AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1997
REGISTRATION NO. 333-35781
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
BANKUNITED FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
FLORIDA 6035 65-0377773
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
<TABLE>
<S> <C>
ALFRED R. CAMNER
CHAIRMAN OF THE BOARD
255 ALHAMBRA CIRCLE BANKUNITED FINANCIAL CORPORATION
CORAL GABLES, FLORIDA 33134 255 ALHAMBRA CIRCLE
(305) 569-2000 CORAL GABLES, FLORIDA 33134
(305) 569-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
---------------
COPIES TO:
<TABLE>
<S> <C>
MARSHA D. BILZIN, ESQ. DAVE M. MUCHNIKOFF, P.C.
STUZIN AND CAMNER, SILVER, FREEDMAN & TAFF, L.L.P.
PROFESSIONAL ASSOCIATION 1100 NEW YORK AVENUE, N.W.
550 BILTMORE WAY, SUITE 700 WASHINGTON, D.C. 20005
CORAL GABLES, FLORIDA 33134 (202) 414-6100
(305) 442-4994
</TABLE>
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of the Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 30, 1997
PROSPECTUS
3,200,000 SHARES
BANKUNITED FINANCIAL CORPORATION
CLASS A COMMON STOCK
----------------
BankUnited Financial Corporation (the "Company"), is hereby offering (the
"Offering") 3,200,000 shares of its Class A Common Stock, par value $.01 per
share (the "Class A Common Stock"). The Company is the holding company for
BankUnited, FSB, Coral Gables, Florida (the "Bank").
Each share of Class A Common Stock is entitled to one-tenth vote on all
matters upon which stockholders have the right to vote. At September 25, 1997
holders of Class A Common Stock of the Company, assuming exercise of all
outstanding options and warrants to acquire Class A Common Stock of the
Company, were entitled to cast 921,055 votes of a total of 2,765,088 votes
entitled to vote at any meeting of stockholders of the Company. See
"Description of Capital Stock--Class A Common Stock." On September 25, 1997 the
closing bid and asked prices of the Class A Common Stock, as quoted on Nasdaq,
were $13.3125 and $13.375, respectively, and the last reported sale price was
$13.3125.
THE SHARES OF CLASS A COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS OR
SAVINGS ACCOUNTS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION (THE "FDIC") OR ANY OTHER GOVERNMENTAL AGENCY.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS, FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH PROSPECTIVE
INVESTOR.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) THE COMPANY(2)
<S> <C> <C> <C>
Per Share of Class A Common Stock $ $ $
Total(3) ........................ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the underwriters named in the
"Underwriting" section of this Prospectus (the "Underwriters") against
certain liabilities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act"). See "Underwriting."
(2) Before deducting estimated expenses of $410,000 relating to the
Offering payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up
to 480,000 additional newly issued shares of Class A Common Stock from
the Company solely to cover over-allotments, if any. To the extent that
the option is exercised, the Underwriters will offer the additional
shares of Class A Common Stock at the Price to Public shown above. If
the option is exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to the Company will be $ , $ , and $
, respectively. See "Underwriting."
The shares of Class A Common Stock are offered by the Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters, and subject to their right to withdraw, modify, correct and
reject orders in whole or in part. It is expected that delivery of the
certificates representing the shares of Class A Common Stock will be made
against payment therefor at the office of Friedman, Billings, Ramsey & Co.,
Inc., or in book entry form through the book entry facilities of the Depository
Trust Company on or about , 1997.
<TABLE>
<S> <C>
FRIEDMAN, BILLINGS, RAMSEY PAINEWEBBER
& CO., INC. INCORPORATED
</TABLE>
The date of this Prospectus is , 1997.
<PAGE>
[MAP OF FLORIDA INDICATING BANKUNITED BRANCH OFFICES]
- --------------------------------------------------------------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS,
SYNDICATE SHORT COVERING TRANSACTIONS AND PENALTY BIDS. ANY OF THE FOREGOING
TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME WITHOUT NOTICE. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
i
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN
OR INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. UNLESS OTHERWISE INDICATED,
THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-
ALLOTMENT OPTION WILL NOT BE EXERCISED.
BANKUNITED FINANCIAL CORPORATION
GENERAL
The Company is a Florida corporation organized for the purpose of becoming
the savings and loan holding company for BankUnited, FSB (the "Bank"). This
holding company reorganization, together with the Bank's conversion from a
Florida-chartered stock savings bank (which was founded in 1984) to a federally
chartered stock savings bank, became effective on March 5, 1993. At June 30,
1997, the Company had $1.1 billion in deposits, $101.4 million in stockholders'
equity, and over $1.8 billion in assets. Based on the latest available
information, the Bank is the fourth largest publicly held financial institution
headquartered in Florida, based on asset size. After completion of the recently
announced sales of two of the largest financial institutions in Florida, the
Bank expects to become the second largest publicly held financial institution
headquartered in the state.
The Company currently has fifteen branch offices in Dade, Broward and Palm
Beach Counties, Florida ("South Florida") and anticipates opening at least six
additional branches by June 30, 1998 in its market area, either by acquisition
or de novo branching, and may expand into other parts of Florida. 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 Florida single-family residential
mortgage loans, and to a lesser extent, to purchase and originate commercial
real estate, commercial business and consumer loans. The Company also invests
in tax certificates and other permitted investments. 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 non-interest overhead expenses incurred in
operations.
On November 15, 1996, the Company acquired Suncoast Savings and Loan
Association, FSA ("Suncoast"), a federally chartered savings association with
assets of $409.4 million at September 30, 1996, and merged Suncoast into the
Bank. The merger increased the Company's deposit market share, particularly in
Broward County, Florida while permitting the Company to achieve economies
associated with an in-market merger, and should enable the Company to compete
more effectively with larger super-regional financial institutions operating in
Florida. On September 19, 1997, the Company also signed a definitive agreement
to acquire Consumers Bancorp, Inc., the parent company of Consumers Savings
Bank ("Consumers"), a Florida chartered savings and loan with assets of $102
million at June 30, 1997. See "Business Strategy--Acquisitions and Branching
Activity" for a further discussion of these acquisitions.
The Bank is a member of the Federal Home Loan Bank system (the "FHLB") 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") to the maximum extent
permitted by law.
The Company's executive offices are located at 255 Alhambra Circle, Coral
Gables, Florida 33134, and its telephone number is (305) 569-2000.
1
<PAGE>
BUSINESS STRATEGY
OPERATING PLAN. The Company's operating plan emphasizes (i) rapidly
expanding the Company's deposit base by providing convenience, competitive
rates and personalized service in its market area and continuing expansion of
the Company's branch network through de novo branching or the acquisition of
branches of, and mergers with, existing financial institutions; (ii)
concentrating lending activities on purchasing single-family residential
mortgage loans and originating such loans as favorable market opportunities
arise; (iii) expanding the Company's commercial and multi-family real estate,
commercial business, and real estate construction lending; (iv) increasing
non-interest income and (v) maintaining asset quality.
DEPOSIT OPPORTUNITIES. The Company focuses on attracting depositors by
stressing convenience, competitive rates and personalized service. As the
super-regional banking companies acquire and close branches, the Company has
identified certain locations for potential expansion. The Company emphasizes
personalized service by a local financial institution to differentiate itself
from the super- regionals that do business in the South Florida market. For the
nine months ended June 30, 1997 deposits at the Company's branches increased by
$594.8 million, or 117.5% from September 30, 1996. Of this growth, $323.7
million was acquired with Suncoast, with $271.1 million of deposits internally
generated.
RESIDENTIAL MORTGAGE LOAN PURCHASES. Since inception in 1984, the
Company's primary source of earning assets has been the purchase of single
family residential mortgages in the secondary market. Management believes the
Company has developed an expertise in making such purchases including
underwriting each loan pursuant to the Company's underwriting standards prior
to purchase. The anticipated future growth in the Company's assets will be
primarily through the purchase of single family residential mortgages.
COMMERCIAL LOAN PRODUCT AVAILABILITY. The Company believes the rapid
consolidation of the South Florida banking market has created and will continue
to create opportunities to originate commercial real estate loans, generally
between approximately $250,000 and $5 million in principal amount, to small to
medium sized companies. The Company has hired seasoned loan officers to take
advantage of these opportunities.
INCREASING NON-INTEREST INCOME. In order to increase non-interest income,
the Company recently initiated a program to sell, on a periodic basis, packages
of adjustable rate residential mortgage loans, servicing retained. In September
1997 the Company sold its first package totalling $30.1 million of loans,
generating a pre-tax gain of approximately $500,000. See "Risk
Factors--Composition of Residential and Commercial Loan Portfolio." The Company
has also recently established a subsidiary to broker, with other financial
institutions, newly originated commercial loans that do not meet the Bank's
underwriting and/or pricing criteria, and a subsidiary to sell annuity products
in the Bank's branch offices. Additionally, the Company will periodically bid
on and may purchase private or agency packages of residential loan servicing.
All of these activities should increase non-interest income.
MAINTAINING ASSET QUALITY. The Company has historically been able to
maintain asset quality as shown by its relatively low level of non-performing
assets to total assets over the last five years. Approximately 87% of the
Company's loan portfolio is in one-to-four family mortgages which are generally
considered less risky than other types of loans. At June 30, 1997, the
Company's non-performing loans as a percentage of total loans was .65%. See
"Risk Factors--Risks Associated with the Company's ARMs," "--Composition of
Residential and Commercial Real Estate Loan Portfolio" and "--Allowance for
Loan Losses."
ACQUISITIONS AND BRANCHING ACTIVITY. The Company has acquired, is
acquiring and will continue to acquire financial institutions and branches in
South Florida. In connection with this activity, the
2
<PAGE>
Company periodically has discussions with and receives financial information on
other financial institutions which may lead to the acquisition of all or part
of that financial institution by the Company.
On September 19, 1997 the Company signed a definitive agreement to acquire
Consumers. The Company intends to merge Consumers into the Bank. Consumers had
assets of $102 million and approximately $60.3 million and $5.7 million in
residential mortgage loans and commercial real estate loans, respectively, at
June 30, 1997. At that date, $453,000 or .68% of Consumers' total loans were
non-performing and Consumers had an allowance for loan losses of $331,000.
Consumers currently operates two branches which the Company plans to merge,
after the acquisition, into its already existing nearby branches. Consumers
also is in the process of renovating a new branch facility, in the Falls area
of southern Dade County, which the Company will retain. The merger is subject
to regulatory and Consumers' stockholders' approval. The acquisition is
expected to be completed by March, 1998.
The purchase price for Consumers will be approximately $11.0 million, paid
in a combination of cash and stock. Subject to adjustment, each share of
Consumers stock outstanding immediately prior to the effective time of the
merger will be converted into the right to receive merger consideration of
$21.33 in cash or 2.081 shares of the Company's Class A Common Stock. Each
shareholder may elect to receive the merger consideration in cash, the
Company's Class A Common Stock, or a combination of both. However, at least 45%
of the total merger consideration will be paid in Class A Common Stock, and the
agreed value of 2.081 shares is subject to change based upon the fair market
value of the Class A Common Stock prior to the effective time. The maximum
number of shares of Class A Common Stock which may be issued pursuant to the
merger is 1,073,171 shares.
On November 15, 1996, the Company acquired Suncoast, a federally chartered
savings association with assets of $409.4 million at September 30, 1996, and
merged Suncoast into the Bank. The merger increased the Company's deposit
market share, particularly in Broward County, while permitting the Company to
achieve economies associated with an in-market merger, and should enable the
Company to compete more effectively with larger super-regional financial
institutions in South Florida. Of Suncoast's six branch offices in South
Florida, five continue to operate and one has been consolidated with an
existing Bank branch office. Additionally, as part of the Suncoast acquisition,
the Company acquired approximately $95.8 million in commercial real estate
loans and $14.1 million in real estate construction loans. See
"Business--Lending Activities--Commercial Real Estate Lending," "--Real Estate
Construction Lending," and "--Commercial Business Lending." Through internal
growth and as a result of the acquisition, the Company's total assets increased
from $824 million at September 30, 1996 to $1.8 billion at June 30, 1997.
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.
The Company also opened branches in Boynton Beach, Florida in June 1996,
West Palm Beach, Florida in September 1996, and Boca Hamptons, Florida in
August 1997. The Company currently has three additional branches under
construction in the Coconut Creek, northeast Dade County and Miami Airport West
areas of South Florida, which are scheduled to open within the next six months.
RESULTS
The Company had net income after preferred stock dividends of $3.3 million
and $1.1 million for the nine months ended June 30, 1997 and June 30, 1996,
respectively. Net income after preferred stock dividends was $0.4 million in
fiscal 1996 compared to $4.0 million in fiscal 1995. The decrease in net income
was primarily attributable to the pretax gain recorded in the fourth quarter of
fiscal 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 SAIF of $2.6 million ($1.6 million after
tax) in the fourth quarter of fiscal 1996. The annualized return on average
assets (which is calculated
3
<PAGE>
using net income before preferred stock dividends) was .54% and .54% for the
nine months ended June 30, 1997 and 1996, respectively.
The Company seeks to maintain asset quality and control credit risk. While
the loan portfolio has grown substantially in recent years, the Company's ratio
of non-performing assets to total assets has decreased from 1.10% at September
30, 1995 to .95% at September 30, 1996 and .66% at June 30, 1997. The ratio of
the loan loss allowance to total loans and to non-performing loans was .21% and
32.2%, respectively, at June 30, 1997.
The implementation of the Company's business strategy has produced for the
Bank tangible capital, core capital and risk-based capital ratios of 8.1%, 8.1%
and 14.0%, respectively, at June 30, 1997. The Bank currently exceeds all
applicable minimum regulatory capital requirements. The Company's total
stockholders' equity was $101 million at June 30, 1997 and its equity to assets
ratio at that date was 5.6%.
PREFERRED STOCK RESTRUCTURING; CONVERSION TO COMMON STOCK.
In August 1997, the Company purchased 448,583 shares of its 9%
Noncumulative Perpetual Preferred Stock (the "9% Preferred Stock") at $10.25
per share. The purchase was made pursuant to a tender offer which expired on
August 15, 1997. After the purchase, 701,417 shares of 9% Preferred Stock were
still outstanding. Pursuant to its terms, that stock may be redeemed by the
Company after September 30, 1998 at the stated redemption price.
In addition, the Company is in the process of redeeming the outstanding
shares of its 8% Noncumulative Convertible Preferred Stock, Series 1996 (the
"Series 1996 Preferred Stock") at $15.00 per share, effective October 10, 1997.
Holders of the Series 1996 Preferred Stock may redeem their shares or convert
them to shares of Class A Common Stock. The conversion rate is approximately
1.67 shares of Class A Common Stock for each share of Series 1996 Preferred
Stock, subject to adjustment upon the occurrence of certain events. Based on
current market conditions, the Company anticipates that a substantial amount of
the Series 1996 Preferred Stock will be converted to Class A Common Stock. If
all outstanding shares of the Series 1996 Preferred Stock are converted,
approximately 1,537,333 additional shares of Class A Common Stock will be
outstanding.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Class A Common Stock offered hereby ...... 3,200,000 shares
Class A Common Stock to be outstanding
after the Offering ..................... 13,349,650(1) shares
Offering Price ........................... $ per Share.
Use of Proceeds ........................... The Company intends to use the net proceeds of
the offering for general corporate purposes
consistent with its business strategy, including but
not limited to, acquisitions by either the Company
or the Bank, expansion of the Company's or the
Bank's operations, capital contributions to the Bank
to support growth and for working capital, and the
possible repurchase of shares of the Company's
preferred stock, subject to acceptable market
conditions.
Voting Rights ........................... Each share of Class A Common Stock entitles the
holder thereof to one-tenth vote on all matters
upon which stockholders have the right to vote. The
Class A Common Stock does not have cumulative
voting rights in the election of directors. See
"Description of Capital Stock--Class A Common
Stock."
Risk Factors .............................. An investment in the Class A Common Stock
involves substantial risks that should be considered
by prospective purchasers. See "Risk Factors."
Nasdaq Stock Market Symbol ............... BKUNA
</TABLE>
- ----------------
(1) Includes shares of Class A Common Stock issued and outstanding as of
September 25, 1997, and the maximum number of shares of Class A Common
Stock which could be issued upon the conversion of 922,400 shares of
Series 1996 Preferred Stock issued and outstanding as of September 25,
1997, which series has been called for redemption as of October 10, 1997,
or which may be converted into Class A Common Stock by holders prior to
that date. Does not include shares of Class A Common Stock which could be
issued upon the exercise of options or warrants, or pursuant to the
acquisition of Consumers.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA
The information for, and as of the end of, the nine months ended June 30,
1997 and 1996 is unaudited, but in the opinion of management reflects all
adjustments (consisting only of normal recurring accruals) necessary for a fair
presentation of the results for such periods. The results for the nine months
ended June 30, 1997 are not necessarily indicative of the results that may be
expected for the entire year. The summary consolidated financial information
should be read in conjunction with the Company's Consolidated Financial
Statements and Notes thereto incorporated by reference into this Prospectus.
