation ranking junior to the Perpetual Preferred Stock upon
liquidation, the amount of $10.00 per share, in the event of a
voluntary or involuntary liquidation (the "Liquidation Preference"),
plus a sum equal to all dividends declared but unpaid for the
then-current Dividend Period. For purposes of this Section 5, the
merger or consolidation of the Corporation into or with any other
corporation or association, the merger or consolidation of any other
corporation or association into or with the Corporation, or the sale,
conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all the
property and assets of the Corporation shall not be deemed a
dissolution, liquidation or winding up of the Corporation, unless
such sale, conveyance, exchange or transfer shall be in connection
with and intended to be a plan of complete liquidation, dissolution
or winding up of the Corporation.
(b) After the payment in cash (in New York Clearing House
funds or its equivalent) to the holders of the shares of the
Perpetual Preferred Stock of the full preferential amounts for the
shares of the Perpetual Preferred Stock, as set forth in Section 5(a)
above, the holders of the Perpetual Preferred Stock as such shall
have no further right or claim to any of the remaining assets of the
Corporation.
(c) In the event the assets of the Corporation available for
distribution to the holders of shares of the Perpetual Preferred
Stock upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation shall be insufficient to pay in full
all amounts to which such holders are entitled pursuant to Section
5(a) above, no distribution shall be made on account of any shares of
any other series of Preferred Stock or any other class of capital
stock of the Corporation ranking on a parity with the shares of the
Perpetual Preferred Stock upon such liquidation, dissolution or
winding up unless proportionate amounts shall be paid on account of
the shares of the Perpetual Preferred Stock, ratably, in proportion
to the full amounts to which holders of all such shares which are on
a parity with the shares of the Perpetual Preferred Stock are
respectively entitled upon such dissolution, liquidation or winding
up.
6. RANK. The Perpetual Preferred Stock shall rank on a parity with
the 8% Noncumulative Convertible Preferred Stock, Series 1993 and senior to
the Class A Common Stock, Class B Common Stock, Noncumulative Convertible
Preferred Stock, Series A, Noncumulative Convertible Preferred Stock, Series
B, Noncumulative Convertible Preferred Stock, Series C and Noncumulative
Convertible Preferred Stock, Series C-II of the Corporation as to payment of
dividends and rights upon liquidation. Unless the Corporation shall have
obtained the consent of the holders as provided in Section 4 above, the
Corporation shall not issue any other series of Preferred Stock ranking
senior to the
G-5
<PAGE>
Perpetual Preferred Stock as to the payment of dividends or rights upon
liquidation or any other series of any equity securities ranking senior to
the Perpetual Preferred Stock as to the payment of dividends or rights upon
liquidation. The Corporation may issue shares of Preferred Stock or other
capital stock ranking junior to or on a parity with the Perpetual Preferred
Stock as to the payment of dividends or rights upon liquidation without the
consent of the holders of the Perpetual Preferred Stock. For purposes of
this Section 6, any capital stock of any series or class of the Corporation
shall be deemed to rank:
(a) senior to the shares of the Perpetual Preferred Stock, as
to dividends or upon liquidation, if the holders of such series or
class shall be entitled to the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the
holders of the shares of the Perpetual Preferred Stock;
(b) on a parity with shares of the Perpetual Preferred Stock,
as to dividends or upon liquidation, whether or not the dividend
rates, dividend payment dates or redemption or liquidation prices per
share or sinking fund provisions, if any, be different from those of
the Perpetual Preferred Stock, if the holders of such stock shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the
case may be, in proportion to their respective dividend rates or
liquidation prices, without preference or priority, one over the
other, as between the holders of such stock and the holders of shares
of the Perpetual Preferred Stock; and
(c) junior to shares of the Perpetual Preferred Stock, as to
dividends or upon liquidation, if the holders of shares of the
Perpetual Preferred Stock shall be entitled to receipt of dividends
or of amounts distributable upon dissolution, liquidation or winding
up of the Corporation, as the case may be, in preference or priority
to the holders of shares of such series or class.
G-6
EXHIBIT 10.5
BANKUNITED FINANCIAL CORPORATION
1996 INCENTIVE COMPENSATION AND STOCK AWARD PLAN
<PAGE>
BANKUNITED FINANCIAL CORPORATION
1996 INCENTIVE COMPENSATION AND STOCK AWARD PLAN
1. PURPOSE. The purpose of this 1996 Incentive Compensation and Stock
Award Plan (the "Plan") is to assist BankUnited Financial Corporation (the
"Company") and its subsidiaries and affiliates in attracting, motivating,
retaining and rewarding high-quality executives and other employees, officers,
directors and independent contractors enabling such persons to acquire or
increase a proprietary interest in the Company in order to strengthen the
mutuality of interests between such persons and the Company's stockholders, and
providing such persons with annual and long term performance incentives to
expend their maximum efforts in the creation of shareholder value.
2. DEFINITIONS.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Affiliate" means any entity other than the Company and its
Subsidiaries that is designated by the Board or the Committee as a participating
employer under the Plan, provided that the other entity is under common control
with the Company.
(b) "Award" means any Option, Stock Bonus or Stock Award in Lieu
of Cash, or Other Stock-Based Award, granted to a Participant under the Plan.
(c) "Award Agreement" means any written agreement,
contract, or other instruments or document evidencing an Award.
(d) "Beneficiary" means the person, persons, trust or trusts
which have been designated by such Participant in his or her most recent written
beneficiary designation filed with the Company to receive the benefits specified
under this Plan upon the death of the Participant, or, if there is no designed
Beneficiary or surviving designated Beneficiary, then the person, persons, trust
or trusts entitled by will or the laws of descent and distribution to receive
such benefits.
(e) "Board" means the Board of Directors of the
Company.
(f) "Change in Control" means Change in Control as defined with
related terms in Section 8.
(g) "Code" means the Internal Revenue Code of 1986, as amended
from time to time. References to any provision of the Code shall be deemed to
include successor provisions thereto and regulations thereunder.
(h) "Committee" means the Compensation Committee of the Board, or
such other Board committee as may be designed at the Board to administer the
Plan; provided, however, that the Committee shall consist solely of two or more
directors of the Company. In appointing members of the Committee, the Board will
consider whether each member will qualify as an "outside director" within the
meaning of Rule 16b-3(b)(3).
1
<PAGE>
(i) "Company" means BankUnited Financial Corporation, a
corporation organized under the laws of the State of Florida, or any successor
corporation.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time. References to any provision of the Exchange Act shall
be deemed to include successor provisions thereto and regulations thereunder.
(k) "Fair Market Value" means, with respect to Stock, Awards, or
other property, the fair market value of such Stock, Awards, or other property
determined by such methods or procedures as shall be established from time to
time by the Board or the Committee. Unless otherwise determined by the Board or
the Committee in good faith, the Fair Market Value of Stock as of any given date
shall mean the per share value of Stock as determined by using the mean between
the high and low bid prices of such Stock as quoted on NASDAQ on the immediately
preceding five days on which the stock was traded, as reported for such date in
the table contained in The Wall Street Journal or an equivalent successor table.
(l) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(m) "NQSO" means any Option that is not an ISO.
(n) "Option" means a right, granted to a Participant under
Section 6(b), to purchase Stock or other Awards. An Option may be either an ISO
or an NQSO.
(o) "Participant" means a person who, as an executive officer,
officer, director, or employee or independent contractor of the Company (which
includes employees of Subsidiaries or Affiliates), has been granted an Award
under the Plan.
(p) "Restricted Stock" means an award of shares of Stock to a
Participant under Section 6(d) that may be subject to certain restrictions and
to a risk of forfeiture.
(q) "Plan" means this 1996 Incentive Compensation and
Stock Award Plan.
(r) "Rule 16b-3" means Rule 16b-3, as from time to time in effect
and applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(s) "Stock" means the Series I Class A Common Stock, the Class B
Common Stock (which together shall be referred to as "Common Stock"), or the
Noncumulative Convertible Preferred Stock ("Preferred Stock"), Series B of the
Company or such other securities as may be substituted or resubstituted therefor
pursuant to Section 5.
(t) "Subsidiary" means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporation in the chain.
2
<PAGE>
3. ADMINISTRATION.
(a) Authority of the Committee. Except as otherwise
provided herein, the Plan shall be administered by the Committee. The Committee
shall have full and final authority to take the following actions, in each case
subject to and consistent with the provisions of the Plan:
(i) to select Participants to whom Awards may be
granted;
(ii) to designate Affiliates;
(iii) to determine the type or types of Awards to be
granted to each Participant;
(iv) to determine the type and number of Awards to be
granted, the number and type of shares of Stock to which an Award may
relate, the terms and conditions of any Award granted under the Plan
(including, but not limited to, any exercise price, grant price, or
purchase price, any restriction or condition, any schedule for lapse of
restrictions or conditions relating to transferability or forfeiture,
exercisability, or settlement of an Award, and waivers or accelerations
thereof, and waivers of performance conditions relating to an Award,
based in each case on such considerations as the Committee shall
determine), and all other matters to be determined in connection with an
Award;
(v) to determine whether, and to what extent the right of
a Participant to exercise or receive a grant or settlement of any Award,
and the timing thereof, may be subject to such performance conditions as
may be specified by the Committee. The Committee may use such business
criteria and other measures of performance as it may deem appropriate in
establishing any performance conditions, and may exercise its discretion
to reduce or increase the amounts payable under any Award subject to
performance conditions;
(vi) to determine whether, to what extent, and under what
circumstances an Award may be settled or the exercise price of an Award
may be cancelled, forfeited, exchanged, or surrendered;
(vii) to determine whether, to what extent, and under what
circumstances an Award will be deferred either automatically, at the
election of the Committee, or at the election of the Participant, and
whether to create trusts and deposit Stock or other property therein;
(viii) to prescribe the form of each Award Agreement,
which need not be identical for each Participant;
(ix) to adopt, amend, suspend, waive, and rescind such
rules and regulations and appoint such agents as the Committee may deem
necessary or advisable to administer the Plan;
3
<PAGE>
(x) to correct any defect or supply any omission or
reconcile any inconsistency in the Plan and to construe and interpret
the Plan and any Award, rules and regulations, Award Agreement, or other
instrument hereunder; and
(xi) to make all other decisions and determinations as may
be required under the terms of the Plan or as the Committee may deem
necessary or advisable for the administration of the Plan.
Other provisions of the Plan notwithstanding, the Board may perform any function
of the Committee under the Plan, including without limitation for the purpose of
ensuring that transactions under the Plan by Participants who are then subject
to Section 16 of the Exchange Act in respect of the Company are exempt under
Rule 16b-3. In any case in which the Board is performing a function of the
Committee under the Plan, each reference to the Committee herein shall be deemed
to refer to the Board.
(b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. Any action of
the Committee with respect to the Plan shall be final, conclusive, and binding
on all persons, including the Company, Subsidiaries, Affiliates, Participants,
any person claiming any rights under the Plan from or through any Participant,
and stockholders. The express grant of any specific power to the Committee, and
the taking of any action by the Committee, shall not be construed as limiting
any power or authority of the Committee. The Committee may delegate to officers
or managers of the Company or any Subsidiary the authority, subject to such
terms as the Committee shall determine, to perform administrative functions and
such other functions as the Committee may determine, to the extent permitted
under applicable law.
(c) LIMITATION OF LIABILITY. Each member of the Committee shall
be entitled to, in good faith, rely or act upon any report or other information
furnished to him or her by any officer or other employee of the Company or any
Subsidiary or Affiliate, the Company's independent certified public accountants,
or other professional retained by the Company to assist in the administration of
the Plan. No member of the Committee, nor any officer or employee of the Company
acting on behalf of the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Committee and any officer or employee of the
Company or its Subsidiaries acting on their behalf shall, to the extent
permitted by law, be fully indemnified and protected by the Company with respect
to any such action, determination, or interpretation.
4. ELIGIBILITY.
(a) GENERALLY. Executive officers, officers, directors, employees
and independent contractors of the Company, including employees of the Company's
Subsidiaries and Affiliates who are responsible for or contribute to the
management, growth and/or profitability of the business of the Company or its
Subsidiaries are eligible to be granted Awards under the Plan.
4
<PAGE>
5. STOCK SUBJECT TO THE PLAN; ADJUSTMENT.
(a) NUMBER OF SHARES. Subject to adjustment as hereinafter
provided, the number of shares of Common Stock for which Options may be granted
under the Plan shall be 400,000, and the number of shares of Common Stock which
may be issued in connection with Stock Bonuses, Stock Awards in lieu of cash or
other Stock-Based Awards shall be 150,000, provided however that to the extent
that the total number of shares of Common Stock does not exceed 550,000 the
Committee may reallocate the split between the number of shares of Common Stock
for which Options may be granted and the number of shares of Common Stock which
may be issued in connection with Stock Bonuses, Stock Awards in lieu of cash or
other Stock-Based Awards. Additionally, subject to adjustment as hereinafter
provided the number of shares of Noncumulative Convertible Preferred Stock,
Series B for which Options may be granted and which may be issued in connection
with Stock Bonuses, Stock Awards in lieu of cash or other Stock-Based Awards
shall be 100,000.