<TABLE>
<CAPTION>
AT OR FOR THE NINE
MONTHS ENDED
JUNE 30,
-----------------------------
1997(1) 1996
------------ ----------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
OPERATIONS DATA:
Interest income ................................................... $ 73,932 $ 36,953
Interest expense ................................................... 50,013 24,934
----------- -----------
Net interest income before provision (credit) for loan losses ...... 23,919 12,019
Provision (credit) for loan losses ................................. 695 (225)
----------- -----------
Net interest income after provision (credit) for loan losses ...... 23,224 12,244
----------- -----------
Non-interest income:
Service fees ...................................................... 2,298 432
Gain on sales of loans and mortgage-backed securities, net ......... 11 8
Gain (loss) on sales of other assets, net(2) ........................ 1 (6)
Other ............................................................... 207 51
----------- -----------
Total non-interest income ....................................... 2,517 485
----------- -----------
Non-interest expense:
Employee compensation and benefits ................................. 6,745 3,161
Occupancy and equipment ............................................. 2,594 1,232
Insurance (3) ...................................................... 701 748
Professional fees ................................................... 1,063 687
Other ............................................................... 5,611 2,470
----------- -----------
Total non-interest expense ................................. 16,714 8,298
----------- -----------
Income before income taxes and Preferred Stock dividends ............ 9,027 4,431
Provision for income taxes (4) .................................... 3,594 1,693
----------- -----------
Net income before Preferred Stock dividends ........................ 5,433 2,738
Preferred Stock dividends .......................................... 2,167 1,609
----------- -----------
Net income after Preferred Stock dividends ........................ $ 3,266 $ 1,129
=========== ===========
FINANCIAL CONDITION DATA:
Total assets ......................................................... $1,807,192 $ 801,531
Loans receivable, net, and mortgage-backed securities(5) ............ 1,587,124 702,529
Investments, overnight deposits, tax certificates, repurchase
agreements, certificates of deposits and other interest earning
assets ............................................................ 115,262 79,991
Total liabilities ................................................... 1,705,777 731,871
Deposits ............................................................ 1,100,923 470,236
Borrowings ......................................................... 447,259 244,775
Trust Preferred Securities .......................................... 116,000 --
Total stockholders' equity .......................................... 101,415 69,660
Common stockholders' equity ....................................... 67,311 45,346
PER COMMON SHARE DATA:
Primary earnings per common share and common equivalent share ...... $ .39 $ .28
=========== ===========
Earnings per common share assuming full dilution .................. $ .38 $ .28
=========== ===========
Weighted average number of common shares and common
equivalent shares assumed outstanding during the period:
Primary ............................................................ 8,376,849 3,997,331
Fully diluted ...................................................... 9,304,102 3,997,331
Equity per common share (6) .......................................... $7.59 $ 7.95
Fully converted tangible equity per common share (6) ............... $6.74 $ 7.20
<CAPTION>
AT OR FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------
1996 1995 1994 1993
---------------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
OPERATIONS DATA:
Interest income ................................................... $ 52,132 $ 39,419 $ 30,421 $ 25,722
Interest expense ................................................... 34,622 26,305 16,295 12,210
----------- ----------- ----------- -----------
Net interest income before provision (credit) for loan losses ...... 17,510 13,114 14,126 13,512
Provision (credit) for loan losses ................................. (120) 1,221 1,187 1,052
----------- ----------- ----------- -----------
Net interest income after provision (credit) for loan losses ...... 17,630 11,893 12,939 12,460
----------- ----------- ----------- -----------
Non-interest income:
Service fees ...................................................... 597 423 358 221
Gain on sales of loans and mortgage-backed securities, net ......... 5 239 150 1,496
Gain (loss) on sales of other assets, net(2) ........................ (6) 9,569 -- --
Other ............................................................... 53 6 46 2
----------- ----------- ----------- -----------
Total non-interest income ....................................... 649 10,237 554 1,719
----------- ----------- ----------- -----------
Non-interest expense:
Employee compensation and benefits ................................. 4,275 3,997 3,372 2,721
Occupancy and equipment ............................................. 1,801 1,727 1,258 978
Insurance (3) ...................................................... 3,610 1,027 844 835
Professional fees ................................................... 929 1,269 833 543
Other ............................................................... 3,421 4,129 3,579 2,746
----------- ----------- ----------- -----------
Total non-interest expense ................................. 14,036 12,149 9,886 7,823
----------- ----------- ----------- -----------
Income before income taxes and Preferred Stock dividends ............ 4,243 9,981 3,607 6,356
Provision for income taxes (4) .................................... 1,657 3,741 1,328 2,318
----------- ----------- ----------- -----------
Net income before Preferred Stock dividends ........................ 2,586 6,240 2,279 4,038
Preferred Stock dividends .......................................... 2,145 2,210 2,069 1,513
----------- ----------- ----------- -----------
Net income after Preferred Stock dividends ........................ $ 441 $ 4,030 $ 210 $ 2,525
=========== =========== =========== ===========
FINANCIAL CONDITION DATA:
Total assets ......................................................... $ 824,360 $ 608,415 $ 551,075 $ 435,378
Loans receivable, net, and mortgage-backed securities(5) ............ 716,550 506,132 470,154 313,899
Investments, overnight deposits, tax certificates, repurchase
agreements, certificates of deposits and other interest earning
assets ............................................................ 87,662 88,768 64,783 100,118
Total liabilities ................................................... 755,249 562,670 509,807 397,859
Deposits ............................................................ 506,106 310,074 347,795 295,108
Borrowings ......................................................... 237,775 241,775 158,175 97,775
Trust Preferred Securities .......................................... -- -- -- --
Total stockholders' equity .......................................... 69,111 45,745 41,268 30,273
Common stockholders' equity ....................................... 44,807 21,096 16,667 17,162
PER COMMON SHARE DATA:
Primary earnings per common share and common equivalent share ...... $ .10 $ 1.77 $ .10 $ 1.42
=========== =========== =========== ===========
Earnings per common share assuming full dilution .................. $ .10 $ 1.26 $ .10 $ 1.00
=========== =========== =========== ===========
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
Fully diluted ...................................................... 4,558,521 4,158,564 2,175,210 3,248,618
Equity per common share (6) .......................................... $ 7.85 $ 10.20 $ 8.33 $ 8.86
Fully converted tangible equity per common share (6) ............... $ 7.13 $ 8.15 $ 7.39 $ 7.57
<CAPTION>
1992
-----------
<S> <C>
OPERATIONS DATA:
Interest income ................................................... $ 24,243
Interest expense ................................................... 14,022
-----------
Net interest income before provision (credit) for loan losses ...... 10,221
Provision (credit) for loan losses ................................. 70
-----------
Net interest income after provision (credit) for loan losses ...... 10,151
-----------
Non-interest income:
Service fees ...................................................... 142
Gain on sales of loans and mortgage-backed securities, net ......... 94
Gain (loss) on sales of other assets, net(2) ........................ 2
Other ............................................................... 25
-----------
Total non-interest income ....................................... 263
-----------
Non-interest expense:
Employee compensation and benefits ................................. 1,986
Occupancy and equipment ............................................. 940
Insurance (3) ...................................................... 697
Professional fees ................................................... 542
Other ............................................................... 2,002
-----------
Total non-interest expense ................................. 6,167
-----------
Income before income taxes and Preferred Stock dividends ............ 4,247
Provision for income taxes (4) .................................... 1,538
-----------
Net income before Preferred Stock dividends ........................ 2,709
Preferred Stock dividends .......................................... 875
-----------
Net income after Preferred Stock dividends ........................ $ 1,834
===========
FINANCIAL CONDITION DATA:
Total assets ......................................................... $ 345,931
Loans receivable, net, and mortgage-backed securities(5) ............ 250,606
Investments, overnight deposits, tax certificates, repurchase
agreements, certificates of deposits and other interest earning
assets ............................................................ 83,445
Total liabilities ................................................... 322,907
Deposits ............................................................ 275,026
Borrowings ......................................................... 42,241
Trust Preferred Securities .......................................... --
Total stockholders' equity .......................................... 16,797
Common stockholders' equity ....................................... 11,134
PER COMMON SHARE DATA:
Primary earnings per common share and common equivalent share ...... $ 1.27
===========
Earnings per common share assuming full dilution .................. $ .92
===========
Weighted average number of common shares and common
equivalent shares assumed outstanding during the period:
Primary ............................................................ 1,448,449
Fully diluted ...................................................... 2,376,848
Equity per common share (6) .......................................... $ 8.51
Fully converted tangible equity per common share (6) ............... $ 6.86
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE NINE
MONTHS ENDED
JUNE 30,
---------------------
1997(1) 1996
---------- ----------
(DOLLARS IN
THOUSANDS,
EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
SELECTED FINANCIAL RATIOS: (Annualized where appropriate)
PERFORMANCE RATIOS:
Return on average assets (7) ....................................... .54% .54%
Return on average common equity ................................. 8.85 4.78
Return on average total equity (7) ................................. 7.84 6.43
Interest rate spread ............................................. 2.24 2.01
Net interest margin ............................................. 2.48 2.43
Dividend payout ratio (8) .......................................... 39.89 58.77
Ratio of earnings to combined fixed charges and preferred stock
dividends (9):
Excluding interest on deposits .................................... 1.29 1.14
Including interest on deposits .................................... 1.11 1.07
Total loans, net, and mortgage-backed securities to total deposits 147.14 149.40
Non-interest expenses to average assets ........................... 1.67 1.63
Efficiency ratio (10) ............................................. 59.35 65.00
ASSET QUALITY RATIOS:
Ratio of non-performing loans to total loans ..................... .65% .84%
Ratio of non-performing assets to total loans, real estate owned and
tax certificates ................................................ .77 1.06
Ratio of non-performing assets to total assets .................. .66 .92
Ratio of charge-offs to total loans .............................. .04 .05
Ratio of loan loss allowance to total loans ..................... .21 .34
Ratio of loan loss allowance to non-performing loans ............ 32.20 40.20
CAPITAL RATIOS:
Ratio of average common equity to average total assets ............ 3.68% 4.64%
Ratio of average total equity to average total assets ............ 6.90 8.36
Tangible capital-to-assets ratio (11) .............................. 8.08 6.92
Core capital-to-assets ratio (11) ................................. 8.08 6.92
Risk-based capital-to-assets ratio (11) ........................... 14.04 13.90
<CAPTION>
AT OR FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ------------ ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS: (Annualized where appropriate)
PERFORMANCE RATIOS:
Return on average assets (7) ....................................... .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 (7) ................................. 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 (8) .......................................... 82.95 35.42 96.79 40.66 34.97
Ratio of earnings to combined fixed charges and preferred stock
dividends (9):
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 (10) ............................................. 76.45 85.53 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 (11) .............................. 7.01 7.09 6.65 7.56 6.66
Core capital-to-assets ratio (11) ................................. 7.01 7.09 6.65 7.56 6.66
Risk-based capital-to-assets ratio (11) ........................... 14.19 15.79 14.13 15.85 14.42
</TABLE>
- ----------------
(1) Includes operations of Suncoast from date of acquisition on November 15,
1996.
(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.
(3) In 1996, the Company recorded a one time SAIF special assessment of $2.6
million ($1.6 million after tax).
(4) Amount reflects expense from change in accounting principle of $195,000
for fiscal 1994. See Note 15 of Notes to Consolidated Financial Statements
incorporated by reference into this Prospectus.
(5) Does not include mortgage loans held for sale (which at June 30, 1997
totaled $32.8 million).
(6) Equity per common share and fully converted tangible equity per common
share would have been $8.89 and $7.86, respectively, at June 30, 1997,
after giving effect to this offering and assuming the conversion of all of
the Company's Series 1996 Preferred Stock.
(7) Return on average assets and average total equity are calculated before
payment of preferred stock dividends.
(8) 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.
(9) 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.
(10) Efficiency ratio is calculated by dividing non-interest expenses less
non-interest income (excluding gains on sales of branches) by net interest
income.
(11) Regulatory capital ratio of the Bank, which as of June 30, 1997 does not
include $54.6 million in cash, an intercompany receivable and securities
held at the holding company level.
7
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, TOGETHER WITH THE OTHER
INFORMATION CONTAINED AND INCORPORATED BY REFERENCE IN THIS PROSPECTUS, THE
FOLLOWING FACTORS IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE PURCHASING
THE CLASS A COMMON STOCK OFFERED HEREBY. PROSPECTIVE INVESTORS SHOULD NOTE, IN
PARTICULAR, THAT THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"), THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES.
WHEN USED IN THIS PROSPECTUS, OR IN THE DOCUMENTS INCORPORATED BY REFERENCE
HEREIN, THE WORDS "ANTICIPATE," "BELIEVE," "ESTIMATE," "MAY," "INTEND" AND
"EXPECT" AND SIMILAR EXPRESSIONS IDENTIFY CERTAIN OF SUCH FORWARD-LOOKING
STATEMENTS. ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS COULD DIFFER MATERIALLY
FROM THOSE CONTEMPLATED, EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS
CONTAINED HEREIN. THE CONSIDERATIONS LISTED BELOW REPRESENT CERTAIN IMPORTANT
FACTORS THE COMPANY BELIEVES COULD CAUSE SUCH RESULTS TO DIFFER. THESE
CONSIDERATIONS ARE NOT INTENDED TO REPRESENT A COMPLETE LIST OF THE GENERAL OR
SPECIFIC RISKS THAT MAY AFFECT THE COMPANY. IT SHOULD BE RECOGNIZED THAT OTHER
RISKS, INCLUDING GENERAL ECONOMIC FACTORS AND EXPANSION STRATEGIES, MAY BE
SIGNIFICANT, PRESENTLY OR IN THE FUTURE, AND THE RISKS SET FORTH BELOW MAY
AFFECT THE COMPANY TO A GREATER EXTENT THAN INDICATED.
POTENTIAL IMPACT OF CHANGES IN INTEREST RATES
The Bank's profitability is dependent to a large extent on its net
interest income, which is the difference between its income on interest-earning
assets and its expense on interest-bearing liabilities. The Bank, like most
financial institutions, is affected by changes in general interest rate levels
and by other economic factors beyond its control. Interest rate risk arises
from mismatches (i.e., the interest sensitivity gap) between the dollar amount
of repricing or maturing assets and liabilities, and is measured in terms of
the ratio of the interest rate sensitivity gap to total assets. More assets
than liabilities repricing or maturing over a given time frame is considered
asset-sensitive and is reflected as a positive gap, and more liabilities than
assets repricing or maturing over a given time frame is considered
liability-sensitive and is reflected as a negative gap. An asset-sensitive
position (i.e., a positive gap) will generally enhance earnings in a rising
interest rate environment and will reduce earnings in a falling interest rate
environment, while a liability-sensitive position (i.e., a negative gap) will
generally enhance earnings in a falling interest rate environment and reduce
earnings in a rising interest rate environment. Fluctuations in interest rates
are not predictable or controllable. At June 30, 1997, the Bank had a one year
cumulative negative gap of 13.0%. This negative one year gap position may, as
noted above, have a negative impact on earnings in a rising interest rate
environment. See "Business--Asset and Liability Management."
There can be no assurances of the Company's ability to continue to achieve
positive net interest income. See "Business--Asset and Liability
Management--Gap Table."
RISKS ASSOCIATED WITH THE COMPANY'S ADJUSTABLE RATE MORTGAGE LOANS
The Company has purchased and intends to continue to purchase a
significant amount of residential mortgage loans. During the nine months ended
June 30, 1997 and the year ended September 30, 1996, the Company purchased
$545.4 million and $210.1 million, respectively, of one- to four family
residential loans, of which $289.3 million and $161.5 million, respectively,
were adjustable rate mortgage loans ("ARMs"). At June 30, 1997 the Company's
residential loan portfolio included $1.0 billion of ARMs (69% of the Company's
gross loan portfolio). The ARMs purchased by the Company generally have annual
interest rate caps that limit rate increases to 2% per year. Further, the ARMs
purchased by the Company provide for initial rates of interest below the rates
which would prevail were the index and margin used for repricing applied
initially (the "teaser rate period"). Although the Company attempts to mitigate
the risk of default on these loans by requiring that borrowers qualify for the
loan based upon the fully indexed rate, nonetheless these loans are subject to
increased risk of delinquency or default as the higher, fully indexed rate of
interest subsequently comes into effect upon repricing. As a result, management
believes that the Company's net interest margin could be negatively impacted in
a rapidly rising interest rate environment by increased delinquencies and
defaults.
8
<PAGE>
Also, if market interest rates rise rapidly, the annual and lifetime
interest rate caps on the ARMs may limit the increase in the interest rates on
the ARMs relative to the increase in market interest rates, and yields on ARMs
with teaser rates may be limited to repricing at interest rates below the
contractual index plus the margin. At June 30, 1997, $200.6 million of the
Company's ARM loans (13.5% of the Company's gross loan portfolio) were in the
teaser rate period with an average teaser rate of 5.97% and an average fully
indexed rate of 8.22%. Rapid increases in market interest rates may not be
fully reflected in loans which are in the teaser rate period and may,
accordingly have a negative impact on the Company's net interest margin.
COMPOSITION OF RESIDENTIAL AND COMMERCIAL LOAN PORTFOLIO
GEOGRAPHIC CONCENTRATION. Most of the loans in the Company's portfolio are
secured by real estate. At June 30, 1997, 39.7% of the Company's gross loans
receivable were secured by properties located in Florida, 14.0% by properties
located in California and the balance throughout the country. Therefore,
conditions in the real estate markets in which the collateral for the Company's
mortgage loans are located strongly influence the level of the Company's
non-performing loans and its results of operations. Real estate values are
affected by, among other things, changes in general or local economic
conditions, changes in governmental rules or policies, the availability of
loans to potential purchasers, and natural disasters. Declines in real estate
markets could negatively impact the value of the collateral securing the
Company's loans and its results of operations. In this regard, as a result of
the downturn in the California real estate market in 1993, the Company believes
that certain of its loans secured by real estate in California have current
loan to value ratios that are higher than those when the loans were originated.