(b) MANNER OF COUNTING SHARES. If any shares subject to an Award
are forfeited, cancelled, exchanged, or surrendered or such Award otherwise
terminates without a distribution of shares to the Participant such number of
shares will again be available for Awards under the Plan. The Committee may make
determinations and adopt regulations for the counting of shares relating to any
Awards to ensure appropriate counting, avoid double counting (in the case of
tandem or substitute awards), and provide for adjustments in any case in which
the number of shares actually distributed differs from the number of shares
previously counted in connection with such Award.
(c) TYPE OF SHARES DISTRIBUTABLE. Any shares of Stock
distributed pursuant to an Award may consist, in whole or in part, of authorized
and unissued shares or treasury shares, including shares acquired by purchase in
the open market or in private transactions.
(d) ADJUSTMENTS. In the event that the Committee shall determine
that any dividend or other distribution (whether in the form of cash, Stock, or
other property) which is special, large, and non-recurring, recapitalization,
stock split, reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, or share exchange, or other similar corporate
transaction or event, affects the Stock such that an adjustment is appropriate
in order to prevent dilution or enlargement of the rights of Participants under
the Plan, then the Committee shall make such equitable changes or adjustments as
it deems appropriate and, in such manner as it may deem equitable, adjust any or
all of (i) the number and kind of shares of Stock which may thereafter be issued
in connection with Awards, (ii) the number of and kind of shares of Stock issued
or issuable in respect of outstanding Awards or, if deemed appropriate, make
provisions for payment of cash or other property with respect to any outstanding
Award, and (iii) the exercise price, grant price, or purchase price relating to
any Award; provided, however, in each case that, with respect to ISOs, such
adjustment shall be made in accordance with Section 424(h) of the Code, unless
the Committee determines otherwise. In addition, the Committee is authorized to
make adjustments in the terms and conditions of, and the criteria and
performance objectives included in Awards, in recognition of unusual or
non-recurring events (including, without limitation, events described in the
preceding sentence, as well as acquisitions and dispositions of businesses and
assets) affecting the Company or any Subsidiary, or business unit, or the
financial statements thereof, or in response to changes in applicable laws,
regulations, accounting principles, tax rates and regulations, or business
conditions or in view of the
5
<PAGE>
Committee's assessment of the business strategy of the Company, a Subsidiary, or
business unit thereof, performance of comparable organizations, economic and
business conditions, personal performance of a Participant, and any other
circumstances deemed relevant.
6. SPECIFIC TERMS OF AWARDS.
(a) GENERAL. Awards may be granted on the terms and conditions
set forth in this Section 6. In addition, the Committee may impose on any Award
or the exercise thereof, at the date of grant or thereafter (subject to Section
9(e)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
regarding forfeiture of Awards or continued exercisability of Awards in the
event of termination of employment by the Participant.
(b) OPTIONS. The Committee is authorized to grant
Options to Participants on the following terms and conditions:
(i) EXERCISE PRICE. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee;
provided, however, that, except as provided in Section 7(a), such
exercise price shall be not less than the Fair Market Value of a share
on the date of grant of such Option, and in no event shall the exercise
price for the purchase of shares be less than par value.
(ii) TIME AND METHOD OF EXERCISE. The Committee shall
determine at the date of grant or thereafter the time or times at which
an Option may be exercised in whole or in part, the methods by which
such exercise price may be paid or deemed to be paid, the form of such
payment, including, without limitation, cash, Stock, other Awards, notes
or other property, and the methods by which Stock will be delivered or
deemed to be delivered to Participants (including, without limitation,
deferral of delivery of shares under a deferral arrangement).
(iii) ISOS. The terms of any ISO granted
under the Plan shall comply in all respects with the provisions of
Section 422 of the Code.
(c) RESTRICTED STOCK. The Committee is authorized to
grant Restricted Stock to Participants on the following terms and conditions:
(i) ISSUANCE AND RESTRICTIONS. Restricted Stock
shall be subject to such restrictions on transferability and other restrictions,
if any, as the committee may impose at the date of grant or thereafter, which
restrictions may lapse separately or in combination at such times, under such
circumstance, in such installments, or otherwise, as the Committee may
determine. Except to the extent restricted under the Award Agreement relating to
the Restricted Stock, a Participant granted Restricted Stock shall have all of
the rights of a stockholder including, without limitation, the right to vote
Restricted Stock and the right to receive dividends thereon.
(ii) FORFEITURE. Except as otherwise determined
by the Committee, at the date of grant or thereafter, upon termination of
employment (as determined under criteria established
6
<PAGE>
by the Committee) during the applicable restriction period, Restricted Stock,
and any accrued but unpaid dividends or Dividend Equivalents, that is or are
then subject to a risk of forfeiture shall be forfeited; provided, however, that
the Committee may provide, by rule or regulation or in any Award Agreement, or
may determine in any individual case, that restrictions or forfeiture conditions
relating to Restricted Stock will be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee may in other
cases waive in whole or in part the forfeiture of Restricted Stock.
(iii) CERTIFICATES FOR STOCK. Restricted
Stock granted under the Plan may be evidenced in such manner as the Committee
shall determine. If certificates representing Restricted Stock are registered in
the name of the participant, such certificates shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such
Restricted Stock, the Company shall retain physical possession of the
certificate, and the Company may require the Participant to deliver a stock
power, endorsed in blank, relating to the Restricted Stock.
(iv) DIVIDENDS. Dividends paid on Restricted
Stock shall be either paid at the dividend payment date in cash or in shares of
unrestricted Stock having a Fair Market Value equal to the amount of such
dividends, or the payment of such dividends shall be deferred or the amount or
value thereof automatically reinvested in additional Restricted Stock,
Restricted Stock Units, other Awards, or other investment vehicles, as the
Committee shall determine or permit the Participant to elect. Stock distributed
in connection with a Stock split or Stock dividend, and other property
distributed as a dividend, shall be subject to restrictions and a risk of
forfeiture to the same extent as the Restricted Stock with respect to which such
Stock or other property has been distributed.
(d) RESTRICTED STOCK UNITS. The Committee is authorized to
grant Restricted Stock Units to Participants, subject to the following terms and
conditions:
(i) AWARD AND RESTRICTIONS. Delivery of Stock
or cash, as the case may be, will occur upon expiration of the deferral period
specified for Restricted Stock Units by the Committee (or, if permitted by the
Committee, as elected by the participant). In addition, Restricted Stock Units
shall be subject to such restrictions as the Committee may impose, if any, at
the date of grant or thereafter, which restrictions may lapse at the expiration
of the deferral period or at earlier or later specified times, separately or in
combination, in installments or otherwise, as the Committee may determine.
(ii) FORFEITURE. Except as otherwise determined
by the Committee, at the date of grant or thereafter, upon termination of
employment (as determined under criteria established by the Committee) during
the applicable deferral period or portion thereof to which forfeiture conditions
apply (as provided in the Award Agreement evidencing the Restricted Stock
Units), or upon failure to satisfy any other material conditions precedent to
the delivery of Stock or cash to which such Restricted Stock Units relate, all
Restricted Stock Units, and any accrued but unpaid Dividend Equivalents, that
are at that time subject to a risk of forfeiture shall be forfeited; provided,
however, that the Committee may provide, by rule or regulation or in any Award
Agreement, or may determine in any individual case, that restrictions or
forfeiture conditions relating to Restricted Stock Units will be waived in whole
or in part in the event of termination resulting from specified causes, and the
Committee may in other cases waive in whole or in part the forfeiture of
Restricted Stock Units.
7
<PAGE>
(e) STOCK BONUSES AND STOCK AWARDS IN LIEU OF CASH AWARDS. The
Committee is authorized to grant Stock as a bonus, or to grant other Awards, in
lieu of Company commitments to pay cash under other plans or compensatory
arrangements. Stock or Awards granted hereunder shall have such other terms as
shall be determined by the Committee.
(f) OTHER STOCK-BASED AWARDS. The Committee is authorized,
subject to limitations under applicable law, to grant to Participants such other
Awards that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Stock or other securities,
as deemed by the Committee to be consistent with the purposes of the Plan,
including, without limitation, rights convertible or exchangeable into Stock or
such securities, purchase rights for Stock or such other securities, and Awards
with value or payment contingent upon performance of the Company, or a
Subsidiary, or upon any other factor or performance condition designated by the
Committee. The Committee is authorized to make cash awards pursuant to this
Section 6(d) as an element of or supplement to any other Award under the Plan.
7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
(a) STAND-ALONE, ADDITIONAL, TANDEM AND SUBSTITUTE AWARDS.
Awards granted under the Plan may, in the discretion of the Committee, be
granted either alone or in addition to, in tandem with, or in exchange or
substitution for, any other Award granted under the Plan or any award granted
under any other plan of the Company, any Subsidiary or Affiliate, or any
business entity to be acquired by the Company or a Subsidiary or Affiliate, or
any other right of a Participant to receive payment from the Company or any
Subsidiary or Affiliate. Awards may be granted in addition to or in tandem with
such other Awards or awards may be granted either as of the same time as or a
different time from the grant of such other Awards or awards. The per share
exercise price of any Option, or purchase price of any other Award conferring a
right to purchase Stock which is granted, in connection with the substitution of
awards granted under any other plan of the Company or any Subsidiary or
Affiliate or any business entity to be acquired by the Company or any Subsidiary
or Affiliate, shall be determined by the Committee, in its discretion, and may,
to the extent the Committee determines necessary in order to preserve the value
of such other award, be less than the Fair Market Value of a share on the date
of grant of such substitute Award.
(b) TERMS OF AWARDS. The term of each Award shall be for such
period as may be determined by the Committee; provided, however, that in no
event shall the term of any ISO granted in tandem therewith exceed a period of
ten years from the date of its grant (or such shorter period as may be
applicable under Section 422 of the Code).
(c) FORM OF PAYMENT UNDER AWARDS. Subject to the terms of the
Plan and any applicable Award Agreement, payments to be made by the Company upon
the grant, maturation, or exercise of an Award may be made in such forms as the
Committee shall determine at the date of grant or thereafter, including, without
limitation, cash, Stock, or other property, and may be made in a single payment
or transfer, in installments, or on a deferred basis. The Committee may make
rules relating the installment or deferred payments with respect to Awards,
including the rate of interest to be credited with respect to such payments.
(d) RULE 16B-3 COMPLIANCE.
8
<PAGE>
(i) SIX-MONTH HOLDING PERIOD. Unless a Participant could
otherwise dispose of equity securities, including derivative securities,
acquired under the Plan without incurring liability under Section 16(b)
of the Exchange Act, equity securities acquired under the Plan must be
held for a period of six months following the date of such acquisition,
provided that this condition shall be satisfied with respect to a
derivative security if at least six months elapse from the date of
acquisition of the derivative security to the date of disposition of the
derivative security (other than upon exercise or conversion) or its
underlying equity security.
(ii) OTHER COMPLIANCE PROVISIONS. With respect
to a Participant who is then subject to Section 16 of the Exchange Act
in respect of the Company, the Committee shall implement transactions
under the Plan and administer the Plan in a manner that will
ensure that each transaction by such a Participant is exempt from
liability under Rule 16b-3, exempt that such a Participant may be
permitted to engage in a non-exempt transaction under the Plan if
written notice has been given to the Participant regarding the
non-exempt nature of such transaction. Unless otherwise specified by the
Participant, equity securities, including derivative securities,
acquired under the Plan which are disposed of by a Participant shall be
deemed to be disposed of in the order acquired by the Participant.
8. CHANGE IN CONTROL PROVISIONS.
(a) ACCELERATION UPON CHANGE IN CONTROL. In the
event of a "Change in Control," as defined in this Section:
(i) any Award carrying a right to exercise that
was not previously exercisable and vested shall become fully
exercisable and vested; and
(ii) the restrictions, deferral limitations, and
forfeiture conditions applicable to any other Award granted under the
Plan shall lapse and such Awards shall be deemed fully vested, and any
performance conditions imposed with respect to Awards shall be deemed to
be fully achieved.
(b) "CHANGE IN CONTROL" DEFINED. For purposes of the
Plan, a "Change in Control" shall have occurred if:
(i) any "person," as such term is used in Sections 13(d)
and 14(d) of the Exchange Act (other than the Company; any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company; any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company; or any person or group of
persons who as of the date of approval of this Plan by the Board of
Directors of the Company owns, directly or indirectly 10% or more of the
stock of the Company), is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act, directly or indirectly, of
securities of the Company representing 50% or more of the combined
voting power of the Company's then outstanding voting securities;
9
<PAGE>
(ii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (A)
a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent(either by remaining outstanding or by being converted into
voting securities of the surviving or parent entity) 50% or more of the
combined voting power of the voting securities of the Company or such
surviving or parent entity outstanding immediately after such merger or
consolidation or (B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
"person" (as hereinabove defined) acquired 50% or more of the combined
voting power of the Company's then outstanding securities; or
(iii) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets (or any transaction having a similar effect).
9. GENERAL PROVISIONS.
(a) COMPLIANCE WITH LEGAL AND EXCHANGE REQUIREMENTS.
The Plan, the granting and exercising of Awards thereunder, and the other
obligations of the Company under the Plan and any Award Agreement, shall be
subject to all applicable federal and state laws, rules and regulations, and to
such approvals by any regulatory or governmental agency as may be required. The
Company, in its discretion, may postpone the issuance or delivery of Stock under
any Award until completion of such stock exchange listing or registration or
qualification of such Stock or other required action under any state, federal or
foreign law, rule or regulation as the Company may consider appropriate, and may
require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Stock in compliance with applicable laws, rules and regulations.
(b) NONTRANSFERABILILTY. Except as otherwise provided in this
Section 9(b), Awards shall not be transferable by a Participant other than by
will or the laws of descent and distribution or pursuant to a designation of a
Beneficiary, and Awards shall be exercisable during the lifetime of a
Participant only by such Participant or his guardian or legal representative. In
addition, except as otherwise provided in this Section 9(b), no rights under the
Plan may be pledged, mortgaged, hypothecated, or otherwise encumbered, or
subject to the claims of creditors. The foregoing notwithstanding, the Committee
may, in its sole discretion, provide that Awards (or rights or interests
therein) other than ISOs and Awards in tandem with ISOs shall be transferable,
including but not limited to permitting transfers, without consideration, to a
Participant's immediate family members (i.e., spouse, children, or
grandchildren, as well as the Participant), to trusts for the benefit of such
family members are the only parties, or other transfers deemed by the Committee
to be not inconsistent with the purposes of the Plan.
(c) NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor
any action taken thereunder shall be construed as giving any employee the right
to be retained in the employ of the Company or any of its Subsidiaries or
Affiliates, nor shall it interfere in any way with the right of the Company or
any of its Subsidiaries or Affiliates to terminate any employee's employment at
any time.
10
<PAGE>
(d) TAXES. The Company or any Subsidiary or Affiliate is
authorized to withhold from any Award granted, any payment relating to an Award
under the Plan, including from a distribution of Stock, or any payroll or other
payment to a Participant, amounts of withholding and other taxes due in
connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations.
(e) CHANGES TO THE PLAN AND AWARDS. The Board may amend, alter,
suspend, discontinue, or terminate the Plan or the Committee's authority to
grant Awards under the Plan without the consent of stockholders or Participants,
except that any such amendment, alteration, suspension, discontinuation, or
termination shall be subject to the approval of the Company's stockholders
within one year after such Board action if such stockholder approval is required
by any federal law or regulation or the rules of any stock exchange or automated
quotation system on which the Stock may then be listed or quoted; provided,
however, that, without the consent of an affected Participant, no amendment,
alteration, suspension, discontinuations, or termination oft he Plan may
materially adversely affect the rights of such Participant under any Award
theretofore granted to him or her. The Committee may waive any conditions or
rights under, or amend, alter, suspend, discontinue, or terminate any Award
theretofore granted and any Award Agreement relating thereto: provided, however,
that, without the consent of an affected Participant, no such amendment,
alteration, suspension, discontinuation, or termination of any Award may
materially adversely affect the rights of such Participant under such Awards.
Following the occurrence of a Change in Control, the Board may not terminate
this Plan or amend this Plan in any manner adverse to Participants.
(f) NO RIGHT TO AWARDS; NO STOCKHOLDER RIGHTS. No
Participant or employee shall have any claim to be granted any Award under the
Plan, and there is no obligation for uniformity of treatment of Participants and
employees. No Award shall confer on any Participant any of the rights of a
stockholder of the Company unless and until Stock is duly issued or transferred
to the Participant in accordance with the terms of the Award.
(g) UNFUNDED STATUS OF AWARDS AND TRUSTS. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant
pursuant to an Award, nothing contained in the Plan or any Award shall give any
such Participant any rights that are greater than those of a general creditor of
the Company; provided, however, that the Committee may authorize the creation of
trusts or make other arrangements to meet the Company's obligations under the
Plan to deliver cash, Stock, other Awards, or other property pursuant to any
Award, which trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant. If an to the extent authorized by the
Committee, the Company may deposit into such a trust Stock or other assets for
delivery tot he Participant in satisfaction of the Company's obligations under
any Award. If so provided by the Committee, upon such a deposit of Stock or
other assets for the benefit of a Participant, there shall be substituted for
the rights of the Participant to receive delivery of Stock and other payments
under the Plan a right to receive the assets of the trust (to the extent that
the deposited Stock or other assets represented the full amount of the Company's
obligation under the Award at the date of deposit). The trustee of the trust may
be authorized to
11
<PAGE>
dispose of trust assets and reinvest the proceeds in alternative investments,
subject to such terms and conditions as the Committee may specify and in
accordance with applicable law.
(h) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan
by the Board nor its submission to the stockholders of the Company for approval
shall be construed as creating any limitations on the power of the Board to
adopt such other incentive arrangements as it may deem desirable, including
without limitation, the granting of stock options and other awards otherwise
than under the Plan, and such arrangements may be either applicable generally or
only in specific cases.
(i) NO FRACTIONAL SHARES. No fractional shares of Stock shall be
issued or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, other Awards, or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(j) GOVERNING LAW. The validity, construction, and effect of the
Plan, any rules and regulations relating to the Plan, and any Award Agreement
shall be determined in accordance with the laws of the state of Florida, without
giving effect to principles of conflicts of laws, and applicable federal law.
(k) EFFECTIVE DATE AND APPROVAL DATE; PLAN TERMINATION. The Plan
shall become effective upon approval by the Board of Directors (the "Effective
Date"), provided, however, that the Plan shall be subject to the subsequent
approval by the affirmative votes of the holders of a majority of voting
securities present in person or represented by proxy, and entitled to vote on
the subject matter, at a meeting of Company stockholders duly held in accordance
with the Florida Corporation Code, or any adjournment thereof in accordance with
applicable provisions of the Florida Corporation Code, such stockholder approval
to be obtained not later than one year after the Effective Date (the "Approval
Date"). Any Awards granted under the Plan prior to such approval of stockholders
shall be subject to such approval and in the absence of such approval, such
Awards shall be null and void. Unless earlier terminated by the Board, authority
to grant Awards under the Plan will terminate ten years after the Effective
Date; provided, however, that ISOs may not be granted later than ten years after
the Effective Date. The Plan will terminate at such time and the Company has no
further obligations with respect to any Award granted under the Plan.
(l) TITLE AND HEADINGS. The titles and headings of the sections
in the Plan are for convenience of reference only. In the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
12
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of this ______ day
of _______________, 1996, by and between Alfred R. Camner (the "Executive") and
BankUnited Financial Corporation, a Florida corporation ("BankUnited"), and its
principal wholly owned subsidiary, BankUnited, FSB (BankUnited and BankUnited,
FSB are collectively referred to herein as the "Company" and are jointly and
severally obligated hereunder, subject to the provisions of Section 11(b)
hereof).
WHEREAS, the Executive has provided valuable service to the Company as
its Chairman of the Board, Chief Executive Officer and President, and has been a
guiding force in the building, development, progress and success of the Company;
WHEREAS, the Board of Directors of BankUnited and the Board of Directors
of BankUnited, FSB (sometimes collectively referred to herein as the "Board")
have determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued dedication and
service of the Executive as its Chairman of the Board, Chief Executive Officer
and President;
WHEREAS, the Board in addition believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by a pending or threatened Change in Control of the Company
(as defined herein), and to encourage the Executive's full attention and
dedication to the Company;
WHEREAS, in order to accomplish these objectives, the Board has caused
the Company to enter into this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS. In addition to the words and terms
defined elsewhere herein, the following words and terms as used herein shall
have the meanings as set forth below, unless the context or use indicates a
different meaning:
(a) "CAUSE" means any willful action or inaction
of the Executive involving personal dishonesty, willful misconduct, breach of
fiduciary duty involving personal profit, intentional refusal to perform the
Executive's duties as described in Section 3, willful violation of any law, rule
or regulation (other than traffic violations or similar offenses), or final
cease-and-desist order, or material breach of any provision of this Agreement.
For purposes hereof, an action or inaction on the part of the Executive shall
not be considered "willful" if done or omitted to be done by the Executive in
good faith and with reasonable belief that such action or inaction was in the
best interests of the Company.
(i) Notwithstanding the foregoing, the
Executive shall not be deemed to be terminated for Cause unless and until:
1
<PAGE>
(A) there shall have been delivered to
the Executive by the Secretary of the Company, pursuant to a resolution duly
adopted by the Board at a meeting as to which the Executive was provided 10
days' notice and an opportunity to be heard, written notice specifying in detail
the action or inaction of the Executive alleged to constitute Cause and
demanding that he remedy such action or inaction;
(B) the Executive shall not have
remedied, or taken all reasonable steps to remedy, such action or inaction
within 30 days after his receipt of such notice; and
(C) there shall have been delivered to
the Executive a Notice of Termination and a certified copy of a resolution duly
adopted by the affirmative vote of not less than three-fourths of the entire
membership of the Board of each Company (excluding the Executive) at a meeting
of the Board at which the Executive was given an opportunity to be heard, which
meeting was called and held for the purpose of finding that, in the good faith
opinion of the Board of each Company, the Executive's action or inaction
constituted Cause and the Executive did not remedy or take all reasonable steps
to remedy such action or inaction after demand by the Board.
(ii) Nothing in Section 1(b) shall, prior to
delivery of a Notice of Termination as provided herein, be deemed to suspend or
extinguish (A) the Executive's entitlement to receive the compensation and other
benefits provided under Section 4 or (B) the Executive's right to terminate his
employment pursuant to subsection (c)(i) of Section 6.
(iii) In the event that the Company terminates
the employment of the Executive for Cause and, within 30 days after
receipt of the Notice of Termination, the Executive notifies the
Company that he disputes such termination, the Executive shall still be
subject to the obligations set forth in Section 3 and entitled to receive
the compensation and other benefits provided under Section 4 until a final
and binding judgment is rendered by a court of competent jurisdiction
finding that the termination was properly for Cause, in which event all
payments subsequent to termination to which the Executive would not
otherwise be entitled shall be recoverable by the Company, except to the
extent such payments constitute reasonable compensation for services
rendered.
(b) "CHANGE IN CONTROL" shall be deemed to have
occurred on the date when:
(i) A reorganization, merger or
consolidation of the Company shall have been consummated, in which the Company
is not the continuing or surviving corporation or pursuant to which shares of
the Company's voting securities would be converted into cash, securities or
other property, other than a merger of the Company in which the holders of the
Company's voting securities immediately prior to the merger have substantially
the same proportionate ownership of the voting securities of the surviving
corporation immediately after the merger;
(ii) Liquidation or dissolution of the
Company, or sale, lease, exchange or transfer (in one transaction or a series of
related transactions) of all or substantially all of the Company's assets shall
have been consummated;
2
<PAGE>
(iii) Any "person" (as such term is
defined in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934,
as amended [the "Exchange Act"]) or group of persons, excluding BankUnited and
any of its subsidiaries, other than Alfred R. Camner or a group acting in
concert with him, shall have acquired direct or indirect beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) of securities of the
Company representing 25% or more of the voting power of the Company's then
outstanding securities;
(iv) Any "person" (as such term is defined
in Sections 407(q)(9)(A) and 408(a)(1)(G) of the National Housing Act of 1934,
as amended [the "NHA"]) or group of persons, shall have acquired "control" (as
such term is defined in Sections 407(q)(9)(B) and 408(a)(2) of the NHA) of the
Company; or
(v) During any period of two consecutive
years, subsequent to the date hereof, the individuals who at the beginning of
such period constitute the Board of BankUnited cease for any reason to
constitute at least a majority thereof, unless the election, or the nomination
for election by BankUnited's shareholders, of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
(c) "DATE OF THE CHANGE IN CONTROL" means the
date on which a Change in Control shall be deemed to have occurred.
(d) "DATE OF TERMINATION" means the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be; provided, however, that if the Executive's employment is terminated
by reason of the Executive's death or Disability, the Date of Termination shall
be the date of death of the Executive or the Disability Effective Date, as the
case may be.