In addition, both Florida and California are states that are subject to natural
disasters such as hurricanes, earthquakes and flooding. In the event a property
securing the loan incurs damage as a result of a natural disaster that is not
covered by homeowner's insurance, the Company's results of operations may be
negatively impacted. Damage from windstorm and flooding is generally covered by
homeowner's insurance, but earthquake damage is frequently not insured. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Lending Activities--Loan Portfolio."
DIVERSIFIED LENDING RISKS. The Company's recent operating strategy has
included an increased emphasis on originating and/or purchasing commercial real
estate (including multi-family residential) loans, and originating real estate
construction and commercial business loans. These lending categories are
generally considered to involve a higher degree of credit risk than that for
traditional single-family residential lending, because, among other factors,
such loans involve larger loan balances to a single borrower or groups of
related borrowers. At June 30, 1997, the Company had a balance of $126.4
million in commercial real estate loans, $8.5 million in construction loans and
$9.1 million in commercial business loans. As part of the Suncoast acquisition,
the Company acquired approximately $95.8 million in commercial real estate
loans and $14.1 million in real estate construction loans. The payment
experience on multi-family residential and commercial real estate loans
typically is dependent on the successful operation of the project (as opposed
to a desire by the borrower to continue to occupy the residence), and thus such
loans may be adversely affected to a greater extent by adverse conditions in
the real estate markets or in the economy generally. In addition to the
foregoing, multi-family residential and commercial real estate loans which are
not fully amortizing over their maturity and which have a balloon payment due
at their stated maturity, as would generally be the case with the Company's
multi-family residential and commercial real estate loans, involve a greater
degree of risk than fully amortizing loans. The ability of a borrower to make a
balloon payment typically will depend on its ability to either refinance the
loan or timely sell the underlying property.
If commercial properties are foreclosed upon, the Company may encounter
environmental problems with the properties. There is a risk that hazardous
substances or wastes, contaminants, pollutants or other environmentally
restricted substances could be discovered on the real estate owned (primarily
in the case of properties securing multi-family residential and commercial real
estate loans). In such event, the Company might be required to remove such
substances from the affected properties or to engage in abatement procedures at
its cost and expense. There can be no assurance that the cost of such removal
or abatement would not substantially exceed the value of the affected
properties or the loans secured by such properties; that the Company would have
adequate remedies against the prior
9
<PAGE>
owners or other responsible parties; or that the Company would be able to
resell the affected properties either prior to or following completion of any
such removal or abatement procedures. If such environmental problems are
discovered prior to foreclosure, the Company generally would not foreclose on
the related loan; however, the value of such property as collateral will
generally be substantially reduced and the Company may suffer a loss upon
collection of the loan as a result.
Risk of loss on a construction loan is dependent largely upon the
concurrence of the initial estimate of the property's value at completion of
construction and the estimated cost (including interest) of construction, as
well as the availability of permanent take-out financing. During the
construction phase, a number of factors could result in delays and cost
overruns. If the estimate of value proves to be inaccurate, the Company may be
confronted, at or prior to the maturity of the loan, with a project which, when
completed, has a value which is insufficient to ensure full repayment.
Unlike residential mortgage loans, which generally are made on the basis
of the borrower's ability to repay the loan from the borrower's employment and
other income and which are secured by real property the value of which tends to
be more easily ascertainable, commercial business loans are of higher risk and
typically are made on the basis of the borrower's ability to make repayment
from the cash flow of the borrower's business. As a result, the availability of
funds for the repayment of commercial business loans may be substantially
dependent on the success of the business itself. Further, the collateral
securing the loans may depreciate over time, may be difficult to appraise, and
may fluctuate in value based on the success of the business.
Accordingly, there can be no assurance that the Company's commercial real
estate, multi-family residential, real estate construction, and commercial
business loans will not be adversely affected by these and the other risks
related to such loans. See "Business--Lending Activities--Commercial Real
Estate Lending," "--Real Estate Construction Lending," and "--Commercial
Business Lending."
RISKS ASSOCIATED WITH LOANS HELD FOR SALE. The Company recently initiated
a program to sell packages of adjustable rate residential loans, servicing
retained, currently originated through its correspondent loan program. In
September 1997, the Company sold its first package, totaling $30.1 million of
residential loans which were either originated by the Company or acquired with
Suncoast. A substantial portion of the loans sold were loans secured by
properties located in South Florida and made to non-resident aliens or secured
by condominiums (both of which are viewed by the Company as potentially having
a greater degree of risk than other types of single family residential loans).
It is currently the Company's intention that future packages will consist of
newly originated loans secured by properties located in Florida and made to
non-resident aliens and/or secured by condominiums, or otherwise identified by
the Company as available for sale at the time of origination. These loans, when
originated, will be classified as available for sale and be subject to a lower
of cost or market adjustment, on a quarterly basis, depending on market
conditions.
In addition, the Company is in the process of refining its policy with
regard to loans currently in its portfolio which will be classified as
available for sale. Final implementaion of this policy could result in up to
15% of the Company's portfolio being reclassified. Any such reclassification is
not currently expected to result in any material lower of cost or market
adjustment or to impact net income. Since the Company does not currently intend
to hedge its available for sale loan portfolio, this portfolio will be subject
to adjustments, based on market conditions, which may adversely affect the
Company's results of operations.
ALLOWANCE FOR LOAN LOSSES
Industry experience indicates that a portion of the Company's loans will
become delinquent and a portion of the loans will require partial or entire
charge-off. Regardless of the underwriting criteria utilized by the Company,
losses may be experienced as a result of various factors beyond the Company's
control, including, among other things, changes in market conditions affecting
the value of properties and problems affecting the credit of the borrower. The
Company's determination of the adequacy of its allowance for loan losses is
based on various considerations, including an analysis of the risk
characteristics of various classifications of loans, previous loan loss
experience, specific loans which
10
<PAGE>
would have loan loss potential, delinquency trends, estimated fair value of the
underlying collateral, current economic conditions, the views of the Company's
regulators, and geographic and industry loan concentrations. Further, a
significant amount of the Company's loan portfolio was originated, purchased or
acquired over the last three years and, therefore, may be considered to be
subject to a greater likelihood of delinquency. If delinquency levels were to
increase, whether as a result of adverse general economic conditions,
especially in Florida and California where the Company's exposure is greatest,
or otherwise, the allowance for loan losses as determined by the Company may
not be adequate. As of June 30, 1997 the Company's allowance for loan losses
was $3.1 million or .21% of total loans. There can be no assurance that the
allowance will be adequate to cover loan losses or that the Company will not
experience significant losses in its loan portfolios which may require
significant increases to the provision for loan losses in the future. See
"Business--Lending Activities--Loan Portfolio Quality."
DISPARATE VOTING RIGHTS; CONTINUING INSIDER CONTROL OF THE COMPANY
The shares of Class A Common Stock are entitled to one-tenth vote per
share. The Company also has outstanding shares of Class B Common Stock entitled
to one vote per share and Series B Preferred Stock entitled to 2-1/2 votes per
share. As of September 1, 1997, directors, executive officers and holders of 5%
or more of the Company's equity securities held approximately 55% of the total
voting power of all outstanding voting stock of the Company. Upon completion of
the Offering, such persons will hold approximately 46% of the total voting
power of all outstanding voting stock of the Company, assuming that options
held by such persons are not exercised, such persons do not purchase any of the
shares offered hereby, and no outstanding convertible shares of stock of the
Company are converted.
The voting power of the directors, executive officers and holders of 5% or
more of the Company's equity securities and certain provisions of the Company's
Articles of Incorporation may discourage any proposed takeover of the Company
unless the terms thereof are approved by management. In addition, the Company's
Articles of Incorporation permit additional shares of Class A Common Stock to
be issued at any time which may have disproportionate voting rights or
preferences as to dividends or other rights, subject to stockholder approval in
certain circumstances. The Company, however, does not intend to issue
additional shares of such stock if the issuance would result in termination of
trading of the Class A Common Stock on Nasdaq. See "Legal Matters" and
"Description of Capital Stock."
CERTAIN POTENTIAL ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Articles of Incorporation and Bylaws
could delay or frustrate the removal of incumbent directors and could make more
difficult a merger, tender offer or proxy contest involving the Company, even
if such events could be perceived as beneficial to the interests of the
stockholders. In addition, certain provisions of state and federal law may also
have the effect of discouraging or prohibiting a future takeover attempt in
which stockholders of the Company might otherwise receive a substantial premium
for their shares over then-current market prices. See "Description of Capital
Stock--Certain Anti-Takeover Provisions."
COMPETITION
The Company faces substantial competition in purchasing and originating
real estate loans and in attracting deposits. The Company's competition in
originating real estate loans is principally from banks, other thrifts,
mortgage banking companies, real estate financing conduits, and small insurance
companies. In purchasing real estate loans the Company competes with other
participants in the secondary mortgage market. Many entities competing with the
Company enjoy competitive advantages over the Company relative to a potential
borrower or seller in terms of a prior business relationship, wide geographic
presence or more accessible branch office locations, the ability to offer
additional services or more favorable pricing alternatives, a lower origination
and operating cost structure, and other relevant items. The Company does not
have a significant market share of the real estate lending activities in the
areas in which it conducts operations, and increased competition in those areas
from traditional competitors or new sources could result in a decrease in the
origination or purchase of mortgage loans and could adversely affect the
Company's results of operations. In its deposit gathering
11
<PAGE>
activities, the Company competes with insured depository institutions such as
thrifts, credit unions, and banks, as well as uninsured investment alternatives
including money market funds. These competitors may offer higher rates than the
Company, which could result in the Company either attracting fewer deposits or
in requiring the Company to increase the rates it pays to attract deposits.
Increased deposit competition could adversely affect the Company's ability to
generate the funds necessary for its lending operations and could adversely
affect the Company's results of operations. See "Business--Market Area and
Competition."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Class A Common Stock in the
public market after the Offering could adversely affect the prevailing market
price of the Class A Common Stock. Upon completion of this offering, assuming
that (i) all outstanding shares of the Company's Series 1996 Preferred Stock
are converted, (ii) no currently outstanding options or warrants are exercised,
and (iii) the Underwriters' over-allotment option is exercised, the Company
will have outstanding 13,829,650 shares of Class A Common Stock. Of these
shares, the 3,680,000 shares sold in this offering will be freely transferable
under the Securities Act, unless they are held by "affiliates" of the Company
as that term is used under the Securities Act and the regulations thereunder.
Of the Class A Common Stock outstanding prior to completion of this
offering, 1,584,711 shares are held by affiliates of the Company and are
subject to the provisions of Rule 144. The Company periodically issues Class A
Common Stock and Class B Common Stock as compensation to employees and as
directors' fees, in lieu of paying such compensation and fees in cash. See
|P`Executive Compensation.|P' Prior to the Offering, a total of approximately
4,540,668 shares of Class A Common Stock could be issued on exercise of options
and warrants to purchase, or conversion of securities convertible into, Class A
Common Stock. Of such shares approximately 2,624,059 could be sold immediately
in the public market, and approximately 1,916,609 could be sold subject to the
provisions of Rule 144.
Under the terms of agreements not to sell shares of BankUnited's capital
stock entered into between the Underwriters and certain affiliated shareholders
("lock up agreements"), approximately 3,501,320 shares of the shares subject to
Rule 144 cannot be sold until 90 days after the effective date of the
Registration Statement of which this Prospectus is a part (the "Effective
Date"). After that date, each affiliated shareholder who is a party to a lock
up agreement will be entitled to sell, within any three-month period commencing
90 days after the Effective Date, a number of shares that does not exceed the
greater of (i) 1% of the then outstanding shares of Class A Common Stock
(approximately 133,496 shares immediately after this offering) or (ii) the
average weekly trading volume in the Class A Common Stock during the four
calendar weeks preceding such sale, subject to the filing of a Form 144 with
respect to such sale and certain other limitations and restrictions.
REGULATORY OVERSIGHT
The Bank is subject to extensive regulation, supervision and examination
by the OTS as its chartering authority and primary federal regulator, and by
the FDIC, which insures its deposits up to applicable limits. The Bank is a
member of the FHLB of Atlanta and is subject to certain limited regulation by
the Federal Reserve Board. As the holding company of the Bank, the Company is
also subject to regulation and oversight by the OTS. Such regulation and
supervision governs the activities in which an institution may engage and is
intended primarily for the protection of the FDIC insurance funds and
depositors. Regulatory authorities have been granted extensive discretion in
connection with their supervisory and enforcement activities and regulations
have been implemented which have increased capital requirements, increased
insurance premiums and have resulted in increased administrative, professional
and compensation expenses. Any change in the regulatory structure or the
applicable statutes or regulations could have a material impact on the Company
and the Bank and their operations. Additional legislation and regulations may
be enacted or adopted in the future which could significantly affect the
powers, authority and operations of the Bank and the Bank's competitors which
in turn could have a material adverse effect on the Bank and its operations.
See "Regulation."
12
<PAGE>
THE COMPANY
The Company is a Florida corporation organized for the purpose of becoming
the savings and loan holding company for the Bank. This holding company
reorganization, together with the Bank's conversion from a Florida-chartered
stock savings bank (which was founded in 1984) to a federally chartered stock
savings bank, became effective on March 5, 1993. At June 30, 1997, the Company
had $1.1 billion in deposits, $101.4 million in stockholders' equity and over
$1.8 billion in assets. Based on the latest available information, the Bank is
the fourth largest publicly held financial institution headquartered in
Florida, based on asset size. After completion of the recently announced sales
of two of the largest financial institutions in Florida, the Bank expects to
become the second largest publicly held financial institution in the state.
The Company currently has fifteen branch offices in South Florida and
anticipates opening at least six additional branches by June 30, 1998 in its
market area, either by acquisition or de novo branching, and may expand into
other parts of Florida. 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
Florida single-family residential mortgage loans, and to a lesser extent, to
purchase and originate commercial real estate, commercial business and consumer
loans. The Company also invests in tax certificates and other permitted
investments. 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 non-interest overhead expenses incurred in operations.
On September 19, 1997 the Company signed a definitive agreement to acquire
Consumers. The Company intends to merge Consumers into the Bank. Consumers had
assets of $102 million and approximately $60.3 million and $5.7 million in
residential mortgage loans and commercial real estate loans, respectively, at
June 30, 1997. At that date, $453,000 or .68% of Consumers total loans were
non-performing and Consumers had an allowance for loan losses of $331,000.
Consumers currently operates two branches which the Company plans to merge,
after the acquisition, into its already existing nearby branches. Consumers
also is in the process of renovating a new branch facility, in the Falls area
of southern Dade County, which the Company will retain. The merger is subject
to regulatory and Consumers' stockholders' approval. The acquisition is
expected to be completed by March, 1998.
The purchase price for Consumers will be approximately $11.0 million, paid
in a combination of cash and stock. Subject to adjustment, each share of
Consumers stock outstanding immediately prior to the effective time of the
merger will be converted into the right to receive merger consideration of
$21.33 in cash or 2.081 shares of the Company's Class A Common Stock. Each
shareholder may elect to receive the merger consideration in cash, the
Company's Class A Common Stock, or a combination of both. However, at least 45%
of the total merger consideration will be paid in Class A Common Stock, and the
agreed value of 2.081 shares is subject to change based upon the fair market
value of the Class A Common Stock prior to the effective time. The maximum
number of shares of Class A Common Stock which may be issued pursuant to the
merger is 1,073,171 shares.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Class A Common Stock
offered hereby, after deduction of the underwriting discounts and estimated
expenses, are estimated to be approximately $ ($ if the
Underwriters' over-allotment options are exercised in full). The Company
intends to use the net proceeds of the Offering for general corporate purposes
consistent with its business strategy, including but not limited to,
acquisitions by either the Company or the Bank, expansion of the Company's or
the Bank's operations, capital contributions to the Bank to support growth and
for working capital, and the possible repurchase of shares of the Company's
preferred stock, subject to acceptable market conditions.
13
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of June 30, 1997, as adjusted to give effect to the consummation of
(i) the tender offer by the Company, which expired on August 15, 1997, for any
and all shares of its outstanding 9% Noncumulative Perpetual Preferred Stock
and which resulted in the purchase of 448,583 shares of preferred stock, (ii)
the assumed conversion to Class A Common Stock of all 920,000 shares of its
outstanding 8% Noncumulative Convertible Preferred Stock, Series 1996, (iii)
the redemption of all outstanding subordinated notes, (iv) the issuance and
sale of the shares of Class A Common Stock offered hereby, and (v) the
acquisition and merger of Consumers and the assumed issuance of 1,073,171
shares of Class A Common Stock (based upon the maximum that could be issued) in
connection therewith. The following data should be read in conjunction with the
Consolidated Financial Statements and Notes thereto of the Company incorporated
by reference into this Prospectus.