(e) "DISABILITY" means any physical or mental
condition that wholly prevents the Executive from performing his duties for at
least six months after the commencement of such condition and that is determined
to be of a permanent duration by a physician acceptable to the Company and the
Executive or the Executive's legal representative (such agreement as to
acceptability not to be unreasonably withheld). If the Company determines in
good faith that the Disability of the Executive has occurred, it may give to the
Executive written notice of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective the Disability Effective Date, provided that the Executive
shall not have returned to full-time performance of the Executive's duties prior
to the Disability Effective Date. Any subsequent Disability, whether of a
similar nature or not, shall not be deemed a continuation of a prior Disability
and, the determination of time for the purposes of this provision shall
recommence.
(f) "DISABILITY EFFECTIVE DATE" means the date
30 days following receipt by the Executive of notice from the Company of the
Company's intention to terminate the Executive's employment because of the
Executive's Disability.
(g) "EMPLOYMENT PERIOD" means the one-year
period commencing on the date of this Agreement and continuing annually
thereafter if the Executive is reappointed to one or
3
<PAGE>
more of the elected positions he holds as of the date hereof and the Board
approves the continuation of the Contract, subject to extension as provided in
Section 2.
(h) "NOTICE OF TERMINATION" means a written
notice that (i) indicates the specific termination provision in this Agreement
relied upon, (ii) in the case of termination for Cause, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment for Cause and includes the resolution of the Board
regarding the termination of the Executive's employment for Cause, and (iii) if
the Date of Termination is other than the date of receipt of such notice,
specifies the termination date.
(i) "OTHER THAN FOR CAUSE" means a termination
of the Executive's employment by the Company after a Change in Control that does
not qualify as a termination for death, Disability or Cause.
(j) "TERMINATION PAYMENT" means a lump sum cash
payment in an amount equal to the product of (i) three and (ii) the average for
the five calendar years ending prior to the Date of Termination of the aggregate
of the Executive's annual salary, annual bonus (of cash and stock) and any other
amounts reported on W-2's or 1099's as the Executive's gross income for federal
income tax purposes that were paid to the Executive by the Company. The
Termination Payment shall be paid to the Executive as provided for in the trust
agreement to be entered into by the Company establishing a trust for the payment
of the Termination Payment, or, in the event that such trust is not established
or sufficiently funded, then the Termination Payment or any portion thereof not
paid pursuant to such trust agreement shall be paid to the Executive by the
Company.
(k) "VESTED BENEFITS" means all amounts earned
by and vested in the Executive pursuant to the plans, programs, policies and
practices of the Company, including, without limitation, the BankUnited
Financial Corporation Profit Sharing Plan, disability insurance plan, and group
and supplemental life insurance plans. For purposes hereof, Vested Benefits
shall include (i) continuation of the Executive's and his family's medical
insurance for two years from the Date of Termination or until the Executive
becomes covered by another medical insurance plan or eligible for Medicare,
whichever is shorter, (ii) continuation of the Executive's group and
supplemental life insurance for two years from the Date of Termination or until
the Executive becomes covered by another life insurance plan, whichever is
shorter, (iii) personal use, at Company expense for two years following the Date
of Termination, of a late model automobile comparable to that used by the
Executive prior to the Change in Control, (iv) the right of the Executive to
purchase, at book value, the equity membership in up to two country clubs which
the Company has maintained for the benefit of the Executive, and (v) the
transfer to the Executive of two $1 million life insurance policies that the
Corporations maintains on the life of the Executive.
2. EMPLOYMENT. The Company hereby agrees to continue to
employ the Executive and the Executive hereby agrees to continue to remain in
the employ of the Company during the Employment Period, on the terms and
conditions set forth herein. If a Change in Control is scheduled to occur and
this Agreement and the Executive's employment hereunder have not been previously
terminated, then the Employment Period shall be extended through the date of the
Change in Control, whereupon this Agreement shall expire, unless sooner
terminated in accordance with the provisions hereof.
4
<PAGE>
3. POSITION AND DUTIES. The Executive shall serve as Chairman of
the Board, Chief Executive Officer and President of BankUnited and BankUnited,
FSB and shall exercise such authority and perform such executive duties as may
from time to time be assigned to the Executive by the Board. Such services shall
be performed at the Company's principal executive offices in Dade County,
Florida, or at such other location as shall be satisfactory to him in his sole
discretion, except for required travel on the Company's business to an extent
substantially consistent with the Executive's current business travel
obligations.
The Executive agrees that during the Employment Period he will devote
reasonable attention and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the Executive's
best reasonable efforts to perform such responsibilities faithfully and
efficiently. During the Employment Period, it shall not be a violation of this
Agreement and shall not permit the Company to terminate the Executive's
employment for Cause if the Executive engages in the activities described below
or any activities similar in nature and scope, so long as such activities do not
significantly interfere with the performance of the Executive's responsibilities
in accordance with this Agreement and do not constitute a violation of any
applicable law, rule or regulation: (a) engaging in the practice of law,
including, without limitation, as a member of the firm of Stuzin and Camner,
Professional Association, (b) serving on industry, corporate, civic or
charitable boards or committees, (c) managing personal investments (including,
without limitation, family-controlled enterprises), or (d) investing in,
advising or serving as an officer, director of other corporations or business
entities. It is expressly understood and agreed that to the extent any such
activities have been conducted by the Executive prior to the date of this
Agreement, the continued conduct of such activities (or the conduct of
activities similar in nature and scope) shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the
Company. The preceding sentence shall not be construed as a limitation on the
non-business activities described above in this Section 3.
4. COMPENSATION AND OTHER BENEFITs. During the Employment
Period, the Executive shall be compensated as follows:
(a) SALARY. He shall receive an annual salary as
fixed by the Compensation Committee of the Board, payable pursuant to the
Company's standard payroll practices for executives.
(b) ANNUAL BONUS. He shall receive an annual
bonus, which may consist of both cash and stock, as determined by the
Compensation Committee of the Board, taking into account various factors
including net income, asset and deposit growth, and such other factors as may be
deemed appropriate by the Compensation Committee.
(c) INCENTIVE COMPENSATION. He shall be
eligible to participate in stock option, incentive compensation and other plans
providing opportunities to receive compensation that are the greater of the
opportunities provided by the Company on the date of this Agreement for
executives with comparable duties or as subsequently enhanced.
(d) OTHER BENEFITS. He shall be entitled to
receive employee benefits (including, but not limited to, medical, retirement,
disability and insurance benefits) and perquisites
5
<PAGE>
that are the greater of the employee benefits and perquisites provided by the
Company on the date of this Agreement to executives with comparable duties or as
subsequently enhanced.
(e) OFFICE AND SUPPORT STAFF. He shall be
entitled to an office or offices of a size and with furnishings and other
appointments, and to secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to the Executive by the Company on the
date of this Agreement or at any time thereafter.
(f) EXPENSES. He shall be entitled to receive
prompt reimbursement for all expenses incurred by the Executive in performing
services hereunder, including all travel expenses and living expenses while away
from home on business or at the request of and in the service of the Company,
provided that such expenses are incurred and accounted for in accordance with
the Company's regular policies and procedures.
5. TERMINATION. Then the Executive shall be entitled to
receive certain payments and benefits as provided in this Section 6 if the
Executive's employment is terminated.
(a) TERMINATION FOR DEATH OR DISABILITY. This
Agreement shall terminate automatically upon the Executive's death and may be
terminated by the Company upon the Executive's Disability. Upon a termination by
reason of the Executive's death or Disability, the Company shall, within 15 days
after the Date of Termination, pay to the Executive or his estate or
beneficiaries, as the case may be, (i) any compensation or other obligations
accrued for periods prior to the Date of Termination, (ii) the Termination
Payment, and (iii) implement the provisions for the Executive's Vested Benefits
as of the Date of Termination. If Termination is due to the Death of the
Executive, the rights to the Vested Benefits shall be given to his spouse. In
addition, the life insurance proceeds from the policies described in paragraph
1(k)(v) shall be paid to the Executive's surviving spouse or if not living, to
his personal representative or such other persons as the Executive may have
designated in writing.
(b) TERMINATION BY THE COMPANY.
(i) CAUSE. This Agreement and the
Executive's employment hereunder may be terminated by the Company for Cause.
Upon a termination for Cause, this Agreement shall terminate without further
obligations to the Executive, other than those obligations accrued or earned and
vested (if applicable) by the Executive through the Date of Termination in
accordance with the plans, programs, policies and practices of the Company under
which such obligations accrued or were earned and vested (if applicable). Such
obligations shall be paid to the Executive in accordance with the terms and
provisions of the plans, programs, policies and practices of the Company under
which they accrued or were earned and vested (if applicable).
(ii) OTHER THAN FOR CAUSE. If this
Agreement and the Executive's employment hereunder is terminated by the Company
Other than for Cause, the Company shall, within 15 days after the Date of
Termination, pay and distribute to the Executive (A) any compensation or other
obligations accrued for periods prior to the Date of Termination, (B) the
Termination Payment, and (C) implement the provisions for the Executive's Vested
Benefits as of the Date of Termination. If Termination is due to the Death of
the Executive, the rights to the
6
<PAGE>
Vested Benefits shall be given to his spouse. In addition, the life insurance
proceeds from the policies described in paragraph 1(k)(v) shall be paid to the
Executive's surviving spouse or if not living, to his personal representative or
such other persons as the Executive may have designated in writing.
(c) TERMINATION BY THE EXECUTIVE UPON A CHANGE OF
CONTROL.
(i) The Executive may terminate this
Agreement and his employment on the Date of the Change in Control or at any time
within one year after the Change of Control.
(ii) Immediately upon a termination by the
Executive, the Company shall pay to the Executive (1) any compensation or other
obligations accrued for periods prior to the Date of Termination, (2) the
Termination Payment, and (3) implement the provisions of the Executive's Vested
Benefits as of the Date of Termination.
(d) APPLICATION OF SECTION 280G OF THE INTERNAL
REVENUE CODE. It is the intention of the parties that, in the event of a Change
in Control of the Company, the payments under Section 6 shall not constitute
"excess parachute payments" within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended, and any regulations promulgated by the
Internal Revenue Service thereunder. In the event that the independent
accountants acting as auditors for the Company on the Date of the Change in
Control (or another accounting firm designated by them) determine that the
payments under Section 6 may constitute "excess parachute payments," the amounts
payable pursuant to Section 6 shall be reduced to the maximum amount that may be
paid without constituting the payments "excess parachute payments." Such
determination pursuant to this Section 6(d) shall take into account (i) whether
the payments under this Agreement are "parachute payments" within the meaning of
Section 280G and, if so, (ii) the amount of payments under Section 6 that
constitutes "reasonable compensation" within the meaning of Section 280G.
Nothing contained in this Agreement shall prevent the Company after a Change in
Control from agreeing to pay the Executive compensation or benefits in excess of
those provided in this Agreement.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or practices
provided by the Company or any of its subsidiaries and for which the Executive
may qualify, nor shall anything herein limit or otherwise affect such rights as
the Executive may have under any stock option or other agreements with the
Company or any of its subsidiaries. Any amounts that are Vested Benefits or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of the Company at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program, and nothing
contained in this Agreement shall serve or be construed to divest the Executive
of any such benefits.
8. NO MITIGATION. The Executive shall not be required to
mitigate the amount of any payment or benefit provided for in this Agreement by
seeking other employment or otherwise. Income earned by the Executive following
the Date of Termination shall have no effect whatsoever on the Company's
obligations and the Executive's rights hereunder, and shall not give rise to any
set-off or recoupment by the Company.
7
<PAGE>
9. CERTAIN REGULATORY CONSIDERATIONS.
(a) If the Executive is suspended and/or
temporarily prohibited from participating in the conduct of BankUnited, FSB's
affairs by a notice served under Sections 8(e)(3) or (g)(1) of the Federal
Deposit Insurance Act (12 U.S.C. 1818 (e)(3) or (g)(1)), (the "Act"), the
Company's obligations under this Agreement shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in such notice
are dismissed, the Company shall pay to the Executive all of the compensation
withheld while the obligations under this Agreement were suspended and shall
reinstate its obligations hereunder.
(b) If the Executive is removed and/or
permanently prohibited from participating in the conduct of BankUnited, FSB's
affairs by an order issued under Sections 8(e)(4) or (g)(1) of the Act (12
U.S.C. 1818 (e)(4) or (g)(1)), all obligations of the Company shall terminate as
of the effective date of the order, but vested rights of the parties hereto
shall not be affected.
(c) If BankUnited, FSB is in default (as defined
in Section 3(x)(1) of the Act), all obligations under this Agreement shall
terminate as of the date of default, but this subsection shall not affect any
vested rights of the parties hereto.
(d) All obligations under this Agreement shall
be terminated, except to the extent determined that continuation of this
Agreement is necessary for the continued operation of BankUnited, FSB, (i) by
the Director of the Office of Thrift Supervision or his/her designee (the
"Director"), at the time the Federal Deposit Insurance Corporation (the "FDIC")
or the Resolution Trust Corporation (the "RTC") enters into an agreement to
provide assistance to or on behalf of BankUnited, FSB under the authority
contained in Section 13(c) of the Act; or (ii) by the Director, at the time the
Director approves a supervisory merger to resolve problems related to operation
of BankUnited, FSB or when BankUnited, FSB is determined by the Director to be
in an unsafe or unsound condition. Any rights of the parties hereto that have
already vested, however, shall not be affected by such action.
10. WITHHOLDING. The Company may withhold from any amounts
payable under this Agreement such federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or regulations.
11. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement is personal to the Executive
and, without the prior written consent of the Company, shall not be assignable
by the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the Executive
and the Executive's legal representatives.
(b) BankUnited and BankUnited, FSB shall be
jointly and severally obligated under this Agreement; provided, however, that to
the extent any payments provided for hereunder are obligations of BankUnited
only, BankUnited, FSB shall not be deemed to be a guarantor of such payments or
otherwise liable therefor.
8
<PAGE>
(c) This Agreement shall inure to the benefit of
and be binding upon and enforceable by the Company and its successors and
assigns.
(d) The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent as the Company would be required to perform if no such succession had
taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid that assumes and agrees to perform this Agreement by operation of law
or otherwise.
12. SURVIVAL. The obligations of the parties hereto
pursuant to Sections 5, 6 and 17 hereof shall survive any termination of this
Agreement.
13. GOVERNING LAW. The provisions of this Agreement shall be
construed in accordance with the laws of the State of Florida.
14. SEVERABILITY. In the event that any provision or
portion of this Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect.
15. ENTIRE AGREEMENT, MODIFICATION AND WAIVER. This
Agreement contains the entire understanding of the parties hereto with respect
to the subject matter hereof. No modification or waiver of any provision of this
Agreement shall be binding unless executed in writing by all parties hereto. No
waiver of any provision of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), nor shall any
such waiver constitute a continuing waiver. The failure of the Executive or the
Company to insist upon strict compliance with any provision hereof shall not be
deemed to be a waiver of such provision or any other provision hereof.
16. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17. LEGAL EXPENSES. In the event that it shall be necessary or
desirable for the Executive to retain legal counsel (which may be counsel of the
Executive's choice) and/or incur other costs and expenses in connection with the
enforcement of any and all of his rights under this Agreement, including
participation in any proceeding contesting the validity or enforceability of
this Agreement, the Company shall pay (or the Executive shall be entitled to
recover from the Company, as the case may be) the Executive's reasonable
attorneys' fees and costs and expenses in connection with the enforcement of his
rights regardless of the final outcome.
18. NOTICES. Any notices, requests, demands and other
communications provided for by this Agreement shall be sufficient if in writing
and if sent by registered or certified mail to the Executive at the last address
he has provided in writing to the Company or to the Company at its principal
executive offices.
9
<PAGE>
IN WITNESS WHEREOF, the Executive and, pursuant to the authorization
from the Board, BankUnited and BankUnited, FSB have executed this Agreement as
of the date first above written.
BANKUNITED FINANCIAL CORPORATION
By:_______________________________
BANKUNITED, FSB
By:_______________________________
EXECUTIVE
___________________________________
Alfred R. Camner
10
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of this _____ day
of ____________, 1996, by and between Earline G. Ford (the "Executive") and
BankUnited Financial Corporation, a Florida corporation ("BankUnited"), and its
principal wholly owned subsidiary, BankUnited, FSB (BankUnited and BankUnited,
FSB are collectively referred to herein as the "Company" and are jointly and
severally obligated hereunder, subject to the provisions of Section 11(b)
hereof).
WHEREAS, the Executive has provided valuable service to the Company as
an executive officer and is currently serving as Executive Vice President of
BankUnited and Executive Vice President of BankUnited, FSB;
WHEREAS, the Board of Directors of BankUnited and the Board of Directors
of BankUnited, FSB (sometimes collectively referred to herein as the "Board")
have determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued dedication and
service of the Executive as a member of the Company's management;
WHEREAS, the Board in addition believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by a pending or threatened Change in Control of the Company
(as defined herein), and to encourage the Executive's full attention and
dedication to the Company;
WHEREAS, in order to accomplish these objectives, the Board has caused
the Company to enter into this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS. In addition to the words and terms defined
elsewhere herein, the following words and terms as used herein shall have the
meanings as set forth below, unless the context or use indicates a different
meaning:
(a) "CAUSE" means any action or inaction of the
Executive involving personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform the Executive's duties as described in Section 3, willful violation of
any law, rule or regulation (other than traffic violations or similar offenses),
or final cease-and-desist order, or material breach of any provision of this
Agreement.
(b) "CHANGE IN CONTROL" shall be deemed to have
occurred on the date when:
(i) A reorganization, merger or consolidation
of the Company shall have been consummated, in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the Company's
voting securities would be converted into cash, securities or other property,
other than a merger of the Company in which the holders of the Company's voting
1
<PAGE>
securities immediately prior to the merger have substantially the same
proportionate ownership of the voting securities of the surviving corporation
immediately after the merger;
(ii) Liquidation or dissolution of the
Company, or sale, lease, exchange or transfer (in one transaction or a series of
related transactions) of all or substantially all of the Company's assets shall
have been consummated; or
(iii) Any "person" (as such term is
defined in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934,
as amended [the "Exchange Act"]) or group of persons, excluding BankUnited and
any of its subsidiaries, other than Alfred R. Camner or a group which includes
Alfred R. Camner, shall have acquired direct or indirect beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) of securities of the
Company representing 51% or more of the voting power of the Company's then
outstanding securities;
provided, however, that a Change in Control shall not occur if the Chief
Executive Officer of the Company as of the date of this Agreement executes,
prior to or simultaneously with the occurrence of any one of the events set
forth in subsections (i), (ii) and (iii) of this Section 1(b), an employment
agreement with the entity or person that will acquire control of the Company or
all or substantially all of the Company's assets, or will result from a
reorganization, merger or consolidation of the Company, whereby the Chief
Executive Officer agrees to continue as the principal executive or principal
operating officer of the Company; and, provided further, that the renewal or
extension of the term of any employment agreement to which the Chief Executive
Officer is bound immediately prior to the Date of the Change in Control, or the
assumption of the obligations set forth in such agreement, shall not be deemed
to be the execution of an employment agreement by the Chief Executive Officer
for purposes hereof.
(c) "CONTRACT EXPIRATION DATE" means the date
one year from the Date of the Change in Control.
(d) "DATE OF THE CHANGE IN CONTROL" means the
date on which a Change in Control shall be deemed to have occurred.
(e) "DATE OF TERMINATION" means the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be; provided, however, that if the Executive's employment is terminated
by reason of the Executive's death or Disability, the Date of Termination shall
be the date of death of the Executive or the Disability Effective Date, as the
case may be.
(f) "DISABILITY" means any physical or mental
condition that wholly prevents the Executive from performing her duties for at
least six months after the commencement of such condition and that is determined
to be of a permanent duration by a physician acceptable to the Company and the
Executive or the Executive's legal representative (such agreement as to
acceptability not to be unreasonably withheld). If the Company determines in
good faith that the Disability of the Executive has occurred, it may give to the
Executive written notice of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective the Disability Effective Date, provided that the Executive
shall not
2
<PAGE>
have returned to full-time performance of the Executive's duties prior to the
Disability Effective Date. Any subsequent Disability, whether of a similar
nature or not, shall not be deemed a continuation of a prior Disability and, the
determination of time for the purposes of this provision shall recommence.
(g) "DISABILITY EFFECTIVE DATE" means the date
30 days following receipt by the Executive of notice from the Company of the
Company's intention to terminate the Executive's employment because of the
Executive's Disability.
(h) "EMPLOYMENT PERIOD" means the one-year
period commencing on the date of this Agreement, subject to renewal or extension
as provided in Section 2 hereof.
(i) "GOOD REASON" means the occurrence after a
Change in Control of any of the following:
(A) the assignment to the Executive of any
duties substantially inconsistent with and inferior to the position or positions
held, exercised by and assigned to the Executive immediately prior to the Date
of the Change in Control, or any other action by the Company that results in a
material diminution in such position, excluding for this purpose an
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(B) a reduction in the Executive's salary
as in effect immediately prior to the Date of the Change in Control or as the
same may be increased from time to time, provided, however, that if the
Executive terminates her employment after a Change in Control as a result of a
reduction in her salary of 5% or more, such termination shall be considered for
all purposes of this Agreement a termination by the Company Other than for
Cause;
(C) any failure by the Company to make
payments of all amounts due from time to time under all of the Company's benefit
plans for which the Executive is eligible;
(D) the Company's requiring the Executive
to be based at any office or location other than the location where the
Executive was employed immediately prior to the Date of the Change in Control,
or at any office or location within 25 miles from such location, or at such
other location as shall be mutually agreed to by the parties, except for travel
reasonably required in the performance of the Executive's responsibilities or a
relocation of the Executive on a temporary basis; or
(E) failure by the Company to comply with
the provisions of this Agreement or the failure of the Company to obtain the
assumption of the commitment to perform this Agreement by any successor
corporation.
(j) "HIGHEST SALARY RATE" means the higher of
the Executive's annual salary rate paid by the Company in effect as of the Date
of Termination or in effect immediately prior to the Date of the Change in
Control.
3
<PAGE>
(k) "NOTICE OF TERMINATION" means a written
notice that (i) indicates the specific termination provision in this Agreement
relied upon, (ii) in the case of termination for Cause or Good Reason, sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated, and (iii) if the Date of Termination is other than the date of
receipt of such notice, specifies the termination date.
(l) "OTHER THAN FOR CAUSE" means a termination
of the Executive's employment by the Company after a Change in Control that does
not qualify as a termination for death, Disability or Cause, or a termination of
the Executive's employment by the Executive after a Change in Control as a
result of a reduction in the Executive's salary of 5% or more.
(m) "OTHER THAN FOR GOOD REASON" means a
termination of the Executive's employment by the Executive after a Change in
Control that does not qualify as a termination for Good Reason.
(n) "RESIGNATION PAYMENT" means a lump sum cash
payment in an amount equal to twice the aggregate of the Executive's Highest
Salary Rate and twice her most recent Cash Bonus; provided, however, that such
amount should be reduced pursuant to Section 6(d) of the Agreement, if
applicable.
(o) "TERMINATION PAYMENT" means a lump sum cash
payment in an amount equal to twice the aggregate of the Executive's Highest
Salary Rate and twice her most recent Cash Bonus multiplied by one and one-half;
provided, however, that such amount should be reduced pursuant to Section 6(d)
of the Agreement, if applicable. The Termination Payment shall be paid to the
Executive as provided for in the trust agreement to be entered into by the
Company establishing a trust for the payment of the Termination Payment, or, in
the event that such trust is not established or sufficiently funded, then the
Termination Payment or any portion thereof not paid pursuant to such trust
agreement shall be paid to the Executive by the Company.
(p) "Vested Benefits" means all amounts earned by and
vested in the Executive pursuant to the plans, programs, policies and practices
of the Company, including, without limitation, the BankUnited Financial
Corporation Profit Sharing Plan, the Executive Retention Plan, disability
insurance plan, and group and supplemental life insurance plans. For purposes
hereof, Vested Benefits shall include continuation of the Executive's medical
insurance for nine months from the Date of Termination or until the Executive
becomes covered by another medical insurance plan or eligible for Medicare,
whichever is shorter.
2. EMPLOYMENT. The Company hereby agrees to continue to
employ the Executive and the Executive hereby agrees to continue to remain in
the employ of the Company during the Employment Period, on the terms and
conditions set forth herein. Prior to a Change in Control of the Company, this
Agreement may upon the affirmative action of the Board of Directors of the
Company be renewed for successive one-year periods, unless 30 days' advance
notice is given by the Executive to the Company regarding her termination of
this Agreement, or unless otherwise terminated pursuant to Sections 5(a) or 5(b)
hereof. If a Change in Control occurs and this Agreement and the Executive's
employment hereunder have not been previously terminated, then the
4
<PAGE>
Employment Period shall be extended through the Contract Expiration Date,
whereupon this Agreement shall expire, unless sooner terminated in accordance
with the provisions hereof.
3. POSITION AND DUTIES. The Executive shall serve as
Executive Vice President of BankUnited and of BankUnited, FSB and shall exercise
such authority and perform such executive duties as may from time to time be
assigned to the Executive by the Board or the Chief Executive Officer of the
Company. Such services shall be performed at the Company's principal executive
offices in Dade County, Florida, or at such other location as shall be mutually
agreed to by the parties. The Executive agrees that during the Employment Period
he will devote her full business time to her executive duties as described
herein and will perform such duties faithfully and efficiently. It is understood
that the Executive may be a director of other corporations and engage in
charitable, civic and similar pursuits if such activities do not interfere
unduly with her devoting her best efforts to the business of the Company.