<TABLE>
<CAPTION>
ACTUAL AS
AS OF JUNE 30, 1997 ADJUSTED (2)
--------------------- ---------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Deposits ................................................... $1,100,923 $1,183,206
FHLB advances ............................................. 446,484 455,484
Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trusts Holding Solely Junior
Subordinated Deferrable Interest Debentures of the
Company ................................................... 116,000 116,000
Subordinated notes .......................................... 775 --
---------- ----------
Total deposits and borrowed funds ........................ 1,664,182 1,754,690
---------- ----------
Stockholders' equity:
Preferred Stock, Series B, 8% Convertible and 9%
Perpetual, $.01 par value; authorized--10,000,000 shares;
issued and outstanding-- 2,998,688 shares as of June 30,
1997 and 1,630,105 shares as adjusted(1) .................. 30 16
Class A Common Stock, $.01 par value; authorized--
30,000,000 shares; issued and outstanding--8,593,356
shares as of June 30, 1997 and 14,399,860 shares as
adjusted ................................................... 86 144
Class B Common Stock, $.01 par value; authorized--
3,000,000 shares, issued and outstanding--275,685 shares as
of June 30, 1997 and as adjusted ........................... 3 3
Additional paid-in capital ................................. 90,780
Retained earnings .......................................... 10,546 10,546
Net unrealized losses on securities available for sale, net of
tax ...................................................... (30) (30)
---------- ----------
Total stockholders' equity .............................. 101,415
----------
Total deposits, borrowed funds and stockholders' equity $1,765,597 $
========== ==========
</TABLE>
- ----------------
(1) Such shares had an aggregate liquidation preference of $34.1 million at
June 30, 1997 and $15.8 million as adjusted. For a more detailed
description of preferred stock, common stock and equivalents, see
"Description of Capital Stock."
(2) Does not include activity in the Company's capital accounts since
June 30, 1997.
14
<PAGE>
PRICE RANGE OF CLASS A COMMON STOCK AND DIVIDENDS
The Class A Common Stock has been traded on Nasdaq since December 1985
under the symbol "BKUNA." On September 25, 1997 the closing bid and asked
prices of the Class A Common Stock, as quoted on Nasdaq, were $13.3125 and
$13.375, respectively, and the reported last sale price of the Class A Common
Stock was $13.3125. As of September 25, 1997, there were approximately 403
record holders of Class A Common Stock and 8,612,317 shares issued and
outstanding (including Suncoast Common Stock holders who have not yet presented
their certificates for reissuance). The Company's Class B Common Stock is not
currently traded on any established public market. As of September 25, 1997,
there were approximately 19 holders of record and 275,685 shares issued and
outstanding.
There were no common stock dividends declared or paid in fiscal 1996 or
1995. See Note 11 to the Company's Notes to Consolidated Financial Statements
incorporated by reference into this Prospectus for a discussion of restrictions
on the Bank's payment of dividends to the Company.
The following table sets forth, for the periods indicated, the cash
dividends declared by the Company and range of high and low bid prices for the
Class A Common Stock quoted on Nasdaq. Stock price data on 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 (1) CLASS B COMMON STOCK (1)
---------------------------------------- -------------------------
PRICE
FISCAL YEAR ENDED --------------------- CASH DIVIDENDS CASH DIVIDENDS
SEPTEMBER 30, 1994: HIGH LOW PAID PER SHARE PAID PER SHARE
- ------------------------ ---------- -------- ---------------- -------------------------
<S> <C> <C> <C> <C>
1st Quarter ......... $ 8.250 $7.500 $.025 $.010
2nd Quarter ......... $ 7.500 $6.750 $.025 $.010
3rd Quarter ......... $ 7.500 $6.750 $.025 $.010
4th Quarter ......... $ 7.250 $6.000 -- --
FISCAL YEAR ENDED
SEPTEMBER 30, 1995:
- -----------------------
1st Quarter ......... $ 7.000 $4.500 -- --
2nd Quarter ......... $ 6.250 $4.750 -- --
3rd Quarter ......... $ 7.000 $5.000 -- --
4th Quarter ......... $ 8.750 $7.130 -- --
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, 1997:
- -----------------------
1st Quarter ......... $10.00 $7.875 -- --
2nd Quarter ......... $11.25 $9.25 -- --
3rd Quarter ......... $10.75 $8.50 -- --
4th Quarter(2) ...... $13.3125 $9.625 -- --
</TABLE>
- ----------------
(1) Adjusted to reflect a 15% stock dividend paid in April of 1993 on the Class
A Common Stock and Class B Common Stock.
(2) Through September 25, 1997.
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA
The information for, and as of the end of, the nine months ended June 30,
1997 and 1996 is unaudited, but in the opinion of management reflects all
adjustments (consisting only of normal recurring accruals) necessary for a fair
presentation of the results for such periods. The results for the nine months
ended June 30, 1997 are not necessarily indicative of the results that may be
expected for the entire year. The selected consolidated financial information
should be read in conjunction with the Company's Consolidated Financial
Statements and Notes thereto incorporated by reference into this Prospectus.
<TABLE>
<CAPTION>
AT OR FOR THE NINE
MONTHS ENDED
JUNE 30,
----------------------------
1997(1) 1996
------------ ---------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
OPERATIONS DATA:
Interest income ................................................ $ 73,932 $ 36,953
Interest expense ............................................. 50,013 24,934
----------- ------------
Net interest income before provision (credit) for loan losses 23,919 12,019
Provision (credit) for loan losses ........................... 695 (225)
----------- ------------
Net interest income after provision (credit) for loan losses ... 23,224 12,244
----------- ------------
Non-interest income:
Service fees ................................................... 2,298 432
Gain on sales of loans and mortgage-backed securities, net ... 11 8
Gain (loss) on sales of other assets, net(2) .................. 1 (6)
Other ......................................................... 207 51
----------- ------------
Total non-interest income .................................... 2,517 485
----------- ------------
Non-interest expense:
Employee compensation and benefits ........................... 6,745 3,161
Occupancy and equipment ....................................... 2,594 1,232
Insurance (3) ................................................ 701 748
Professional fees ............................................. 1,063 687
Other ......................................................... 5,611 2,470
----------- ------------
Total non-interest expense ................................. 16,714 8,298
----------- ------------
Income before income taxes and Preferred Stock dividends ...... 9,027 4,431
Provision for income taxes (4) ................................. 3,594 1,693
----------- ------------
Net income before Preferred Stock dividends .................. 5,433 2,738
Preferred Stock dividends .................................... 2,167 1,609
----------- ------------
Net income after Preferred Stock dividends ..................... $ 3,266 $ 1,129
=========== ============
FINANCIAL CONDITION DATA:
Total assets ................................................... $1,807,192 $ 801,531
Loans receivable, net, and mortgage-backed securities(5) ...... 1,587,124 702,529
Investments, overnight deposits, tax certificates, repurchase
agreements, certificates of deposits and other interest
earning assets ................................................ 115,262 79,991
Total liabilities ............................................. 1,705,777 731,871
Deposits ...................................................... 1,100,923 470,236
Borrowings ................................................... 447,259 244,775
Trust Preferred Securities .................................... 116,000 --
Total stockholders' equity .................................... 101,415 69,660
Common stockholders' equity .................................... 67,311 45,346
PER COMMON SHARE DATA:
Primary earnings per common share and common
equivalent share ............................................. $ .39 $ .28
=========== ============
Earnings per common share assuming
full dilution ................................................ $ .38 $ .28
=========== ============
Weighted average number of common shares and common
equivalent shares assumed outstanding during the period:
Primary ...................................................... 8,376,849 3,997,331
Fully diluted ................................................ 9,304,102 3,997,331
Equity per common share (6) .................................... $ 7.59 $ 7.95
Fully converted tangible equity per common share (6) ............ $ 6.74 $ 7.20
<CAPTION>
AT OR FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------
1996 1995 1994 1993
--------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
OPERATIONS DATA:
Interest income ................................................ $ 52,132 $ 39,419 $ 30,421 $ 25,722
Interest expense ............................................. 34,622 26,305 16,295 12,210
------------ ------------ ------------ ------------
Net interest income before provision (credit) for loan losses 17,510 13,114 14,126 13,512
Provision (credit) for loan losses ........................... (120) 1,221 1,187 1,052
------------ ------------ ------------ ------------
Net interest income after provision (credit) for loan losses ... 17,630 11,893 12,939 12,460
------------ ------------ ------------ ------------
Non-interest income:
Service fees ................................................... 597 423 358 221
Gain on sales of loans and mortgage-backed securities, net ... 5 239 150 1,496
Gain (loss) on sales of other assets, net(2) .................. (6) 9,569 -- --
Other ......................................................... 53 6 46 2
------------ ------------ ------------ ------------
Total non-interest income .................................... 649 10,237 554 1,719
------------ ------------ ------------ ------------
Non-interest expense:
Employee compensation and benefits ........................... 4,275 3,997 3,372 2,721
Occupancy and equipment ....................................... 1,801 1,727 1,258 978
Insurance (3) ................................................ 3,610 1,027 844 835
Professional fees ............................................. 929 1,269 833 543
Other ......................................................... 3,421 4,129 3,579 2,746
------------ ------------ ------------ ------------
Total non-interest expense ................................. 14,036 12,149 9,886 7,823
------------ ------------ ------------ ------------
Income before income taxes and Preferred Stock dividends ...... 4,243 9,981 3,607 6,356
Provision for income taxes (4) ................................. 1,657 3,741 1,328 2,318
------------ ------------ ------------ ------------
Net income before Preferred Stock dividends .................. 2,586 6,240 2,279 4,038
Preferred Stock dividends .................................... 2,145 2,210 2,069 1,513
------------ ------------ ------------ ------------
Net income after Preferred Stock dividends ..................... $ 441 $ 4,030 $ 210 $ 2,525
============ ============ ============ ============
FINANCIAL CONDITION DATA:
Total assets ................................................... $ 824,360 $ 608,415 $ 551,075 $ 435,378
Loans receivable, net, and mortgage-backed securities(5) ...... 716,550 506,132 470,154 313,899
Investments, overnight deposits, tax certificates, repurchase
agreements, certificates of deposits and other interest
earning assets ................................................ 87,662 88,768 64,783 100,118
Total liabilities ............................................. 755,249 562,670 509,807 397,859
Deposits ...................................................... 506,106 310,074 347,795 295,108
Borrowings ................................................... 237,775 241,775 158,175 97,775
Trust Preferred Securities .................................... -- -- -- --
Total stockholders' equity .................................... 69,111 45,745 41,268 30,273
Common stockholders' equity .................................... 44,807 21,096 16,667 17,162
PER COMMON SHARE DATA:
Primary earnings per common share and common
equivalent share ............................................. $ .10 $ 1.77 $ .10 $ 1.42
============ ============ ============ ============
Earnings per common share assuming
full dilution ................................................ $ .10 $ 1.26 $ .10 $ 1.00
============ ============ ============ ============
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
Fully diluted ................................................ 4,558,521 4,158,564 2,175,210 3,248,618
Equity per common share (6) .................................... $ 7.85 $ 10.20 $ 8.33 $ 8.86
Fully converted tangible equity per common share (6) ............ $ 7.13 $ 8.15 $ 7.39 $ 7.57
<CAPTION>
1992
------------
<S> <C>
OPERATIONS DATA:
Interest income ................................................ $ 24,243
Interest expense ............................................. 14,022
------------
Net interest income before provision (credit) for loan losses 10,221
Provision (credit) for loan losses ........................... 70
------------
Net interest income after provision (credit) for loan losses ... 10,151
------------
Non-interest income:
Service fees ................................................... 142
Gain on sales of loans and mortgage-backed securities, net ... 94
Gain (loss) on sales of other assets, net(2) .................. 2
Other ......................................................... 25
------------
Total non-interest income .................................... 263
------------
Non-interest expense:
Employee compensation and benefits ........................... 1,986
Occupancy and equipment ....................................... 940
Insurance (3) ................................................ 697
Professional fees ............................................. 542
Other ......................................................... 2,002
------------
Total non-interest expense ................................. 6,167
------------
Income before income taxes and Preferred Stock dividends ...... 4,247
Provision for income taxes (4) ................................. 1,538
------------
Net income before Preferred Stock dividends .................. 2,709
Preferred Stock dividends .................................... 875
------------
Net income after Preferred Stock dividends ..................... $ 1,834
============
FINANCIAL CONDITION DATA:
Total assets ................................................... $ 345,931
Loans receivable, net, and mortgage-backed securities(5) ...... 250,606
Investments, overnight deposits, tax certificates, repurchase
agreements, certificates of deposits and other interest
earning assets ................................................ 83,445
Total liabilities ............................................. 322,907
Deposits ...................................................... 275,026
Borrowings ................................................... 42,241
Trust Preferred Securities .................................... --
Total stockholders' equity .................................... 16,797
Common stockholders' equity .................................... 11,134
PER COMMON SHARE DATA:
Primary earnings per common share and common
equivalent share ............................................. $ 1.27
============
Earnings per common share assuming
full dilution ................................................ $ .92
============
Weighted average number of common shares and common
equivalent shares assumed outstanding during the period:
Primary ...................................................... 1,448,449
Fully diluted ................................................ 2,376,848
Equity per common share (6) .................................... $ 8.51
Fully converted tangible equity per common share (6) ............ $ 6.86
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE NINE
MONTHS ENDED
JUNE 30,
---------------------
1997(1) 1996
---------- ----------
(DOLLARS IN
THOUSANDS,
EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
SELECTED FINANCIAL RATIOS:
(ANNUALIZED WHERE APPROPRIATE)
PERFORMANCE RATIOS:
Return on average assets(7) .............................. .54% .54%
Return on average common equity ........................ 8.85 4.78
Return on average total equity(7) ........................ 7.84 6.43
Interest rate spread .................................... 2.24 2.01
Net interest margin .................................... 2.48 2.43
Dividend payout ratio(8) ................................. 39.89 58.77
Ratio of earnings to combined fixed charges and preferred
stock dividends(9):
.........................................................
Excluding interest on deposits ........................... 1.29 1.14
Including interest on deposits ........................... 1.11 1.07
Total loans, net, and mortgage-backed securities to total
deposits ................................................ 147.14 149.40
Non-interest expenses to average assets .................. 1.67 1.63
Efficiency ratio(10) .................................... 59.35 65.00
ASSET QUALITY RATIOS:
Ratio of non-performing loans to total loans ............ .65% .84%
Ratio of non-performing assets to total loans, real estate
owned and tax certificates .............................. .77 1.06
Ratio of non-performing assets to total assets ......... .66 .92
Ratio of charge-offs to total loans ..................... .04 .05
Ratio of loan loss allowance to total loans ............ .21 .34
Ratio of loan loss allowance to non-performing loans ... 32.20 40.20
CAPITAL RATIOS:
Ratio of average common equity to average total assets ... 3.68% 4.64%
Ratio of average total equity to average total assets ... 6.90 8.36
Tangible capital-to-assets ratio(11) ..................... 8.08 6.92
Core capital-to-assets ratio(11) ........................ 8.08 6.92
Risk-based capital-to-assets ratio(11) .................. 14.04 13.90
<CAPTION>
AT OR FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ------------ ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS:
(ANNUALIZED WHERE APPROPRIATE)
PERFORMANCE RATIOS:
Return on average assets(7) .............................. .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(7) ........................ 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(8) ................................. 82.95 35.42 96.79 40.66 34.97
Ratio of earnings to combined fixed charges and preferred
stock dividends(9):
.........................................................
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(10) .................................... 76.45 85.53 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(11) ..................... 7.01 7.09 6.65 7.56 6.66
Core capital-to-assets ratio(11) ........................ 7.01 7.09 6.65 7.56 6.66
Risk-based capital-to-assets ratio(11) .................. 14.19 15.79 14.13 15.85 14.42
</TABLE>
- ----------------
(1) Includes operations of Suncoast from date of acquisition on November 15,
1996.
(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.
(3) In 1996, the Company recorded a one time SAIF special assessment of $2.6
million ($1.6 million after tax).
(4) Amount reflects expense from change in accounting principle of $195,000
for fiscal 1994. See Note 15 of Notes to Consolidated Financial Statements
incorporated by reference into this Prospectus.
(5) Does not include mortgage loans held for sale (which at June 30, 1997
totaled $32.8 million).
(6) Equity per common share and fully converted tangible equity per common
share would have been $8.89 and $7.86, respectively, at June 30, 1997,
after giving effect to this offering and assuming the conversion of all of
the Company's Series 1996 Preferred Stock.
(7) Return on average assets and average total equity are calculated before
payment of preferred stock dividends.
(8) 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.
(9) 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.
(10) Efficiency ratio is calculated by dividing non-interest expenses less
non-interest income (excluding gains on sales of branches) by net interest
income.
(11) Regulatory capital ratio of the Bank, which as of June 30, 1997 does not
include $54.6 million in cash, an intercompany receivable and securities
held at the holding company level.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis and the related financial data
present a review of the consolidated operating results and financial condition
of the Company for the three and nine month periods ended June 30, 1997 and
1996 and for the fiscal years ended September 30, 1996, 1995 and 1994. This
discussion and analysis are presented to assist the reader in understanding and
evaluating the financial condition, results of operations and future prospects
of the Company, and are intended to supplement, and should be read in
conjunction with, the Consolidated Financial Statements and Notes thereto
incorporated by reference into this Prospectus.
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.
In addition to the foregoing, 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.
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 the Notes to
Consolidated Financial Statements incorporated by reference into this
Prospectus 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.
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM SEPTEMBER 30, 1996 TO JUNE 30,
1997.
ASSETS. Total assets increased by $983 million, or 119.2%, from $824
million at September 30, 1996, to $1.81 billion at June 30, 1997, due primarily
to the acquisition of Suncoast on November 15, 1996 and internally generated
growth. On the date of the acquisition, Suncoast had total assets of $435.7
million.