4. COMPENSATION AND OTHER BENEFITS. During the Employment
Period, the Executive shall be compensated as follows:
(a) SALARY. He shall receive an annual salary
as set by the Compensation Committee of the Board of Directors, payable pursuant
to the Company's standard payroll practices for executives.
(b) OTHER BENEFITS. He shall be entitled to
receive the usual employee benefits afforded to employees of the Company, such
as medical, disability and life insurance benefits, in accordance with the
policies as may be set from time to time by the Board.
5. TERMINATION PRIOR TO A CHANGE IN CONTROL.
(a) TERMINATION. This Agreement and the
Executive's employment hereunder may be terminated by the Board or the Executive
Committee of the Board (the "Executive Committee") at any time prior to a Change
in Control of the Company, for any reason that the Board may determine in its
sole discretion, which reasons may include, without limitation, Cause or any
reasons other than Cause.
(b) DEATH OR DISABILITY. This Agreement shall
terminate automatically upon the Executive's death and may be terminated by the
Company upon the Executive's Disability.
(c) COMPENSATION. If the Executive's employment
is terminated for any reason prior to a Change in Control, this Agreement shall
terminate without further obligations to the Executive or her legal
representatives, other than those obligations accrued or earned and vested (if
applicable) by the Executive as of the Date of Termination in accordance with
the plans, programs, policies and practices of the Company under which such
obligations accrued or were earned and vested (if applicable). Such obligations
shall be paid in accordance with the terms and provisions of the plans,
programs, policies and practices of the Company under which they accrued or were
earned and vested (if applicable). Notwithstanding the foregoing, severance or
other compensation or benefits payable upon termination, other than those
expressly required by law, shall be determined and paid only in the sole
discretion of the Board or the Executive Committee.
5
<PAGE>
6. TERMINATION AFTER A CHANGE IN CONTROL. If a Change in
Control occurs and this Agreement and the Executive's employment hereunder have
not been previously terminated, then the Executive shall be entitled to receive
certain payments and benefits as provided in this Section 6 if the Executive's
employment is terminated after the Change in Control.
(a) Termination for Death or Disability. This
Agreement shall terminate automatically upon the Executive's death and may be
terminated by the Company upon the Executive's Disability. Upon a termination by
reason of the Executive's death or Disability, the Company shall, within 30 days
after the Date of Termination, pay to the Executive or her estate or
beneficiaries, as the case may be, (i) any compensation or other obligations
accrued for periods prior to the Date of Termination, (ii) the Termination
Payment, and (iii) the Executive's Vested Benefits as of the Date of
Termination.
(b) Termination by the Company.
(i) Cause. This Agreement and the
Executive's employment hereunder may be terminated by the Company for Cause.
Upon a termination for Cause, this Agreement shall terminate without further
obligations to the Executive, other than those obligations accrued or earned and
vested (if applicable) by the Executive through the Date of Termination in
accordance with the plans, programs, policies and practices of the Company under
which such obligations accrued or were earned and vested (if applicable). Such
obligations shall be paid to the Executive in accordance with the terms and
provisions of the plans, programs, policies and practices of the Company under
which they accrued or were earned and vested (if applicable).
(ii) Other than for Cause. If this
Agreement and the Executive's employment hereunder is terminated by the Company
Other than for Cause, the Company shall, within 30 days after the Date of
Termination, pay to the Executive (A) any compensation or other obligations
accrued for periods prior to the Date of Termination, (B) the Termination
Payment, and (C) the Executive's Vested Benefits as of the Date of Termination.
(c) Termination by the Executive.
(i) Good Reason.
(A) The Executive may terminate this
Agreement and her employment hereunder for a Good Reason if any termination is
initiated by the Executive at any time following the Date of the Change in
Control, then such termination shall be deemed conclusively to be a termination
for Good Reason for all purposes of this Agreement and shall not be challenged
for any reason by the Company or by any person acting or purporting to act for
or on behalf of the Company.
(B) Upon a termination for Good Reason
as provided in subsection (c)(i)(A) of Section 6, the Company shall, within 30
days after the Date of Termination, pay to the Executive (1) any compensation or
other obligations accrued for periods prior to the Date of Termination, (2) the
Resignation Payment, and (3) the Executive's Vested Benefits as of the Date of
Termination.
6
<PAGE>
(C) The failure by the Executive to
set forth in the Notice of Termination any fact or circumstance that contributes
to a showing of Good Reason shall not waive any right of the Executive hereunder
or preclude the Executive from asserting such fact or circumstance in enforcing
her rights hereunder.
(ii) OTHER THAN FOR GOOD REASON. If this
Agreement and the Executive's employment hereunder is terminated by the
Executive Other than for Good Reason, this Agreement shall terminate without
further obligations to the Executive, other than those obligations accrued or
earned and vested (if applicable) by the Executive through the Date of
Termination in accordance with the plans, programs, policies and practices of
the Company under which such obligations accrued or were earned and vested (if
applicable). Such obligations shall be paid to the Executive in accordance with
the terms and provisions of the plans, programs, policies and practices of the
Company under which they accrued or were earned and vested (if applicable). If
the Executive terminates her employment Other than for Good Reason, he shall not
be entitled to receive the Resignation Payment or the Termination Payment.
(d) APPLICATION OF SECTION 280G OF THE INTERNAL
REVENUE CODE. It is the intention of the parties that, in the event of a Change
in Control of the Company, the payments under Section 6 shall not constitute
"excess parachute payments" within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended, and any regulations promulgated by the
Internal Revenue Service thereunder. In the event that the independent
accountants acting as auditors for the Company on the Date of the Change in
Control (or another accounting firm designated by them) determine that the
payments under Section 6 may constitute "excess parachute payments," the amounts
payable pursuant to Section 6 shall be reduced to the maximum amount that may be
paid without constituting the payments "excess parachute payments." Such
determination pursuant to this Section 6(d) shall take into account (i) whether
the payments under this Agreement are "parachute payments" within the meaning of
Section 280G and, if so, (ii) the amount of payments under Section 6 that
constitutes "reasonable compensation" within the meaning of Section 280G.
Nothing contained in this Agreement shall prevent the Company after a Change in
Control from agreeing to pay the Executive compensation or benefits in excess of
those provided in this Agreement.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or practices
provided by the Company or any of its subsidiaries and for which the Executive
may qualify, nor shall anything herein limit or otherwise affect such rights as
the Executive may have under any stock option or other agreements with the
Company or any of its subsidiaries. Any amounts that are Vested Benefits or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of the Company at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program, and nothing
contained in this Agreement shall serve or be construed to divest the Executive
of any such benefits.
8. NO MITIGATION. The Executive shall not be required to
mitigate the amount of any payment or benefit provided for in this Agreement by
seeking other employment or otherwise. Income earned by the Executive following
the Date of Termination shall have no effect whatsoever on the Company's
obligations and the Executive's rights hereunder, and shall not give rise to any
set-off or recoupment by the Company.
7
<PAGE>
9. CERTAIN REGULATORY CONSIDERATIONS.
(a) If the Executive is suspended and/or
temporarily prohibited from participating in the conduct of BankUnited, FSB's
affairs by a notice served under Sections 8(e)(3) or (g)(1) of the Federal
Deposit Insurance Act (12 U.S.C. 1818 (e)(3) or (g)(1)), (the "Act"), the
Company's obligations under this Agreement shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in such notice
are dismissed, the Company shall pay to the Executive all of the compensation
withheld while the obligations under this Agreement were suspended and shall
reinstate its obligations hereunder.
(b) If the Executive is removed and/or
permanently prohibited from participating in the conduct of BankUnited, FSB's
affairs by an order issued under Sections 8(e)(4) or (g)(1) of the Act (12
U.S.C. 1818 (e)(4) or (g)(1)), all obligations of the Company shall terminate as
of the effective date of the order, but vested rights of the parties hereto
shall not be affected.
(c) If BankUnited, FSB is in default (as defined
in Section 3(x)(1) of the Act), all obligations under this Agreement shall
terminate as of the date of default, but this subsection shall not affect any
vested rights of the parties hereto.
(d) All obligations under this Agreement shall
be terminated, except to the extent determined that continuation of this
Agreement is necessary for the continued operation of BankUnited, FSB, (i) by
the Director of the Office of Thrift Supervision or her designee (the
"Director"), at the time the Federal Deposit Insurance Corporation ("FDIC") or
the Resolution Trust Corporation (the "RTC") enters into an agreement to provide
assistance to or on behalf of BankUnited, FSB under the authority contained in
Section 13(c) of the Act; or (ii) by the Director, at the time the Director
approves a supervisory merger to resolve problems related to operation of
BankUnited, FSB or when BankUnited, FSB is determined by the Director to be in
an unsafe or unsound condition. Any rights of the parties hereto that have
already vested, however, shall not be affected by such action.
10. WITHHOLDING. The Company may withhold from any amounts
payable under this Agreement such federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or regulations.
11. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement is personal to the Executive
and, without the prior written consent of the Company, shall not be assignable
by the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the Executive
and the Executive's legal representatives.
(b) BankUnited and BankUnited, FSB shall be
jointly and severally obligated under this Agreement; provided, however, that to
the extent any payments provided for hereunder are obligations of BankUnited
only, BankUnited, FSB shall not be deemed to be a guarantor of such payments or
otherwise liable therefor.
8
<PAGE>
(c) This Agreement shall inure to the benefit of
and be binding upon and enforceable by the Company and its successors and
assigns.
(d) The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent as the Company would be required to perform if no such succession had
taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid that assumes and agrees to perform this Agreement by operation of law
or otherwise.
12. SURVIVAL. The obligations of the parties hereto
pursuant to Sections 5(c), 6 and 17 hereof shall survive any termination of this
Agreement.
13. GOVERNING LAW. The provisions of this Agreement shall be
construed in accordance with the laws of the State of Florida.
14. SEVERABILITY. In the event that any provision or portion
of this Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect.
15. ENTIRE AGREEMENT, MODIFICATION AND WAIVER. This
Agreement contains the entire understanding of the parties hereto with respect
to the subject matter hereof. No modification or waiver of any provision of this
Agreement shall be binding unless executed in writing by all parties hereto. No
waiver of any provision of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), nor shall any
such waiver constitute a continuing waiver. The failure of the Executive or the
Company to insist upon strict compliance with any provision hereof shall not be
deemed to be a waiver of such provision or any other provision hereof.
16. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17. LEGAL EXPENSES. In the event of any litigation arising
out of or related to this Agreement, the prevailing party shall be entitled to
recover all costs incurred, including reasonable attorneys' fees and trial and
appellate court costs.
18. NOTICES. Any notices, requests, demands and other
communications provided for by this Agreement shall be sufficient if in writing
and if sent by registered or certified mail to the Executive at the last address
he has provided in writing to the Company or to the Company at its principal
executive offices.
9
<PAGE>
IN WITNESS WHEREOF, _________ the Executive and, pursuant to the
authorization from the Board, BankUnited and BankUnited, FSB have executed this
Agreement as of the date first above written.
BANKUNITED FINANCIAL CORPORATION
By:
-----------------------------------
BANKUNITED, FSB
By:
-----------------------------------
EXECUTIVE
-----------------------------------
10
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of this _____ day
of ____________, 1996, by and between _________________ (the "Executive") and
BankUnited Financial Corporation, a Florida corporation ("BankUnited"), and its
principal wholly owned subsidiary, BankUnited, FSB (BankUnited and BankUnited,
FSB are collectively referred to herein as the "Company" and are jointly and
severally obligated hereunder, subject to the provisions of Section 11(b)
hereof).
WHEREAS, the Executive has provided valuable service to the Company as
an executive officer and is currently serving as of BankUnited and of
BankUnited, FSB;
WHEREAS, the Board of Directors of BankUnited and the Board of Directors
of BankUnited, FSB (sometimes collectively referred to herein as the "Board")
have determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued dedication and
service of the Executive as a member of the Company's management;
WHEREAS, the Board in addition believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by a pending or threatened Change in Control of the Company
(as defined herein), and to encourage the Executive's full attention and
dedication to the Company;
WHEREAS, in order to accomplish these objectives, the Board has caused
the Company to enter into this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS. In addition to the words and terms
defined elsewhere herein, the following words and terms as used herein shall
have the meanings as set forth below, unless the context or use indicates a
different meaning:
(a) "CAUSE" means any action or inaction of the
Executive involving personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform the Executive's duties as described in Section 3, willful violation of
any law, rule or regulation (other than traffic violations or similar offenses),
or final cease-and-desist order, or material breach of any provision of this
Agreement.
(b) "CHANGE IN CONTROL" shall be deemed to have
occurred on the date when:
(i) A reorganization, merger or
consolidation of the Company shall have been consummated, in which the Company
is not the continuing or surviving corporation or pursuant to which shares of
the Company's voting securities would be converted into cash, securities or
other property, other than a merger of the Company in which the holders of the
Company's voting
1
<PAGE>
securities immediately prior to the merger have substantially the same
proportionate ownership of the voting securities of the surviving corporation
immediately after the merger;
(ii) Liquidation or dissolution of the
Company, or sale, lease, exchange or transfer (in one transaction or a series of
related transactions) of all or substantially all of the Company's assets shall
have been consummated; or
(iii) Any "person" (as such term is defined in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
[the "Exchange Act"]) or group of persons, excluding BankUnited and any of its
subsidiaries, other than Alfred R. Camner or a group which includes Alfred R.
Camner, shall have acquired direct or indirect beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) of securities of the Company
representing 51% or more of the voting power of the Company's then outstanding
securities;
provided, however, that a Change in Control shall not occur if the Chief
Executive Officer of the Company as of the date of this Agreement executes,
prior to or simultaneously with the occurrence of any one of the events set
forth in subsections (i), (ii) and (iii) of this Section 1(b), an employment
agreement with the entity or person that will acquire control of the Company or
all or substantially all of the Company's assets, or will result from a
reorganization, merger or consolidation of the Company, whereby the Chief
Executive Officer agrees to continue as the principal executive or principal
operating officer of the Company; and, provided further, that the renewal or
extension of the term of any employment agreement to which the Chief Executive
Officer is bound immediately prior to the Date of the Change in Control, or the
assumption of the obligations set forth in such agreement, shall not be deemed
to be the execution of an employment agreement by the Chief Executive Officer
for purposes hereof.
(c) "CONTRACT EXPIRATION DATE" means the date
one year from the Date of the Change in Control.
(d) "DATE OF THE CHANGE IN CONTROL" means the
date on which a Change in Control shall be deemed to have occurred.
(e) "DATE OF TERMINATION" means the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be; provided, however, that if the Executive's employment is terminated
by reason of the Executive's death or Disability, the Date of Termination shall
be the date of death of the Executive or the Disability Effective Date, as the
case may be.
(f) "DISABILITY" means any physical or mental
condition that wholly prevents the Executive from performing his duties for at
least six months after the commencement of such condition and that is determined
to be of a permanent duration by a physician acceptable to the Company and the
Executive or the Executive's legal representative (such agreement as to
acceptability not to be unreasonably withheld). If the Company determines in
good faith that the Disability of the Executive has occurred, it may give to the
Executive written notice of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective the Disability Effective Date, provided that the Executive
shall not
2
<PAGE>
have returned to full-time performance of the Executive's duties prior to the
Disability Effective Date. Any subsequent Disability, whether of a similar
nature or not, shall not be deemed a continuation of a prior Disability and, the
determination of time for the purposes of this provision shall recommence.
(g) "DISABILITY EFFECTIVE DATE" means the date
30 days following receipt by the Executive of notice from the Company of the
Company's intention to terminate the Executive's employment because of the
Executive's Disability.
(h) "EMPLOYMENT PERIOD" means the one-year
period commencing on the date of this Agreement, subject to renewal or extension
as provided in Section 2 hereof.
(i) "GOOD REASON" means the occurrence after a
Change in Control of any of the following:
(A) the assignment to the Executive of any
duties substantially inconsistent with and inferior to the position or positions
held, exercised by and assigned to the Executive immediately prior to the Date
of the Change in Control, or any other action by the Company that results in a
material diminution in such position, excluding for this purpose an
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(B) a reduction in the Executive's salary
as in effect immediately prior to the Date of the Change in Control or as the
same may be increased from time to time, provided, however, that if the
Executive terminates his employment after a Change in Control as a result of a
reduction in his salary of 5% or more, such termination shall be considered for
all purposes of this Agreement a termination by the Company Other than for
Cause;
(C) any failure by the Company to make
payments of all amounts due from time to time under all of the Company's benefit
plans for which the Executive is eligible;
(D) the Company's requiring the Executive
to be based at any office or location other than the location where the
Executive was employed immediately prior to the Date of the Change in Control,
or at any office or location within 25 miles from such location, or at such
other location as shall be mutually agreed to by the parties, except for travel
reasonably required in the performance of the Executive's responsibilities or a
relocation of the Executive on a temporary basis; or
(E) failure by the Company to comply with
the provisions of this Agreement or the failure of the Company to obtain the
assumption of the commitment to perform this Agreement by any successor
corporation.
(j) "HIGHEST SALARY RATE" means the higher of
the Executive's annual salary rate paid by the Company in effect as of the Date
of Termination or in effect immediately prior to the Date of the Change in
Control.
3
<PAGE>
(k) "NOTICE OF TERMINATION" means a written
notice that (i) indicates the specific termination provision in this Agreement
relied upon, (ii) in the case of termination for Cause or Good Reason, sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated, and (iii) if the Date of Termination is other than the date of
receipt of such notice, specifies the termination date.
(l) "OTHER THAN FOR CAUSE" means a termination
of the Executive's employment by the Company after a Change in Control that does
not qualify as a termination for death, Disability or Cause, or a termination of
the Executive's employment by the Executive after a Change in Control as a
result of a reduction in the Executive's salary of 5% or more.
(m) "OTHER THAN FOR GOOD REASON" means a
termination of the Executive's employment by the Executive after a Change in
Control that does not qualify as a termination for Good Reason.
(n) "RESIGNATION PAYMENT" means a lump sum cash
payment in an amount equal to the aggregate of the Executive's Highest Salary
Rate and his most recent Cash Bonus; provided, however, that such amount should
be reduced pursuant to Section 6(d) of the Agreement, if applicable.
(o) "TERMINATION PAYMENT" means a lump sum cash
payment in an amount equal to the aggregate of the Executive's Highest Salary
Rate and his most recent Cash Bonus multiplied by one and one-half; provided,
however, that such amount should be reduced pursuant to Section 6(d) of the
Agreement, if applicable.
(p) "VESTED BENEFITS" means all amounts earned
by and vested in the Executive pursuant to the plans, programs, policies and
practices of the Company, including, without limitation, the BankUnited
Financial Corporation Profit Sharing Plan, the Executive Retention Plan,
disability insurance plan, and group and supplemental life insurance plans. For
purposes hereof, Vested Benefits shall include continuation of the Executive's
medical insurance for nine months from the Date of Termination or until the
Executive becomes covered by another medical insurance plan or eligible for
Medicare, whichever is shorter.
2. EMPLOYMENT. The Company hereby agrees to continue to
employ the Executive and the Executive hereby agrees to continue to remain in
the employ of the Company during the Employment Period, on the terms and
conditions set forth herein. Prior to a Change in Control of the Company, this
Agreement may upon the affirmative action of the Board of Directors of the
Company be renewed for successive one-year periods, unless 30 days' advance
notice is given by the Executive to the Company regarding his/her termination of
this Agreement, or unless otherwise terminated pursuant to Sections 5(a) or 5(b)
hereof. If a Change in Control occurs and this Agreement and the Executive's
employment hereunder have not been previously terminated, then the Employment
Period shall be extended through the Contract Expiration Date, whereupon this
Agreement shall expire, unless sooner terminated in accordance with the
provisions hereof.
3. Position and Duties. The Executive shall serve as
___________________________ of BankUnited and of BankUnited, FSB and shall
exercise such authority and perform such executive
4
<PAGE>
duties as may from time to time be assigned to the Executive by the Board or the
Chief Executive Officer of the Company. Such services shall be performed at the
Company's principal executive offices in Dade County, Florida, or at such other
location as shall be mutually agreed to by the parties. The Executive agrees
that during the Employment Period he will devote his full business time to his
executive duties as described herein and will perform such duties faithfully and
efficiently. It is understood that the Executive may be a director of other
corporations and engage in charitable, civic and similar pursuits if such
activities do not interfere unduly with his devoting his best efforts to the
business of the Company.
4. COMPENSATION AND OTHER BENEFITS. During the
Employment Period, the Executive shall be compensated as follows:
(a) SALARY. He shall receive an annual salary
as set by the Compensation Committee of the Board of Directors, payable pursuant
to the Company's standard payroll practices for executives.
(b) OTHER BENEFITS. He shall be entitled to
receive the usual employee benefits afforded to employees of the Company, such
as medical, disability and life insurance benefits, in accordance with the
policies as may be set from time to time by the Board.
5. TERMINATION PRIOR TO A CHANGE IN CONTROL.
(a) TERMINATION. This Agreement and the
Executive's employment hereunder may be terminated by the Board or the Executive
Committee of the Board (the "Executive Committee") at any time prior to a Change
in Control of the Company, for any reason that the Board may determine in its
sole discretion, which reasons may include, without limitation, Cause or any
reasons other than Cause.
(b) DEATH OR DISABILITY. This Agreement shall
terminate automatically upon the Executive's death and may be terminated by the
Company upon the Executive's Disability.
(c) COMPENSATION. If the Executive's employment
is terminated for any reason prior to a Change in Control, this Agreement shall
terminate without further obligations to the Executive or his legal
representatives, other than those obligations accrued or earned and vested (if
applicable) by the Executive as of the Date of Termination in accordance with
the plans, programs, policies and practices of the Company under which such
obligations accrued or were earned and vested (if applicable). Such obligations
shall be paid in accordance with the terms and provisions of the plans,
programs, policies and practices of the Company under which they accrued or were
earned and vested (if applicable). Notwithstanding the foregoing, severance or
other compensation or benefits payable upon termination, other than those
expressly required by law, shall be determined and paid only in the sole
discretion of the Board or the Executive Committee.
6. TERMINATION AFTER A CHANGE IN CONTROL. If a Change in Control
occurs and this Agreement and the Executive's employment hereunder have not been
previously terminated, then the Executive shall be entitled to receive certain
payments and benefits as provided in this Section 6 if the Executive's
employment is terminated after the Change in Control.
5
<PAGE>
(a) TERMINATION FOR DEATH OR DISABILITY. This
Agreement shall terminate automatically upon the Executive's death and may be
terminated by the Company upon the Executive's Disability. Upon a termination by
reason of the Executive's death or Disability, the Company shall, within 30 days
after the Date of Termination, pay to the Executive or his estate or
beneficiaries, as the case may be, (i) any compensation or other obligations
accrued for periods prior to the Date of Termination, (ii) the Termination
Payment, and (iii) the Executive's Vested Benefits as of the Date of
Termination.
(b) TERMINATION BY THE COMPANY.
(i) CAUSE. This Agreement and the
Executive's employment hereunder may be terminated by the Company for Cause.
Upon a termination for Cause, this Agreement shall terminate without further
obligations to the Executive, other than those obligations accrued or earned and
vested (if applicable) by the Executive through the Date of Termination in
accordance with the plans, programs, policies and practices of the Company under
which such obligations accrued or were earned and vested (if applicable). Such
obligations shall be paid to the Executive in accordance with the terms and
provisions of the plans, programs, policies and practices of the Company under
which they accrued or were earned and vested (if applicable).
(ii) OTHER THAN FOR CAUSE. If this
Agreement and the Executive's employment hereunder is terminated by the Company
Other than for Cause, the Company shall, within 30 days after the Date of
Termination, pay to the Executive (A) any compensation or other obligations
accrued for periods prior to the Date of Termination, (B) the Termination
Payment, and (C) the Executive's Vested Benefits as of the Date of Termination.
(c) TERMINATION BY THE EXECUTIVE.
(i) GOOD REASON.
(A) The Executive may terminate this
Agreement and his employment hereunder for a Good Reason; provided, however,
that no such termination for Good Reason may occur during the six-month period
immediately following the Date of the Change in Control; and, provided further,
if any termination is initiated by the Executive during the 30-day period
immediately following the end of six months from the Date of the Change in
Control, then such termination shall be deemed conclusively to be a termination
for Good Reason for all purposes of this Agreement and shall not be challenged
for any reason by the Company or by any person acting or purporting to act for
or on behalf of the Company.
(B) Upon a termination for Good Reason
as provided in subsection (c)(i)(A) of Section 6, the Company shall, within 30
days after the Date of Termination, pay to the Executive (1) any compensation or
other obligations accrued for periods prior to the Date of Termination, (2) the
Resignation Payment, and (3) the Executive's Vested Benefits as of the Date of
Termination.
(C) The failure by the Executive to
set forth in the Notice of Termination any fact or circumstance that contributes
to a showing of Good Reason shall not waive
6
<PAGE>
any right of the Executive hereunder or preclude the Executive from asserting
such fact or circumstance in enforcing his rights hereunder.
(ii) OTHER THAN FOR GOOD REASON. If this
Agreement and the Executive's employment hereunder is terminated by the
Executive Other than for Good Reason, this Agreement shall terminate without
further obligations to the Executive, other than those obligations accrued or
earned and vested (if applicable) by the Executive through the Date of
Termination in accordance with the plans, programs, policies and practices of
the Company under which such obligations accrued or were earned and vested (if
applicable). Such obligations shall be paid to the Executive in accordance with
the terms and provisions of the plans, programs, policies and practices of the
Company under which they accrued or were earned and vested (if applicable). If
the Executive terminates his employment Other than for Good Reason, he shall not
be entitled to receive the Resignation Payment or the Termination Payment.