Cash and due from banks increased $4.0 million from $5.5 million as of
September 30, 1996 to $9.5 million at June 30, 1997. This increase was
primarily in response to the additional cash requirements resulting from the
acquisition of Suncoast's mortgage loan servicing operations.
The Company's short-term investments, consisting of FHLB overnight
deposits and federal funds sold, decreased by $26.2 million, to $2.4 million at
June 30, 1997, from $28.6 million at September 30, 1996. This decrease was due
primarily to the reinvestment of such funds in loans receivable.
Mortgage-backed securities available for sale increased $65.9 million from
$55.5 million at September 30, 1996 to $121.4 million at June 30, 1997, due
primarily to $18.7 million of mortgage-backed securities acquired with Suncoast
and the purchase of $56.5 million mortgage backed securities.
18
<PAGE>
All mortgage backed-securities acquired with Suncoast, as well as all mortgage
backed-securities purchased in the nine months ended June 30, 1997, have been
classified as available for sale.
The Company's net loan portfolio increased by $840.0 million, or 129.9%,
to $1.5 billion at June 30, 1997, from $646.4 million at September 30, 1996,
primarily due to the acquisition of $341.4 million of loans with Suncoast and
the purchase of $545.4 million of residential loans.
Loans available for sale as of June 30, 1997 were $32.8 million as
compared with no such loans available for sale as of September 30, 1996.
Beginning in the Company's fiscal 1997 fourth quarter, management intends to
offer for sale between 50% to 75% of the Company's internally generated
residential loans.
The increase in mortgage servicing rights, goodwill, prepaid expenses and
other assets totaling $32.8 million relates to the acquisition of Suncoast. In
the second quarter, the Company sold $292 million of Ginnie Mae ("GNMA")
mortgage servicing rights for $4.7 million. No gain or loss was recorded on the
sale.
Total non-performing assets as of June 30, 1997 were $11.9 million which
represents an increase of $4.1 million from $7.8 million as of September 30,
1996; while non-performing assets as a percentage of total assets declined 29
basis points from .95% as of September 30, 1996 to .66% as of June 30, 1997.
Approximately $2.4 million of non-performing assets were acquired with
Suncoast.
The allowance for loan losses increased $963,000 from $2.2 million as of
September 30, 1996 to $3.1 million as of June 30, 1997. The increase was
attributable primarily to the allowance acquired from Suncoast of $775,000.
The following table sets forth information concerning the Company's
non-performing assets for the periods indicated.
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1997 1996
---------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Non-accrual loans(1) ................................................... $ 7,806 $ 4,939
Restructured loans ................................................... 1,887 1,457
-------- --------
Total non-performing loans .......................................... 9,693 6,396
Non-accrual tax certificates .......................................... 1,051 800
REO .................................................................. 1,171 632
-------- --------
Total non-performing assets .......................................... $11,915 $ 7,828
======== ========
Allowance for tax certificates ....................................... $ 661 $ 614
Allowance for loan losses ............................................. 3,121 2,158
-------- --------
Total allowance ...................................................... $ 3,782 $ 2,772
======== ========
Non-performing assets as a percentage of total assets .................. .66% .95%
Non-performing loans as a percentage of total loans .................. .65% .99%
Allowance for loan losses as a percentage of total loans ............... .21% .34%
Allowance for loan losses as a percentage of non-performing loans ...... 32.20% 33.74%
</TABLE>
- ----------------
(1) In addition, management had concerns as to the borrower's ability to comply
with present repayment terms on $1,794,390 and $109,000 of accruing loans
as of June 30, 1997 and September 30, 1996, respectively. A substantial
portion of this increase was due to one commercial real estate loan with a
balance of $1,257,643 which, although now current, had in the past become
90 days past due.
Subsequent to June 30, 1997, management became aware of problems
concerning seven loans (acquired with Suncoast) to one borrower totaling $1.5
million as of June 30, 1997. Management believes the potential losses, if any,
on these loans will be insignificant; however, the collection time period may
be lengthy.
19
<PAGE>
LIABILITIES. Deposits increased by $594.8 million, or 117.5%, to $1.1
billion at June 30, 1997 from $506.1 million at September 30, 1996. Of this
growth, $323.7 million was acquired with Suncoast; $67.6 million of the
increase represents growth in former Suncoast branches since acquisition;
$128.1 million represents growth in the three branches opened in the last 18
months; and $22.0 million represents deposits from the State of Florida.
Management believes this strong deposit growth was primarily attributable to
the Company offering competitive interest rates and personalized service. The
Company intends to open six or more branches in the next 12 months.
FHLB advances were $446.5 million at June 30, 1997, up $209.5 million from
$237.0 million at September 30, 1996. This increase was the result of FHLB
advances being used to fund the purchase of residential loans as well as $26.5
million of advances assumed by the Bank in connection with the acquisition of
Suncoast.
In July 1997, the Company notified all outstanding subordinated note
holders that all the remaining notes, totaling $774,500, would be called as of
August 31, 1997.
CAPITAL. The Company's total stockholders' equity was $101.4 million at
June 30, 1997, an increase of $32.3 million, or 46.7%, from $69.1 million at
September 30, 1996. The increase was due primarily to the issuance of 2,199,930
shares of Class A Common Stock and 920,000 shares of 8% Noncumulative
Convertible Preferred Stock, Series 1996, issued in connection with the
Suncoast acquisition. The estimated value of the stock issued to acquire
Suncoast was $27.8 million.
In December 1996, the Company's subsidiary, BankUnited Capital, issued $50
million of Trust Preferred Securities; in March 1997, BankUnited Capital issued
an additional $20 million of Trust Preferred Securities; and in June 1997, the
Company's subsidiary, BankUnited Capital II issued $46 million of Trust
Preferred Securities. The net proceeds from the sales of the Trust Preferred
Securities were $112 million. These funds may be used for general corporate
purposes, including, but not limited to, acquisitions by either the Company or
the Bank, capital contributions to support the Bank's growth and for working
capital, and the possible repurchase of shares of the Company's preferred stock
subject to acceptable market conditions. In the nine months ended June 30,
1997, the Company contributed $60 million of additional capital to the Bank.
In February 1997, the holder of the Company's Series C and Series C-II
classes of preferred stock exercised the right to convert both classes to Class
A Common Stock at exchange ratios of 1.45475 shares of Class A Common Stock for
each share of Series C preferred stock and 1.3225 shares of Class A Common
Stock for each share of Series C-II preferred stock. The Company had previously
exercised its right to call both classes of preferred stock.
In July 1997, the Company began a tender offer to purchase any and all of
its outstanding shares of 9% Preferred Stock at $10.25 per share. The offer
expired on August 15, 1997, and the Company purchased 448,583 shares pursuant
thereto. The number of shares remaining outstanding after the tender offer is
701,417 shares.
DISCUSSION OF FINANCIAL CONDITION CHANGES FOR THE YEARS ENDED SEPTEMBER 30,
1994, 1995 AND 1996
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 $40.2 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.
20
<PAGE>
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 ARM's. Of this amount the
Company had $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. See "Business--Lending
Activities--Residential Mortgage Loan Purchases and Originations."
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 and 1.17% as of September 30, 1994. The percentage 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 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, the Company began to reduce the percentage of
new loans acquired which were secured by property located 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. Although effective in fiscal 1997, after taking
into account the improved economic conditions in Southern California,
management has discontinued this policy. To date it has made no significant
purchases of 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
nonaccrual 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 $1.5 million or 37.6%, 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.
21
<PAGE>
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.
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.
22
<PAGE>
The following table sets forth information concerning the Company's
non-performing assets for the periods indicated:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------------------------------------------------
1996 1995 1994 1993 1992
---------------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Non-accrual loans(l) ........................... $ 4,939(2) $ 3,496 $ 3,918 $ 4,225 $ 1,043
Restructured loans(3) ........................... 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) In addition to the above, management had concerns as to the borrower's
ability to comply with present repayment terms on $109,000 of accruing
loans as of September 30, 1996.
(3) All restructured loans were accruing.
(4) Based on balances prior to deductions for allowance for loan losses.
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
23
<PAGE>
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, 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 3.8%, respectively,
which was in compliance with these requirements, and as of June 30, 1997, the
Bank had liquid assets and short-term liquid assets of 5.9% and 1.9%,
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 $192.8 million, $43.1 million, and $117.6 million,
respectively, and the Company purchased $22.7 million, $16.6 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 $196.0
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 the Bank are also required to maintain
capital at levels specified by applicable minimum capital ratios. For a
detailed discussion of these requirements, see "Regulation--Savings
Institutions Regulations--Regulatory Capital Requirements." 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.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND
1996
NET INCOME AFTER PREFERRED STOCK DIVIDENDS. The Company had net income
after preferred stock dividends of $1,273,000 for the three months ended June
30, 1997, compared to net income after preferred stock dividends of $597,000
for the three months ended June 30, 1996. All major categories of income and
expense increased significantly in the three months ended June 30, 1997 as
compared to the three months ended June 30, 1996 and reflect the significant
growth the Company has experienced in the last year. A significant factor in
such growth was the acquisition of Suncoast, which was completed
24
<PAGE>
on November 15, 1996 and the operations of which are included in the Company`s
Consolidated Statement of Operations for the three months ended June 30, 1997.
Below is a more detailed discussion of each major category of income and
expenses.
NET INTEREST INCOME. Net interest income increased $4.1 million, or
87.2%, to $8.8 million for the three months ended June 30, 1997 from $4.7
million for the three months ended June 30, 1996. This increase was
attributable to an increase in average interest-earning assets of $843.8
million, or 114.1%, to $1.6 billion for the three months ended June 30, 1997
from $739.7 million for the three months ended June 30, 1996, offset by an
increase in average interest-bearing liabilities of $838.1 million, or 124.2%,
to $1.5 billion for the three months ended June 30, 1997 from $675.0 million
for the three months ended June 30, 1996. Approximately $400 million of the
increase in average interest-earning assets for the three months ended June 30,
1997 was a result of the acquisition of Suncoast. The remaining increase in
average interest-earning assets was due primarily to loan purchases. The
average yield on interest-earning assets increased 26 basis points to 7.63% for
the three months ended June 30, 1997 from 7.37% for the three months ended June
30, 1996. The increase in average yield was attributable to an increase in the
yield on loans receivable relating primarily to commercial real estate and
construction loans acquired with Suncoast. Suncoast had a greater percentage of
higher yielding commercial real estate and construction loans than the Bank.
The increase in interest income of $16.6 million, or 121.9%, to $30.2
million for the three months ended June 30, 1997 from $13.6 million for the
three months ended June 30, 1996, reflects increases in interest and fees on
loans of $15.8 million. The average yield on loans receivable increased to
7.74% for the three months ended June 30, 1997 from 7.58% for the three months
ended June 30, 1996 and the average balance of loans receivable increased
$801.7 million, or 138.8%, to $1.4 billion for the three months ended June 30,
1997. Approximately $360 million of the increase in loans was due to the
acquisition of Suncoast and, as stated above, the increase in the yield on
loans was also attributable to Suncoast.
The increase in interest expense of $12.5 million, or 140.3%, to $21.4
million for the three months ended June 30, 1997 from $8.9 million for the
three months ended June 30, 1996 primarily reflects an increase in interest
expense on interest-bearing deposits of $8.5 million, or 154.5%, from $5.5
million for the three months ended June 30, 1996, to $14.0 million for the
three months ended June 30, 1997. This increase was due to an increase in
average interest-bearing deposits of $633 million, or 143.4%, from $442 million
for the three months ended June 30, 1996 to $1.1 billion for the three months
ended June 30, 1997. Approximately $300 million of this increase represents
deposits acquired with Suncoast. The average rate paid on interest-bearing
deposits increased 22 basis points from 5.03% for the three months ended June
30, 1996 to 5.25% for the three months ended June 30, 1997. Interest on the
Trust Preferred Securities was $2.1 million for the three months ended June 30,
1997 compared with no interest expense in 1996.
PROVISION FOR LOAN LOSSES. The provision for loan losses for the three
months ended June 30, 1997 was $280,000 as compared with $75,000 for the three
months ended June 30, 1996 reflecting the increase in loans receivable between
periods. The provision for loan losses represents management's estimate of the
charge to operations after reviewing the nature, volume, delinquency status,
and inherent risk in the loan portfolio in relation to the allowance for loan
losses. For a detailed discussion of the Company's asset quality and allowance
for loan losses, see "--Discussion of Financial Condition Changes for the Years
Ended September 30, 1994, 1995 and 1996--Credit Quality."
NON-INTEREST INCOME. Non-interest income for the three months ended June
30, 1997 was $916,000 compared with $198,000 for the three months ended June
30, 1996, an increase of $718,000. Of this increase, $488,000 represents loan
servicing fees (net of amortization of capitalized servicing rights) from
operations acquired with Suncoast. The remaining increase was primarily
attributable to service fees on deposits reflecting the increase in the amount
of deposits outstanding.
NON-INTEREST EXPENSES. Operating expenses increased $3.2 million, or
104.9%, to $6.2 million for the three months ended June 30, 1997 compared to
$3.0 million for the three months ended June 30,
25
<PAGE>
1996. The increase in expenses was attributable to the growth the Company has
experienced including the expenses of Suncoast's operations.
INCOME TAXES. The income tax provision was $1.3 million for the three
months ended June 30, 1997 compared to $706,000 for the three months ended June
30, 1996. The increase in income taxes was the result of the Company's higher
pre-tax earnings during the three months ended June 30, 1997, compared to the
three months ended June 30, 1996.
PREFERRED STOCK DIVIDENDS. Preferred stock dividends for the three months
ended June 30, 1997 were $718,000, an increase of $181,000, as compared to
$537,000 for the three months ended June 30, 1996. This increase was the result
of dividends paid on the 8% Noncumulative Convertible Preferred Stock, Series
1996, issued in connection with the acquisition of Suncoast, partially offset
by the conversion of the Noncumulative Convertible Preferred Stock, Series C
and C-II in February 1997.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND
1996
NET INCOME AFTER PREFERRED STOCK DIVIDENDS. The Company had net income
after preferred stock dividends of $3.3 million for the nine months ended June
30, 1997, compared to net income after preferred stock dividends of $1.1
million for the nine months ended June 30, 1996. All major categories of income
and expense increased significantly in the nine months ended June 30, 1997 as
compared to the nine months ended June 30, 1996 and reflect the significant
growth the Company has experienced in the last year. A significant factor in
such growth was the acquisition of Suncoast, which was completed on November
15, 1996. The Company's Consolidated Statement of Operations for the nine
months ended June 30, 1997 reflects Suncoast's operations from the date of
acquisition. Below is a more detailed discussion of each major category of
income and expenses.
NET INTEREST INCOME. Net interest income increased $11.9 million, or
99.0%, to $23.9 million for the nine months ended June 30, 1997 from $12.0
million for the nine months ended June 30, 1996. This increase was attributable
to an increase in average interest-earning assets of $613.8 million, or 92.4%,
to $1.3 billion for the nine months ended June 30, 1997 from $664.5 million for
the nine months ended June 30, 1996. Approximately $300 million of the increase
in average interest-earning assets for the nine months ended June 30, 1997 was
a result of the acquisition of Suncoast. The remaining increase in average
interest-earning assets is due primarily to loan purchases. The average yield
on interest-earning assets increased 29 basis points to 7.70% for the nine
months ended June 30, 1997 from 7.41% for the nine months ended June 30, 1996.
The increase in average yield was attributable to an increase in the yield on
loans receivable relating primarily to commercial real estate and construction
loans acquired with Suncoast. Suncoast had a greater percentage of higher
yielding commercial real estate and construction loans than the Bank.
The increase in interest income of $37.0 million, or 100.0%, to $74.0
million for the nine months ended June 30, 1997 from $37.0 million for the nine
months ended June 30, 1996, primarily reflects increases in interest and fees
on loans of $35.3 million. The average yield on loans receivable increased to
7.87% for the nine months ended June 30, 1997 from 7.62% for the nine months
ended June 30, 1996 and the average balance of loans receivable increased
$579.5 million, or 113.6%, to $1.1 billion for the nine months ended June 30,
1997. Approximately $300 million of the increase in loans was due to the
acquisition of Suncoast and, as stated above, the increase in the yield on
loans was also attributed to Suncoast.
The increase in interest expense of $25.1 million, or 100.6%, to $50.0
million for the nine months ended June 30, 1997 from $24.9 million for the nine
months ended June 30, 1996 primarily reflects an increase in interest expense
on interest-bearing deposits of $20.2 million, or 139.2%, from $14.6 million
for the nine months ended June 30, 1996, to $34.8 million for the nine months
ended June 30, 1997 and interest expense of $3.5 million on Trust Preferred
Securities which were issued in fiscal 1997. This increase was due to an
increase in average interest-bearing deposits of $525 million, or 138.4%, from
$379 million for the nine months ended June 30, 1996 to $904 million for the
nine months ended
26
<PAGE>
June 30, 1997. Approximately $250 million of this increase represents deposits
acquired with Suncoast. The average rate paid on interest-bearing deposits
increased two basis points from 5.13% for the nine months ended June 30, 1996
to 5.15% for the nine months ended June 30, 1997.