(d) APPLICATION OF SECTION 280G OF THE INTERNAL
REVENUE CODE. It is the intention of the parties that, in the event of a Change
in Control of the Company, the payments under Section 6 shall not constitute
"excess parachute payments" within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended, and any regulations promulgated by the
Internal Revenue Service thereunder. In the event that the independent
accountants acting as auditors for the Company on the Date of the Change in
Control (or another accounting firm designated by them) determine that the
payments under Section 6 may constitute "excess parachute payments," the amounts
payable pursuant to Section 6 shall be reduced to the maximum amount that may be
paid without constituting the payments "excess parachute payments." Such
determination pursuant to this Section 6(d) shall take into account (i) whether
the payments under this Agreement are "parachute payments" within the meaning of
Section 280G and, if so, (ii) the amount of payments under Section 6 that
constitutes "reasonable compensation" within the meaning of Section 280G.
Nothing contained in this Agreement shall prevent the Company after a Change in
Control from agreeing to pay the Executive compensation or benefits in excess of
those provided in this Agreement.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or practices
provided by the Company or any of its subsidiaries and for which the Executive
may qualify, nor shall anything herein limit or otherwise affect such rights as
the Executive may have under any stock option or other agreements with the
Company or any of its subsidiaries. Any amounts that are Vested Benefits or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of the Company at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program, and nothing
contained in this Agreement shall serve or be construed to divest the Executive
of any such benefits.
8. NO MITIGATION. The Executive shall not be required to
mitigate the amount of any payment or benefit provided for in this Agreement by
seeking other employment or otherwise. Income earned by the Executive following
the Date of Termination shall have no effect whatsoever on the Company's
obligations and the Executive's rights hereunder, and shall not give rise to any
set-off or recoupment by the Company.
7
<PAGE>
9. CERTAIN REGULATORY CONSIDERATIONS.
(a) If the Executive is suspended and/or
temporarily prohibited from participating in the conduct of BankUnited, FSB's
affairs by a notice served under Sections 8(e)(3) or (g)(1) of the Federal
Deposit Insurance Act (12 U.S.C. 1818 (e)(3) or (g)(1)), (the "Act"), the
Company's obligations under this Agreement shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in such notice
are dismissed, the Company shall pay to the Executive all of the compensation
withheld while the obligations under this Agreement were suspended and shall
reinstate its obligations hereunder.
(b) If the Executive is removed and/or
permanently prohibited from participating in the conduct of BankUnited, FSB's
affairs by an order issued under Sections 8(e)(4) or (g)(1) of the Act (12
U.S.C. 1818 (e)(4) or (g)(1)), all obligations of the Company shall terminate as
of the effective date of the order, but vested rights of the parties hereto
shall not be affected.
(c) If BankUnited, FSB is in default (as defined
in Section 3(x)(1) of the Act), all obligations under this Agreement shall
terminate as of the date of default, but this subsection shall not affect any
vested rights of the parties hereto.
(d) All obligations under this Agreement shall
be terminated, except to the extent determined that continuation of this
Agreement is necessary for the continued operation of BankUnited, FSB, (i) by
the Director of the Office of Thrift Supervision or his/her designee (the
"Director"), at the time the Federal Deposit Insurance Corporation ("FDIC") or
the Resolution Trust Corporation (the "RTC") enters into an agreement to provide
assistance to or on behalf of BankUnited, FSB under the authority contained in
Section 13(c) of the Act; or (ii) by the Director, at the time the Director
approves a supervisory merger to resolve problems related to operation of
BankUnited, FSB or when BankUnited, FSB is determined by the Director to be in
an unsafe or unsound condition. Any rights of the parties hereto that have
already vested, however, shall not be affected by such action.
10. WITHHOLDING. The Company may withhold from any
amounts payable under this Agreement such federal, state or local taxes as shall
be required to be withheld pursuant to any applicable law or regulations.
11. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement is personal to the Executive
and, without the prior written consent of the Company, shall not be assignable
by the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the Executive
and the Executive's legal representatives.
(b) BankUnited and BankUnited, FSB shall be
jointly and severally obligated under this Agreement; provided, however, that to
the extent any payments provided for hereunder are obligations of BankUnited
only, BankUnited, FSB shall not be deemed to be a guarantor of such payments or
otherwise liable therefor.
8
<PAGE>
(c) This Agreement shall inure to the benefit of
and be binding upon and enforceable by the Company and its successors and
assigns.
(d) The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent as the Company would be required to perform if no such succession had
taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid that assumes and agrees to perform this Agreement by operation of law
or otherwise.
12. SURVIVAL. The obligations of the parties hereto
pursuant to Sections 5(c), 6 and 17 hereof shall survive any termination of this
Agreement.
13. GOVERNING LAW. The provisions of this Agreement shall be
construed in accordance with the laws of the State of Florida.
14. SEVERABILITY. In the event that any provision or
portion of this Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect.
15. ENTIRE AGREEMENT, MODIFICATION AND WAIVER. This
Agreement contains the entire understanding of the parties hereto with respect
to the subject matter hereof. No modification or waiver of any provision of this
Agreement shall be binding unless executed in writing by all parties hereto. No
waiver of any provision of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), nor shall any
such waiver constitute a continuing waiver. The failure of the Executive or the
Company to insist upon strict compliance with any provision hereof shall not be
deemed to be a waiver of such provision or any other provision hereof.
16. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17. LEGAL EXPENSES. In the event of any litigation arising
out of or related to this Agreement, the prevailing party shall be entitled to
recover all costs incurred, including reasonable attorneys' fees and trial and
appellate court costs.
18. NOTICES. Any notices, requests, demands and other
communications provided for by this Agreement shall be sufficient if in writing
and if sent by registered or certified mail to the Executive at the last address
he has provided in writing to the Company or to the Company at its principal
executive offices.
9
<PAGE>
IN WITNESS WHEREOF, _________ the Executive and, pursuant to the
authorization from the Board, BankUnited and BankUnited, FSB have executed this
Agreement as of the date first above written.
BANKUNITED FINANCIAL CORPORATION
By:
-----------------------------------
BANKUNITED, FSB
By:
-----------------------------------
EXECUTIVE
-----------------------------------
10
EXHIBIT 11.1
BANKUNITED FINANCIAL CORPORATION
CALCULATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
CALCULATION OF PRIMARY EARNINGS PER COMMON SHARE
Net income before cumulative effect of change in accounting
principle ......................................................... $ 2,586 $ 6,240 $ 2,474
Preferred stock dividends ........................................... (2,145) (2,210) (2,069)
Reduction of interest expense due to assumed exercise of stock
options, net of taxes ............................................. 3 44 1
--------- ---------- ----------
Net income available to common shares before cumulative effect of
change in accounting principle .................................... 444 4,074 406
Cumulative effect of change in accounting principle ................. -- -- (195)
--------- ---------- ----------
Net income available to common shares ............................... $ 444 $ 4,074 $ 211
========= ========== ==========
Weighted average number of common shares outstanding
during the period ................................................. 4,306 2,022 1,957
Assumed exercise of stock options (Modified Treasury Stock Method) . 252 274 218
--------- ---------- ----------
Weighted average number of common share equivalents assumed
outstanding during the period ..................................... 4,558 2,296 2,175
========= ========== ==========
Earnings per share before cumulative effect of change in
accounting principle .............................................. $ .10 $ 1.77 $ 0.19
Cumulative effect of change in accounting principle ................. -- -- (0.09)
---------- ---------- ----------
Primary earnings per shares ......................................... $ .10 $ 1.77 $ .10
========= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
CALCULATION OF FULLY DILUTED EARNINGS PER COMMON SHARE
Net income before cumulative effect of change in account
principle ........................................................ $ 2,586 $ 6,240 $ 2,474
Preferred stock dividends ........................................ (2,145) (1,035) (2,069)
Reduction of interest expense due to assumed exercise of stock
options, net of taxes ......................................... 3 40 1
--------- ---------- ----------
Net income available to common shares before cumulative effect of
change in accounting principle ................................. 444 5,245 406
Cumulative effect of change in accounting principle ............. -- -- (195)
--------- ---------- ----------
Net income available to common shares ............................ $ 444 $ 5,245 $ 211
========= ========== ==========
Weighted average number of common shares outstanding
during the period .............................................. 4,306 2,022 1,957
Assumed exercise of stock options (Modified Treasury Stock
Method) .......................................................... 252 274 218
Assumed conversion of preferred stock ............................ -- 1,863 --
--------- ---------- ----------
Weighted average number of fully diluted common shares assumed
outstanding during the period .................................. 4,558 4,159 2,175
========= ========== ==========
Earnings per share before cumulative effect of change in
accounting principle ........................................... $ .10 $ 1.26 $ 0.19
Cumulative effect of change in accounting principle ............. -- -- (0.09)
---------- ---------- ----------
Fully diluted earnings per share ................................. $ .10 $ 1.26 $ 0.10
========== ========== ==========
</TABLE>
EXHIBIT 12.1
<TABLE>
<CAPTION>
BANKUNITED FINANCIAL CORPORATION
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
FOR THE YEAR ENDED SEPTEMBER 30,
----------------------------------------------
1996 1995 1994 1993 1992
----------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Fixed charges (excluding interest on deposits):
Interest on Borrowings 13,832 8,456 4,951 1,949 1,888
Rent (33%) 302 320 256 202 205
----------------------------------------------
Total fixed charges 14,134 8,776 5,207 2,151 2,093
Income before income taxes and
extraordinary items 4,243 9,981 3,607 6,356 4,248
----------------------------------------------
Earnings 18,377 18,757 8,814 8,507 6,341
==============================================
Total fixed charges 14,134 8,776 5,207 2,151 2,093
Preferred stock dividends on a pretax basis 3,460 3,536 3,016 2,386 1,373
----------------------------------------------
Combined fixed charges and
preferred stock dividends 17,594 12,312 8,223 4,537 3,466
==============================================
Ratio of earnings to combined fixed charges
and preferred stock dividends 1.05:1 1.52:1 1.07:1 1.87:1 1.83:1
==============================================
Fixed charges (including interest on deposits):
Interest on Deposits 20,791 17,849 11,344 10,261 12,134
Interest on Borrowings 13,832 8,456 4,951 1,949 1,888
Rent (33%) 302 320 256 202 205
----------------------------------------------
Total fixed charges 34,925 26,625 16,551 12,412 14,227
Income before income taxes and
extraordinary items 4,243 9,981 3,697 6,356 4,248
----------------------------------------------
Earnings 39,468 36,606 20,158 18,768 18,475
==============================================
Total fixed charges 34,925 26,625 16,551 12,412 14,227
Preferred stock dividends on a pretax basis 3,460 3,536 3,016 2,386 1,373
----------------------------------------------
Combined fixed charges and
preferred stock dividends 38,384 30,161 19,567 14,798 15,600
==============================================
Ratio of earnings to combined fixed charges
and preferred stock dividends 1.02:1 1.21:1 1.03:1 1.27:1 1.18:1
==============================================
</TABLE>
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
---------------------------
BankUnited FSB
255 ALHAMBRA CIRCLE
CORAL GABLES, FL 33134
Bay Holdings, Inc
255 ALHAMBRA CIRCLE
CORAL GABLES, FL 33134
T & D Properties, Inc.
255 ALHAMBRA CIRCLE
CORAL GABLES, FL 33134
BankUnited Mortgage Corporation
255 ALHAMBRA CIRCLE
CORAL GABLES, FL 33134
BU Ventures
255 ALHAMBRA CIRCLE
CORAL GABLES, FL 33134
SCG Mortgage Corporation
4000 Hollywood Boulevard
Hollywood, Florida 33021
Incorporated in the State of Delaware
Suncoast Finance Corporation
Corporate Trust Center
4000 Hollywood Boulevard
Hollywood, Florida 33021
Incorporated in the State of Delaware
Suncoast Management Corporation
Corporation Trust Center
4000 Hollywood Boulevard
Hollywood, Florida 33021
Incorporated in the State of Delaware
SCS Ventures, Incorporated
4000 Hollywood Boulevard
Hollywood, Florida 33021
Incorporated in the State of Florida
SCG Holdings, Inc.
4000 Hollywood Boulevard
Hollywood, Florida 33021
Incorporated in the State of Florida
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-76878, No. 33-76884, No. 33-76882 and
333-432111) of BankUnited Financial Corporation of our report dated December
14, 1996 appearing on page 54 of this Form 10-K.
/s/ PRICE WATERHOUSE LLP
- -------------------------
PRICE WATERHOUSE LLP
Miami, Florida
December 14, 1996