PROVISION FOR LOAN LOSSES. The provision for loan losses for the nine
months ended June 30, 1997 was $695,000 as compared with a credit for loan
losses of $225,000 for the nine months ended June 30, 1996. The credit in 1996
was due to a recovery of approximately $1 million as a result of a legal
settlement relating to certain loans previously purchased. The provision for
loan losses represents management's estimate of the charge to operations after
reviewing the nature, volume, delinquency status, and inherent risk in the loan
portfolio in relation to the allowance for loan losses. For a detailed
discussion of the Company's asset quality and allowance for loan losses, see
"--Description of Financial Condition Changes for the Years Ended September 30,
1994, 1995 and 1996--Credit Quality."
NON-INTEREST INCOME. Non-interest income for the nine months ended June
30, 1997 was $2.5 million compared with $485,000 for the nine months ended June
30, 1996, an increase of $2.0 million. Of this increase, $1.2 million
represents loan servicing fees (net of amortization of capitalized servicing
rights) from operations acquired with Suncoast. The remaining increase was
primarily attributable to service fees on deposits reflecting the increase in
the amount of deposits outstanding.
NON-INTEREST EXPENSES. Operating expenses increased $8.4 million, or
101.4%, to $16.7 million for the nine months ended June 30, 1997 compared to
$8.3 million for the nine months ended June 30, 1996. The increase in expenses
was attributable to the growth the Company has experienced including the
expenses of Suncoast's operations.
INCOME TAXES. The income tax provision was $3.6 million for the nine
months ended June 30, 1997 compared to $1.7 million for the nine months ended
June 30, 1996. The increase in income taxes was the result of the Company's
higher pre-tax earnings during the nine months ended June 30, 1997, compared to
the nine months ended June 30, 1996.
PREFERRED STOCK DIVIDENDS. Preferred stock dividends for the nine months
ended June 30, 1997 were $2.2 million, an increase of $558,000, as compared to
$1.6 million for the nine months ended June 30, 1996. This increase is the
result of dividends paid on the 8% Noncumulative Convertible Preferred Stock,
Series 1996, issued in connection with the acquisition of Suncoast, partially
offset by the conversion of the Noncumulative Convertible Preferred Stock,
Series C and C-II in February 1997.
COMPARISON OF OPERATING RESULTS 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
fiscal 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 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
27
<PAGE>
an 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 this regard the Company acquired $108.0
million of non-residential loans 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 "--Description of Financial Condition Changes for the Years Ended
September 30, 1994, 1995 and 1996--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 15.7%
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.
28
<PAGE>
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.
Insurance expense increased 251.5% due to the one time SAIF special
assessment of $2.6 million. Insurance expense is expected to decrease in future
periods 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 Noncumulative 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.
COMPARISON OF OPERATING RESULTS 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 $2.3 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.
29
<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
"--Description of Financial Condition Changes for the Years Ended September 30,
1994, 1995 and 1996--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 property in Southern
California. REO operating expenses increased $213,000 for fiscal 1995, due to
higher levels of REO during the year.
30
<PAGE>
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 $1.9 million in fiscal 1994. In the fourth
quarter of fiscal 1995, the Company declared a special dividend on the Series A
and Series B Noncumulative 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 Noncumulative
Convertible Preferred Stock, respectively. Dividends of $0.55, $0.80, and $0.80
were paid on the Company's Series C, Series C-11, and Series 1993,
Noncumulative Convertible Preferred Stock respectively for both years.
Dividends on the 9% Noncumulative 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 Noncumulative Perpetual
Preferred Stock, Series 1993.
31
<PAGE>
YIELDS EARNED AND RATES PAID
The following tables set 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 period, 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>
THREE MONTHS ENDED JUNE 30,
---------------------------------------
1997
---------------------------------------
AS OF
6/30/97 AVERAGE
YIELD/RATE BALANCE INTEREST YIELD/RATE
----------- --------------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net ..................... 7.70% $ 1,379,182 $ 26,727 7.74%
Mortgage-backed securities ............... 6.95 115,444 1,984 6.87
Short-term investments (1) ............... 6.23 11,501 185 6.36
Tax certificates ........................ 5.57 39,014 669 6.86
Long-term investments and FHLB
stock, net .............................. 7.01 38,398 672 7.01
------ ----------- --------- ------
Total interest-earning assets ......... 7.54 1,583,539 30,237 7.63
------ ----------- --------- ------
Interest-bearing liabilities:
NOW/money market ........................ 2.46 95,796 602 2.52
Savings ................................. 4.59 148,689 1,693 4.57
Certificates of deposit .................. 5.69 830,027 11,759 5.68
Trust preferred securities ............... 10.16 83,143 2,148 10.33
FHLB advances and other
borrowings .............................. 5.91 355,527 5,193 5.78
------ ----------- --------- ------
Total interest-bearing liabilities . 5.78 1,513,182 21,395 5.65
------ ----------- --------- ------
Excess of interest-earning assets over
interest-bearing liabilities ............ $ 70,357
===========
Net interest income ........................ $ 8,842
=========
Interest rate spread ..................... 1.76% 1.98%
====== ======
Net interest margin ........................ 2.01% 2.23%
====== ======
Ratio of interest-earning assets to
interest-bearing liabilities ............ 104.65%
===========
<CAPTION>
1996
-----------------------------------
AVERAGE
BALANCE INTEREST YIELD/RATE
---------- ------------ -----------
<S> <C> <C> <C>
Interest-earning assets:
Loans receivable, net ..................... $577,486 $ 10,937 7.58%
Mortgage-backed securities ............... 73,618 1,236 6.72
Short-term investments (1) ............... 38,297 520 5.37
Tax certificates ........................ 30,628 594 7.76
Long-term investments and FHLB
stock, net .............................. 19,671 340 6.94
--------- ---------- ------
Total interest-earning assets ......... 739,700 13,627 7.37
--------- ---------- ------
Interest-bearing liabilities:
NOW/money market ........................ 42,582 272 2.57
Savings ................................. 62,285 678 4.38
Certificates of deposit .................. 336,633 4,573 5.46
Trust preferred securities ............... -- -- --
FHLB advances and other
borrowings .............................. 233,511 3,381 5.73
--------- ---------- ------
Total interest-bearing liabilities . 675,011 8,904 5.27
--------- ---------- ------
Excess of interest-earning assets over
interest-bearing liabilities ............ $ 64,689
=========
Net interest income ........................ $ 4,723
==========
Interest rate spread ..................... 2.10%
======
Net interest margin ........................ 2.56%
======
Ratio of interest-earning assets to
interest-bearing liabilities ............ 109.58%
==========
</TABLE>
- ----------------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and certificates
of deposit.
32
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30,
---------------------------------------
1997
---------------------------------------
AS OF
6/30/97 AVERAGE
YIELD/RATE BALANCE INTEREST YIELD/RATE
----------- --------------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net ..................... 7.70% $ 1,089,582 $64,405 7.87%
Mortgage-backed securities .................. 6.95 95,671 4,844 6.75
Short-term investments (1) .................. 6.23 30,943 1,318 5.62
Tax certificates ........................... 5.57 35,253 1,966 7.44
Long-term investments and FHLB stock,
net ....................................... 7.01 26,876 1,399 6.95
------ ----------- -------- ------
Total interest-earning assets ............ 7.54 1,278,325 73,932 7.70
------ ----------- -------- ------
Interest-bearing liabilities:
NOW/money market ........................... 2.46 88,953 1,602 2.41
Savings .................................... 4.59 132,438 4,543 4.59
Certificates of deposit ..................... 5.69 682,330 28,678 5.62
Trust preferred securities .................. 10.16 45,150 3,525 10.41
FHLB advances and other borrowings ......... 5.91 272,974 11,665 5.64
------ ----------- -------- ------
Total interest-bearing liabilities ...... 5.78 1,221,845 50,013 5.46
------ ----------- -------- ------
Excess of interest-earning assets over
interest-bearing liabilities ............... $ 56,480
===========
Net interest income ........................ $23,919
========
Interest rate spread ........................ 1.76% 2.24%
====== ======
Net interest margin ........................ 2.01% 2.48%
====== ======
Ratio of interest-earning assets to interest-
bearing liabilities ........................ 104.62%
===========
<CAPTION>
1996
-----------------------------------
AVERAGE
BALANCE INTEREST YIELD/RATE
---------- ------------ -----------
<S> <C> <C> <C>
Interest-earning assets:
Loans receivable, net ..................... $510,128 $ 29,135 7.62%
Mortgage-backed securities .................. 59,643 3,023 6.76
Short-term investments (1) .................. 46,602 1,969 5.55
Tax certificates ........................... 31,487 1,941 8.22
Long-term investments and FHLB stock,
net ....................................... 16,644 885 7.09
--------- ---------- ------
Total interest-earning assets ............ 664,504 36,953 7.41
--------- ---------- ------
Interest-bearing liabilities:
NOW/money market ........................... 30,256 511 2.26
Savings .................................... 55,981 1,828 4.36
Certificates of deposit ..................... 292,812 12,216 5.57
Trust preferred securities .................. -- -- --
FHLB advances and other borrowings ......... 234,111 10,379 5.83
--------- ---------- ------
Total interest-bearing liabilities ...... 613,160 24,934 5.40
--------- ---------- ------
Excess of interest-earning assets over
interest-bearing liabilities ............... $ 51,344
=========
Net interest income ........................ $ 12,019
==========
Interest rate spread ........................ 2.01%
======
Net interest margin ........................ 2.43%
======
Ratio of interest-earning assets to interest-
bearing liabilities ........................ 108.37%
==========
</TABLE>
- ----------------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and certificates
of deposit.
33
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
----------------------------------------------
1996
----------------------------------------------
AS OF
9/30/96 AVERAGE YIELD/
YIELD/RATE BALANCE INTEREST RATE
------------ ------------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net ............... 7.97% $ 540,313 $41,313 7.65%
Mortgage-backed securities ......... 6.82 62,711 4,250 6.78
Short-term investments(1) ............ 5.30 41,240 2,359 5.72
Tax certificates ..................... 8.96 34,831 3,018 8.66
Long-term investments and
FHLB stock, net ..................... 6.98 17,352 1,192 6.87
---- --------- -------- ----
Total interest-earning assets 7.80 696,447 52,132 7.49
---- --------- -------- ----
Interest-bearing liabilities:
NOW/Money Market ..................... 2.45 33,148 775 2.34
Savings .............................. 4.40 59,965 2,627 4.38
Certificates of deposit ............ 5.52 313,521 17,389 5.55
FHLB advances and other
borrowings ........................ 5.74 235,264 13,831 5.88
---- --------- -------- ----
Total interest-bearing
liabilities ........................ 5.31 641,898 34,622 5.39
---- --------- -------- ----
Excess of interest-earning assets
over interest-bearing liabilities . $ 54,549
=========
Net interest income .................. $17,510
========
Interest rate spread .................. 2.49% 2.10%
===== =====
Net interest margin .................. 2.90% 2.51%
===== =====
Ratio of interest-earning assets
to interest-bearing liabilities ... 108.50%
=========
<CAPTION>
1995 1994
--------------------------------- --------------------------------
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE
------------- ---------- -------- ------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net ............... $ 419,501 $30,171 7.19% $ 364,224 $23,513 6.46%
Mortgage-backed securities ......... 59,204 4,093 6.91 35,215 2,308 6.55
Short-term investments(1) ............ 23,844 1,491 6.25 21,101 803 3.81
Tax certificates ..................... 37,377 3,087 8.26 39,228 3,207 8.17
Long-term investments and
FHLB stock, net ..................... 7,930 577 7.29 10,041 590 5.89
--------- -------- ---- --------- -------- ----
Total interest-earning assets 547,856 39,419 7.20 469,809 30,421 6.48
--------- -------- ---- --------- -------- ----
Interest-bearing liabilities:
NOW/Money Market ..................... 41,196 875 2.12 51,860 1,102 2.12
Savings .............................. 55,950 2,420 4.33 46,925 1,716 3.66
Certificates of deposit ............ 276,564 14,554 5.26 221,074 8,526 3.86
FHLB advances and other
borrowings ........................ 144,052 8,456 5.87 120,604 4,951 4.11
--------- -------- ---- --------- -------- ----
Total interest-bearing
liabilities ........................ 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
========= =========
Net interest income .................. $13,114 $14,126
======== ========
Interest rate spread .................. 2.12% 2.78%
===== =====
Net interest margin .................. 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.
34
<PAGE>
RATE/VOLUME ANALYSIS
The following tables present, for the periods indicated, the change in
interest income and the change 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>
THREE MONTHS ENDED JUNE 30,
---------------------------------------------------
1997 VS. 1996
---------------------------------------------------
INCREASE (DECREASE) DUE TO
---------------------------------------------------
CHANGES CHANGES CHANGES TOTAL
IN IN IN INCREASE/
VOLUME RATE RATE/VOLUME (DECREASE)
--------- --------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest income attributable to:
Loans .......................................... $15,408 $ 111 $ 271 $15,790
Mortgage-backed securities ..................... 702 29 17 748
Short-term investments (1) ..................... (360) 95 (70) (335)
Tax certificates ................................. 163 (69) (19) 75
Long-term investments and FHLB stock ............ 313 8 11 332
------- ------ ------- -------
Total interest-earning assets ............... 16,226 174 210 16,610
------- ------ ------- -------
Interest expense attributable to:
NOW/money market ................................. 337 (5) (2) 330
Savings .......................................... 933 29 53 1,015
Certificates of deposit ........................ 6,647 182 357 7,186
Trust preferred securities ..................... 2,148 -- -- 2,148
FHLB advances and other borrowings ............ 1,763 37 12 1,812
------- ------ ------- -------
Total interest-bearing liabilities ............ 11,828 243 420 12,491
------- ------ ------- -------
Increase (decrease) in net interest income ...... $4,398 $ (69) $ (210) $ 4,119
======= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30,
-----------------------------------------------------
1997 VS. 1996
-----------------------------------------------------
INCREASE (DECREASE) DUE TO
-----------------------------------------------------
CHANGES CHANGES CHANGES TOTAL
IN IN IN INCREASE/
VOLUME RATE RATE/VOLUME (DECREASE)
--------- ----------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest income attributable to:
Loans ....................................... $34,241 $ 368 $ 661 $35,270
Mortgage-backed securities .................. 1,826 (3) (2) 1,821
Short-term investments (1) .................. (660) 22 (14) (652)
Tax certificates ........................... 232 (185) (22) 25
Long-term investments and FHLB stock ...... 522 (5) (2) 515
------- ------- ------ -------
Total interest-earning assets ............ 36,161 197 621 36,979
------- ------- ------ -------
Interest expense attributable to:
NOW/money market ........................... 990 35 66 1,091
Savings .................................... 2,494 96 125 2,715
Certificates of deposit ..................... 16,236 103 123 16,462
Trust Preferred Securities .................. 3,525 -- -- 3,525
FHLB advances and other borrowings ......... 1,713 (334) (93) 1,286
------- ------- ------ -------
Total interest-bearing liabilities ...... 24,958 (100) 221 25,079
------- ------- ------ -------
Increase in net interest income ............ $11,203 $ 297 $ 400 $11,900
======= ======= ====== =======
</TABLE>
- ----------------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and certificates
of deposit.
35
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------
1996 V. 1995
-----------------------------------------------
INCREASE (DECREASE)
DUE TO
-----------------------------------------------
CHANGES CHANGES CHANGES TOTAL
IN IN IN INCREASE
VOLUME RATE RATE/VOLUME (DECREASE)
---------- --------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest income attributable to:
Loans .................................... $ 8,689 $1,905 $ 548 $11,142
Mortgage-backed securities and
collateralized mortgage obligations ...... 242 (81) (4) 157
Short-term investments(1) .................. 1,088 (127) (93) 868
Tax Certificates ........................... (210) 152 (11) (69)
Long-term investments and
FHLB stock .............................. 687 (33) (39) 615
-------- ------ ------- -------
Total interest-earning assets ............ 10,496 1,816 401 12,713
-------- ------ ------- -------
Interest expense attributable to:
NOW/Money Market ........................... (171) 88 (17) (100)
Savings .................................... 173 31 3 207
Certificates of Deposit .................. 1,946 785 104 2,835
FHLB advances and other
borrowings .............................. 5,354 13 8 5,375
-------- ------ ------- -------
Total interest-bearing liabilities ...... 7,302 917 98 8,317
-------- ------ ------- -------
Increase (decrease) in net interest
income .................................... $ 3,194 $ 899 $ 303 $ 4,396
======== ====== ======= =======
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------
1995 V. 1994
------------------------------------------------
INCREASE (DECREASE)
DUE TO
------------------------------------------------
CHANGES CHANGES CHANGES TOTAL
IN IN IN INCREASE
VOLUME RATE RATE/VOLUME (DECREASE)
--------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Interest income attributable to:
Loans .................................... $3,568 $ 2,683 $ 407 $ 6,658
Mortgage-backed securities and
collateralized mortgage obligations ...... 1,572 126 87 1,785
Short-term investments(1) .................. 104 517 67 688
Tax Certificates ........................... (151) 33 (2) (120)
Long-term investments and
FHLB stock .............................. (124) 140 (29) (13)
------ -------- ------- --------
Total interest-earning assets ............ 4,969 3,499 530 8,998
------ -------- ------- --------
Interest expense attributable to:
NOW/Money Market ........................... (227) -- -- (227)
Savings .................................... 330 314 60 704
Certificates of Deposit .................. 2,140 3,108 780 6,028
FHLB advances and other
borrowings .............................. 963 2,128 414 3,505
------ -------- ------- --------
Total interest-bearing liabilities ...... 3,206 5,550 1,254 10,010
------ -------- ------- --------
Increase (decrease) in net interest
income .................................... $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.
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.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 125 "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities" and in
December 1996, the FASB issued a related Statement of Financial Accounting
Standards No. 127, "Deferral of the Effective Date of Certain Provisions of
FASB No. 125" (collectively "Statement No. 125"). Statement No. 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. Portions of Statement No. 125 were effective
for transactions entered into after December 31, 1996 with the remaining
portions effective for transactions entered into after December 31, 1997. The
impact of adopting Statement No. 125 has not been nor is it currently expected
to be material to the Company's financial position or the results of
operations.
In February 1997, FASB issued Statement of Financial Accounting Standards
No. 128 "Earnings per Share" (Statement No. 128). Statement No. 128 specifies
the computation, presentation and disclosure
36
<PAGE>
requirements for earnings per share. It replaces primary earnings per share and
fully diluted earnings per share with basic earnings per share and diluted
earnings per share and is effective for reporting periods ending after December
15, 1997. For the Company, the computation for basic earnings per share is
similar to primary earnings per share except stock options are not considered
when computing basic earnings per share. Also, for the Company, diluted
earnings per share and fully diluted earnings per share are similar.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129 "Disclosure of Information about Capital Structure"
("Statement No. 129"). Statement No. 129 continues previous requirements to
disclose certain information about an entity's capital structure. The Company
currently complies with the disclosure requirements of Statement No. 129.
37
<PAGE>
BUSINESS
GENERAL
The Company is the savings and loan holding company for the Bank. The
Company currently has fifteen branch offices in South Florida and anticipates
opening at least six additional branches by June 30, 1998 in its market area,
either by acquisition or de novo branching, and may expand into other parts of
Florida. 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 Florida
single-family residential mortgage loans, and to a lesser extent, to purchase
and originate commercial real estate, commercial business and consumer loans.
The Company also invests in tax certificates and other permitted investments.
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 deposits and borrowings and non-interest overhead
expenses incurred in operations.
During the past three years the Company has redefined its strategy to
increase its emphasis on strategic product niches which management believes are
being underserved as South Florida's banking market consolidates. The products
include commercial business and commercial real estate lending and deposit
services for small to mid-sized businesses. The Company has also focused on
attracting depositors by stressing convenience, competitive rates and
personalized service.
The Company's operating plan emphasizes (i) rapidly expanding the
Company's deposit base by providing convenience, competitive rates and
personalized service in its market area and continuing expansion of the
Company's branch network through de novo branching or the acquisition of
branches of, and mergers with, existing financial institutions; (ii)
concentrating lending activities on purchasing single-family residential
mortgage loans and originating such loans as favorable market opportunities
arise; (iii) expanding the Company's commercial and multi-family real estate,
commercial business, and real estate construction lending; (iv) increasing
non-interest income, and (v) maintaining asset quality.
The Bank is a member of the FHLB and is subject to comprehensive
regulation, examination and supervision by the OTS and the FDIC. Deposits at
the Bank are insured by the SAIF to the maximum extent permitted by law.
MARKET AREA AND COMPETITION
The Company conducts operations in South Florida, which geographic region,
at December 31, 1996 had a total of approximately $76 billion in deposits in
commercial banks, savings institutions, and credit unions (39% of the total of
$195 billion of deposits in Florida). The Company intends to continue to
establish or acquire branches in its market area and may expand into other
parts of Florida.
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 Boynton Beach, Florida in June 1996,
West Palm Beach, Florida in September 1996, and Boca Hamptons, Florida in
August 1997. 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. On November 15, 1996 the Company acquired Suncoast. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Acquisition of Suncoast Savings and Loan Association, FSA and The
Bank of Florida." On September 19, 1997 the Company signed a definitive
agreement to acquire Consumers and merge it into the Bank. See "Summary--
Business Strategy--Acquisitions and Branching Activity."
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,
38
<PAGE>
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 super-regional 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 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, FHLB advances, and trust
preferred securities). 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.
39
<PAGE>
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 June 30, 1997,
70.1% 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 13% of total assets as of June 30,
1997. This imbalance, when coupled with the deregulation of the restrictions
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.
40
<PAGE>
GAP TABLE. The following table sets forth the amount of interest-earning
assets and interest-bearing liabilities outstanding at June 30, 1997, which are
expected to reprice or mature in each of the future time periods shown.
<TABLE>
<CAPTION>
AT JUNE 30, 1997
-------------------------------------------
INTEREST SENSITIVITY PERIOD (1)
-------------------------------------------
6 MONTHS 6 MONTHS OVER 1 -
OR LESS - 1 YEAR 5 YEARS
--------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest-earning assets:
Investments, tax certificates, Federal funds sold,
FHLB overnight deposits and other interest
earning assets, at cost ........................ $ 47,966 $ 22,719 $ 44,577
Mortgage-backed securities ..................... 17,467 6,716 54,728
Loans:
Adjustable-rate mortgages ........................ 653,830 229,399 140,229
Fixed-rate mortgages ........................... 34,996 29,509 160,497
Commercial and consumer loans .................. 8,466 364 1,569
------------ ------------ -----------
Total loans .................................... 697,292 259,272 302,295
------------ ------------ -----------
Total interest-earning assets .................. 762,725 288,707 401,600
Total non-interest-earning assets ............... -- -- --
------------ ------------ -----------
Total assets ................................. $ 762,725 $ 288,707 $ 401,600
============ ============ ===========
Interest-bearing liabilities:
Customer deposits:
Money market and NOW accounts .................. 72,471 -- --
Passbook accounts .............................. 151,575 -- --
Certificate accounts ........................... 567,964 150,203 137,039
------------ ------------ -----------
Total customer deposits ........................... 792,010 150,203 137,039
------------ ------------ -----------
Borrowings:
FHLB advances .................................... 340,000 5,000 100,000
Trust Preferred ................................. -- -- --
Other borrowings ................................. -- -- --
------------ ------------ -----------
Total borrowings ................................. 340,000 5,000 100,000
------------ ------------ -----------
Total interest-bearing liabilities ............... 1,132,010 155,203 237,039
Total non-interest-bearing liabilities ............ -- -- --
Stockholders' equity .............................. -- -- --
------------ ------------ -----------
Total liabilities and stockholders' equity ...... $1,132,010 $ 155,203 $ 237,039
============ ============ ===========
Total interest-earning assets less interest-bearing
liabilities ("GAP") .............................. $ (369,285) $ 133,504 $ 164,561
============ ============ ===========
Ratio of GAP to total assets ..................... (20.43)% 7.39% 9.11%
============ ============ ===========
Cumulative excess (deficiency) of interest-earning
assets over interest-bearing liabilities ......... $ (369,285) $ (235,781) $ (71,220)
============ ============ ===========
Cumulative excess (deficiency) of interest-earning
assets over interest-bearing liabilities, as a
percentage of total assets ..................... (20.43)% (13.05)% (3.94)%
============ ============ ===========
<CAPTION>
NON-
OVER 5 - OVER 10 INTEREST
10 YEARS YEARS EARNING TOTAL
------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Interest-earning assets:
Investments, tax certificates, Federal funds sold,
FHLB overnight deposits and other interest
earning assets, at cost ........................ $ -- $ -- $ -- $ 115,262
Mortgage-backed securities ..................... 24,138 30,512 -- 133,561
Loans:
Adjustable-rate mortgages ........................ -- -- 7,508 1,030,966
Fixed-rate mortgages ........................... 110,184 112,574 256 448,016
Commercial and consumer loans .................. 42 -- 42 10,483
--------- --------- ----------- -----------
Total loans .................................... 110,226 112,574 7,806 1,489,465
--------- --------- ----------- -----------
Total interest-earning assets .................. 134,364 143,086 7,806 1,738,288
Total non-interest-earning assets ............... -- -- 68,904 68,904
--------- --------- ----------- -----------
Total assets ................................. $ 134,364 $ 143,086 $ 76,710 $1,807,192
========= ========= =========== ===========
Interest-bearing liabilities:
Customer deposits:
Money market and NOW accounts .................. -- -- 21,671 94,142
Passbook accounts .............................. -- -- -- 151,575
Certificate accounts ........................... -- -- -- 855,206
--------- --------- ----------- -----------
Total customer deposits ........................... -- -- 21,671 1,100,923
--------- --------- ----------- -----------
Borrowings:
FHLB advances .................................... 1,484 -- -- 446,484
Trust Preferred ................................. -- 116,000 -- 116,000
Other borrowings ................................. 460 315 -- 775
--------- --------- ----------- -----------
Total borrowings ................................. 1,944 116,315 -- 563,259
--------- --------- ----------- -----------
Total interest-bearing liabilities ............... 1,944 116,315 21,671 1,664,182
Total non-interest-bearing liabilities ............ -- -- 41,595 41,595
Stockholders' equity .............................. -- -- 101,415 101,415
--------- --------- ----------- -----------
Total liabilities and stockholders' equity ...... $ 1,944 $ 116,315 $ 164,681 $1,807,192
========= ========= =========== ===========
Total interest-earning assets less interest-bearing
liabilities ("GAP") .............................. $ 132,420 $ 26,771 $ (87,971) $ --
========= ========= =========== ===========
Ratio of GAP to total assets ..................... 7.33% 1.48% (4.87)% --
========= ========= =========== ===========
Cumulative excess (deficiency) of interest-earning
assets over interest-bearing liabilities ......... $ 61,200 $ 87,971
========= =========
Cumulative excess (deficiency) of interest-earning
assets over interest-bearing liabilities, as a
percentage of total assets ..................... 3.39% 4.87%
========= =========
</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.
41
<PAGE>
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 "Regulation"). 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 June 30, 1997, 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 (484) $1,610,288 (0.03)% (9.37)%
+200 90,068 1,703,855 5.29 (4.05)
Static 166,845 1,786,479 9.34 --
-200 206,339 1,835,806 11.24 1.90
-400 226,347 1,869,112 12.11 2.77
</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 liabilities indicated as maturing or otherwise repricing
within a stated period may in fact mature or reprice at different times and at
different volumes.
42
<PAGE>
LENDING ACTIVITIES
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 June 30, 1997, the Company's loan portfolio totaled $1.5 billion, of which
$1.3 billion or 86.8% 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. As of June 30, 1997, the remainder of the Company's loan
portfolio consisted of $126.4 million of commercial real estate loans (8.5% of
total loans); five or more unit residential loans of $32.0 million (2.1% of
total loans); $6.4 million of second mortgage loans (.4% of total loans); $1.8
million of consumer loans (.1% of total loans); $9.1 million of commercial
business loans (.6% of total loans); and $16.9 million of other loans (1.1% of
total loans).
At June 30, 1997, the Company's loan portfolio included $90.2 million of
residential mortgage loans to nonresident aliens. See "Residential 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>
NINE MONTHS
ENDED JUNE 30, YEAR ENDED SEPTEMBER 30,
---------------- ------------------------------------------
1997 1996 1995 1994
---------------- ------------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Total loans receivable, net, at beginning of period(1) ...... $ 646,385 $ 453,350 $413,287 $ 310,441
Loans originated:
One-to-four family residential real estate .................. 125,930 65,954 54,438 72,108
All other loans ............................................. 8,724 16,705 7,556 3,885
------------ ---------- --------- ---------
Total loans originated .................................... 134,654 82,659 61,994 75,993
Loans acquired with Suncoast/Bank of Florida ............... 341,394(2) 8,116 -- --
Loans purchased(3) .......................................... 545,387 242,099 76,081 150,502
Loans sold ................................................... (7,542) (4,356) (2,449) (21,867)
Principal payments and amortization of discounts and
premiums ................................................... (171,290) (133,836) (93,787) (96,214)
Loans charged off .......................................... (570) (493) (594) (1,582)
Transfers to real estate owned, net ........................ (2,074) (1,154) (1,182) (3,986)
------------ ---------- --------- ---------
Total loans receivable, net, at end of period(1) ......... $ 1,486,344 $ 646,385 $453,350 $ 413,287
============ ========== ========= =========
</TABLE>
- ----------------
(1) Includes loans held for sale.
(2) Loans acquired with Suncoast included $229.3 million of one-to-four family
residential real estate loans, $86.8 million of commercial real estate
loans and $25.3 million of other types of loans.
(3) All loans purchased have been one-to-four family residential real estate
loans except for the purchase of $32.0 million of commercial real estate
loans in fiscal 1996.
43
<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, as of the dates indicated.
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF SEPTEMBER 30,
---------------------- -----------------------------------------
1997 1996 1995
---------------------- -------------------- --------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------------ --------- ---------- --------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
First mortgage loans:
One-to-four-family residential ...... $1,290,024 86.8% $568,203 87.9% $432,472 95.4%
Five-or-more-unit residential ...... 31,956 2.1 12,559 2.0 1,124 0.2
Commercial ........................... 126,431 8.5 49,318 7.6 10,223 2.3
Construction ........................ 8,509 0.6 -- -- 200 0.1
Land ................................. 8,436 0.6 2,687 0.4 450 0.1
Second mortgage loans ............... 6,442 0.4 2,748 0.4 2,412 0.5
---------- ------ -------- ------ -------- ------
Total first and second
mortgage loans ..................... 1,471,798 99.0 635,515 98.3 446,881 98.6
---------- ------ -------- ------ -------- ------
Consumer loans ........................ 1,752 0.1 2,648 0.4 920 0.2
Commercial business loans ............ 9,081 0.6 5,822 0.9 3,632 0.8
---------- ------ -------- ------ -------- ------
Total loans receivable ............ 1,482,631 99.7 643,985 99.6 451,433 99.6
---------- ------ -------- ------ -------- ------
Deferred loan fees, premiums and
(discounts) ........................ 6,834 .5 4,558 0.7 3,386 0.7
Allowance for loan losses ............ (3,121) (.2) (2,158) (0.3) (1,469) (0.3)
---------- ------ -------- ------ -------- ------
Loans receivable, net(1) ............ $1,486,344 100.0% 646,385 100.0% 453,350 100.0%
========== ====== ======== ====== ======== ======
<CAPTION>
1994 1993 1992
-------------------- -------------------- -------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
---------- --------- ---------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
First mortgage loans:
One-to-four-family residential ...... $393,933 95.3% $298,342 96.1% $222,901 96.6%
Five-or-more-unit residential ...... 2,164 0.5 705 0.2 856 .04
Commercial ........................... 4,469 1.1 748 0.2 350 0.1
Construction ........................ -- -- 2,248 0.7 505 0.2
Land ................................. 1,095 0.3 1,099 0.4 1,301 0.6
Second mortgage loans ............... 2,616 0.6 623 0.2 631 0.3
-------- ------ -------- ------ -------- ------
Total first and second
mortgage loans ..................... 404,277 97.8 303,765 97.8 226,544 98.2
-------- ------ -------- ------ -------- ------
Consumer loans ........................ 2,336 0.6 2,786 0.9 2,664 1.2
Commercial business loans ............ 4,732 1.1 3,665 1.2 2,143 0.9
-------- ------ -------- ------ -------- ------
Total loans receivable ............ 411,345 99.5 310,216 99.9 231,351 100.3
-------- ------ -------- ------ -------- ------
Deferred loan fees, premiums and
(discounts) ........................ 2,783 0.7 1,409 0.5 (437) (0.2)
Allowance for loan losses ............ (841) (0.2) (1,184) (0.4) (265) (0.1)
-------- ------ -------- ------ -------- ------
Loans receivable, net(1) ............ 413,287 100.0% 310,441 100.0% 230,649 100.0%
======== ====== ======== ====== ======== ======
</TABLE>
- ----------------
(1) Includes loans held for sale.
The following table sets forth, as of June 30, 1997 the amount of loans
(including mortgage loans held for sale) by category and expected principal
repayments by year.
<PAGE>
<TABLE>
<CAPTION>
OUTSTANDING ON
JUNE 30, 1997 1998 1999
---------------- ---------- ----------
<S> <C> <C> <C>
First mortgage loans:
One-to-four family residential ............ $1,290,024 $212,404 $177,438
Five-or-more unit residential ............... 31,956 4,589 3,940
Commercial ................................. 126,431 20,648 17,230
Construction .............................. 8,509 4,568 3,024
Land ....................................... 8,436 7,105 1,221
Second mortgage loans ........................ 6,442 1,374 1,195
----------- --------- ---------
Total first and second mortgage loans ...... 1,471,798 250,688 204,048
Consumer loans .............................. 1,752 1,128 624
Commercial business loans .................. 9,081 1,122 7,959
----------- --------- ---------
Total loans ................................. $1,482,631 $252,938 $212,631
=========== ========= =========
<CAPTION>
2002- 2004- 2008 AND
2000 2001 2003 2007 THEREAFTER
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
First mortgage loans:
One-to-four family residential ............ $148,372 $124,183 $191,057 $228,771 $207,799
Five-or-more unit residential ............... 3,380 2,899 4,626 5,916 6,606
Commercial ................................. 14,383 12,018 18,461 22,073 21,618
Construction .............................. 917 -- -- -- --
Land ....................................... 82 28 -- -- --
Second mortgage loans ........................ 1,038 900 1,449 486 --
--------- --------- --------- --------- ---------
Total first and second mortgage loans ...... 168,172 140,028 215,593 257,246 236,023
Consumer loans .............................. -- -- -- -- --
Commercial business loans .................. -- -- -- -- --
--------- --------- --------- --------- ---------
Total loans ................................. $168,172 $140,028 $215,593 $257,246 $236,023
========= ========= ========= ========= =========
</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
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 June 30, 1997, 14.0% of the Company's gross loans
receivable (11.6% of total assets) were secured by properties located in
California and 39.7% of gross loans receivable (32.7% 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.
44
<PAGE>
The following table sets forth, as of June 30, 1997 the distribution of
the amount of the Company's loans (including mortgage loans held for sale) by
state.
<TABLE>
<CAPTION>
OUTSTANDING ON
STATE JUNE 30, 1997
- ------------------------------------- ---------------
(IN THOUSANDS)
<S> <C>
Florida(l) ..................... $ 590,957
California ..................... 208,986
Virginia ........................ 51,581
Illinois ........................ 50,007
Michigan ........................ 49,057
Maryland ........................ 48,085
Colorado ........................ 47,360
New Jersey ..................... 45,414
Massachusetts .................. 39,123
Texas ........................... 33,416
Ohio ........................... 32,350
New York ........................ 31,393
Georgia ........................ 27,784
Arizona ........................ 27,222
Pennsylvania ..................... 26,850
Connecticut ..................... 20,985
Washington ..................... 17,445
North Carolina .................. 14,175
Minnesota ........................ 10,425
South Carolina .................. 8,956
Tennessee ........................ 8,224
Nevada ........................... 7,990
Missouri ........................ 7,970
Utah ........................... 6,872
Kentucky ........................ 6,825
Oregon ........................... 6,236
District of Columbia ............ 4,851
Indiana ........................ 4,053
Oklahoma ........................ 3,969
Alabama ........................ 3,900
Kansas ........................... 3,746
Wisconsin ........................ 3,525
New Mexico ..................... 2,907
Rhode Island ..................... 2,760
Hawaii ........................... 2,745
Louisiana ........................ 2,162
Arkansas ........................ 1,609
Maine ........................... 1,441
New Hampshire .................. 1,390
Vermont ........................ 1,072
Others(2) ........................ 4,730
Not secured by real estate ...... 12,083
-----------
Total ........................ $1,482,631
===========
</TABLE>
- ----------------
(1) Does not include $1.3 million of tax certificates representing liens
secured by properties in Florida.
(2) Less than $1 million in any one state.
45
<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'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 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 COFI. 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 generally purchases or originates loans with "teaser" rates
that are below market rates during an initial period after the loan is
originated. For loans with teaser rates, the borrower's ability to repay is
determined upon fully indexed rates. The Company underwrites these loans
pursuant to its underwriting guidelines prior to purchase.
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 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
46
<PAGE>
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 $90.2 million, or 6.1%, 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).
The Company has also 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 and $88.8 million for the nine
months ended June 30, 1997.
COMMERCIAL REAL ESTATE LENDING. The Company's commercial real estate
lending division originates or purchases multi-family and commercial real
estate loans from approximately $250,000 to $5.0 million. The Company's
strategy is to promote commercial lending together with private banking, as
both areas seek to develop long-term relationships with select businesses, real
estate borrowers, and professionals. At June 30, 1997, the Company had $126.4
million of commercial real estate loans, representing a total of 8.5% 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 to 75% of the appraised value of the property securing
the loan. In determining whether to originate or purchase multi-family or
47
<PAGE>
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.
REAL ESTATE CONSTRUCTION LENDING. The Company makes 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. At
June 30, 1997, the Company had $8.5 million of construction loans representing
a total of .6% of the Company's loan portfolio before net items.
COMMERCIAL BUSINESS LENDING. Commercial business loans totaled $9.1
million as of June 30, 1997 representing 0.6% 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 possess 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) nonaccrual 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.
48
<PAGE>
As of June 30, 1997, the Company had $12.8 million in substandard assets
of which $11.9 million are included in non-performing assets. Substandard
assets consisted of the following:
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
--------------------
(IN THOUSANDS)
<S> <C>
One-to-four-family residential loans ...... $10,168
Consumer and business loans ............... 114
REO ....................................... 1,171
Tax certificates ........................... 1,326
--------
Total Substandard Assets .................. $12,779
========
</TABLE>
In addition, $244,000 of tax certificates were classified as loss as of
June 30, 1997 and have been specifically reserved for.
Subsequent to June 30, 1997, management became aware of problems
concerning seven loans (acquired with Suncoast) to one borrower totaling $1.5
million as of June 30, 1997. Management believes the potential losses, if any,
on these loans will be insignificant. However, the collection time period may
be lengthy.
The following table sets forth information regarding the Company's
allowance for loan losses for the periods indicated:
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
JUNE 30, FOR THE YEARS ENDED SEPTEMBER 30,
------------- --------------------------------------------
1997 1996 1995 1994 1993 1992
------------- -------- -------- ----------- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Allowance for loan losses balance (at beginning of period) ...... $2,158 $1,469 $ 841 $ 1,184 $ 265 $195
Provisions (credit) for loan losses .............................. 695 (120) 1,221 1,187 1,052 70
Allowance from The Bank of Florida .............................. -- 183 -- -- -- --
Allowance from Suncoast .......................................... 775 -- -- -- -- --
Allocation from discounts on loans purchased ..................... -- -- -- -- 90 --
Loans charged off:
One-to four-family residential loans ........................... (570) (493) (535) (1,582) (223) --
Commercial and other ............................................. -- -- (59) -- -- --
------ ------ ------ -------- ------ -----
Total ...................................................... (570) (493) (594) (1,582) (223) --
------ ------ ------ -------- ------ -----
Recoveries:
One-to four-family residential loans ........................... 48 1,119 1 52 -- --
Commercial and other ............................................. 15 -- -- -- -- --
------ ------ ------ -------- ------ -----
Total ......................................................... 63 1,119 1 52 -- --
------ ------ ------ -------- ------ -----
Allowance for loan losses, balance (at end of period) ............ $3,121 $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.
49
<PAGE>
The following table sets forth the allocation of general allowance for
loan losses by loan category for the periods indicated.
<TABLE>
<CAPTION>
AT JUNE 30, AS OF SEPTEMBER 30,
---------------------- -------------------------------------------------------------------
1997 1996 1995 1994
---------------------- ---------------------- ---------------------- ---------------------
% OF % OF % OF % OF
LOANS LOANS LOANS LOANS
IN EACH IN EACH IN EACH IN EACH
CATEGORY TO CATEGORY TO CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
-------- ------------- -------- ------------- -------- ------------- -------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at end of period
applicable to:
One-to-four-family residential
mortgages ..................... $1,723 87.4% $1,381 88.6% $1,207 95.9% $766 96.0%
Commercial and other loans ...... 1,384 12.6% 739 11.4% 168 4.1% 75 4.0%
Unallocated ..................... 14 N/A 38 N/A 94 N/A -- N/A
------- ------ ------- ------ ------- ------ ----- ------
Total allowances for
loan losses ..................... $3,121 100.0% $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--Description of Financial Condition Changes for the Years Ended
September 30, 1994, 1995, and 1996--Credit Quality."
INVESTMENTS AND MORTGAGE-BACKED SECURITIES
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.
Mortgage-backed securities are primarily acquired for their liquidity,
yield, and credit characteristics. Such securities may be used as collateral
for borrowing or pledged as collateral for certain deposits, including public
funds deposits. Mortgage-backed securities acquired include fixed and
adjustable rate agency securities (GNMA, FNMA and FHLMC), private issue
securities and collateralized mortgage obligations.
50
<PAGE>
The following table sets forth information regarding the Company's
investments and mortgage-backed securities as of the dates indicated. Amounts
shown are historical amortized cost. For additional information regarding the
Company's investments and mortgage-backed securities, including the carrying
values and approximate market values of such securities, see Notes 1 and 4 of
the Notes to the Company's Consolidated Financial Statements incorporated by
reference into this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF SEPTEMBER 30,
---------------- ---------------------------------------------
1997 1996 1995 1994
---------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Securities purchased under agreements to resell ...... $ -- $ -- $ -- $ 700
Federal funds sold .................................... -- 400 400 375
Federal agency securities ........................... 25,174 4,985 4,675 2,003
FHLB overnight deposits .............................. 2,403 28,253 31,813 11,212
Tax certificates .................................... 63,497 40,088 39,544 42,612
Mortgage-backed securities ........................... 133,561 70,165 52,998 57,155
Other ................................................ 1,839 1,711 11 11
--------- --------- --------- ---------
Total investment securities ........................ $ 226,474 $ 145,602 $ 129,441 $ 114,068
========= ========= ========= =========
Weighted average yield .............................. 6.54% 7.09% 7.43% 7.26%
========= ========= ========= =========
</TABLE>
The following table sets forth information regarding the maturities of the
Company's investments as of June 30, 1997. Amounts shown are book values.
<TABLE>
<CAPTION>
PERIODS TO MATURITY
FROM JUNE 30, 1997
--------------------------------------------------------------------------
AS OF JUNE 30, WITHIN 1 THROUGH 5 THROUGH OVER
1997 1 YEAR 5 YEARS 10 YEARS 10 YEARS
---------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Federal agency securities ...... $ 25,174 $ 900 $ 24,274 $ -- $ --
FHLB overnight deposits ......... 2,403 2,403 -- -- --
Mortgage-backed securities ...... 133,561 24,183 54,728 24,138 30,512
Tax certificates(1) ............ 63,497 44,301 19,196 -- --
Other ........................... 1,839 732 1,107 -- --
--------- -------- -------- -------- --------
Total ........................... $ 226,474 $ 72,519 $ 99,305 $ 24,138 $ 30,512
========= ======== ======== ======== ========
Weighted average yield ......... 6.54% 6.05% 6.54% 7.17% 7.17%
========= ======== ======== ======== ========
</TABLE>
- ----------------
(1) Maturities are based on historical experience.
MORTGAGE LOAN SERVICING
Prior to November 1996, the Company primarily serviced mortgage loans only
for its portfolio. With the acquisition of Suncoast on November 15, 1996, the
Company acquired a servicing portfolio consisting of 19,487 loans owned by
outside investors.
Servicing agreements generally provide for loan servicing fees ranging
from 0.25% to 0.50% per annum of the declining principal amount of the loans,
plus any late charges or other ancillary fees. Loan servicing fees for loans
serviced under mortgage-backed securities programs are either subject to
negotiation with the sponsoring agency or in certain instances set by the
sponsoring agency. Servicing fees for loans sold to private investors are
determined by agreement with the investor. Income from servicing is calculated
based upon the contractual servicing fee, net of amortization of the carrying
value of the acquired loan servicing rights.
The Company is subject to certain costs and risks related to servicing
delinquent loans. Servicing agreements relating to the mortgage-backed security
programs of FNMA and FHLMC require the servicer to advance funds to make
scheduled payments of interest, taxes and insurance, and in some instances
principal, if such payments have not been received from the borrowers. However,
the
51
<PAGE>
Company recovers substantially all of the advanced funds upon cure of default
by the borrower, or through foreclosure proceedings and claims against agencies
or companies that have insured or guaranteed the loans. Certain servicing
agreements for loans sold directly to other investors require the Company to
remit funds to the loan purchaser only upon receipt of payments from the
borrower and, accordingly, the investor bears the risk of loss. The Company,
however, is subject to the risk that declines in the market rates of interest
for mortgage loans or other economic conditions will result in a revaluation of
its servicing assets as borrowers refinance or otherwise prepay higher interest
rate loans.
The following table sets forth, by category of investor, the composition
of the servicing portfolios of the Bank as of the dates indicated:
<TABLE>
<CAPTION>
NOVEMBER 15, 1996
JUNE 30, 1997 (SUNCOAST ACQUISITION)
-------------------------------- ----------------------------------
# OF BOOK # OF BOOK
LOANS PRINCIPAL VALUE LOANS PRINCIPAL VALUE
------- ----------- -------- -------- ------------ --------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
GNMA ........................ -- $ -- $ -- 5,791 $ 299,183 $ 4,952
FNMA ........................ 1,339 106,918 1,556 1,462 117,856 1,690
FHLMC ..................... 3,039 259,331 2,449 3,425 295,392 2,758
Private investors ......... 309 43,448 531 337 50,741 626
FDIC/RTC-subservicing ...... 4,367 113,431 -- 7,087 150,317 --
Private subservicing ...... 641 48,206 -- 1,385 190,350 --
------ --------- ------- ------- ----------- --------
9,695 $571,334 $4,536 19,487 $1,103,839 $10,026
====== ========= ======= ======= =========== ========
</TABLE>
In the second quarter of 1997, the GNMA mortgage servicing portfolio was
sold and no gain or loss was recorded. As of August 31, 1997, the Company
transferred the FDIC/RTC subservicing portfolios to a third party servicer.
These actions were taken to increase the Company's profitability from mortgage
loan servicing.
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 (including trust preferred securities) 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 instruments 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.
52
<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 JUNE 30, AS OF SEPTEMBER 30,
----------------------- ---------------------------------------------------------
1997 1996 1995 1994
----------------------- --------------------- ------------------ ----------------
AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE
------------ ---------- ---------- ---------- ---------- ------- --------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Passbook accounts:
Regular .................................... $ 151,543 4.59% $ 73,741 4.44% $ 50,327 3.04% $ 44,533 3.04%
Holiday club .............................. 32 2.00 39 2.00 46 2.00 50 1.75
----------- --------- --------- --------
Total passbook accounts .................. 151,575 73,780 50,373 44,583
----------- --------- --------- ---------
Checking:
Insured money market ........................ 22,100 3.96 16,556 3.87 7,733 2.68 18,006 1.51
NOW and non-interest-bearing accounts ...... 72,042 2.00 24,566 1.49 18,157 2.17 29,805 1.67
----------- --------- --------- --------
Total transaction accounts ............... 94,142 41,122 25,890 47,811
----------- --------- --------- ---------
Total passbook and checking accounts ...... 245,717 114,902 76,263 92,394
----------- --------- --------- ---------
Certificates:
30-89-day certificates of deposit ......... -- -- -- -- 91 2.73 166 3.01
3-5-month certificates of deposit ......... 104,188 5.44 7,114 4.67 1,465 4.78 4,552 3.95
6-8-month certificates of deposit ......... 263,220 5.64 159,850 5.40 93,684 5.65 87,071 4.23
9-11-month certificates of deposit ......... 4,309 5.23 20,279 5.45 5,654 5.55 1,302 3.53
12-17-month certificates of deposit ......... 321,593 5.70 124,637 5.49 79,637 5.90 71,115 4.44
18-23-month certificates of deposit ......... 21,096 5.72 12,375 5.79 12,382 5.37 33,282 4.31
24-29-month certificates of deposit ......... 62,466 5.83 42,875 5.94 18,593 5.57 24,453 4.36
30-35-month certificates of deposit ......... 11,756 5.91 1,774 5.57 2,868 4.99 4,867 4.66
36-60-month certificates of deposits ...... 66,578 6.06 22,300 5.93 19,437 5.81 28,593 5.46
----------- --------- --------- --------
Total certificates ........................ 855,206 391,204 233,811 255,401
----------- --------- --------- ---------
Total .................................... $1,100,923 $506,106 $310,074 $347,795
=========== ========= ========= =========
Weighted average rate .................. 5.26% 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 June 30, 1997 that mature during the periods indicated:
<TABLE>
<CAPTION>
PERIODS TO MATURITY
FROM JUNE 30, 1997
-----------------------------------------------
AS OF WITHIN 1 TO 2 TO MORE THAN
JUNE 30, 1997 1 YEAR 2 YEARS 3 YEARS 3 YEARS
--------------- ---------- --------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Certificate accounts:
3.00% to 3.99% ................................. $ 83 $ 83 $ -- $ -- $ --
4.00% to 4.99% ................................. 28,035 27,651 384 -- --
5.00% to 5.99% ................................. 626,899 548,940 65,815 7,618 4,526
6.00% to 6.99% ................................. 56,470 17,622 10,229 7,258 21,361
7.00% to 7.99% ................................. 808 10 748 -- 50
--------- --------- -------- -------- --------
Total certificate accounts (under $100,000) ...... $712,295 $594,306 $77,176 $14,876 $25,937
========= ========= ======== ======== ========
</TABLE>
53
<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 June 30, 1997 that mature during the periods indicated:
<TABLE>
<CAPTION>
PERIODS TO MATURITY
FROM JUNE 30, 1997
-----------------------------------------------
AS OF WITHIN 1 TO 2 TO MORE THAN
JUNE 30, 1997 1 YEAR 2 YEARS 3 YEARS 3 YEARS
--------------- ---------- --------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Jumbo certificate accounts:
3.00% to 3.99% ..................... $ 633 $ 633 $ -- $ -- $ --
4.00% to 4.99% ..................... 4,868 4,868 -- -- --
5.00% to 5.99% ..................... 119,074 108,447 9,212 1,090 325
6.00% to 6.99% ..................... 17,680 9,763 3,033 1,263 3,621
7.00% to 7.99% ........................ 656 150 506 -- --
--------- --------- -------- ------- -------
Total Jumbo certificate amounts ...... $142,911 $123,861 $12,751 $2,353 $3,946
========= ========= ======== ======= =======
</TABLE>
Of the Company's total deposits at June 30, 1997 and September 30, 1996,
1995 and 1994, 13.0%, 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 Boynton Beach, Florida in June 1996,
West Palm Beach, Florida in September 1996, and a second branch in Boca Raton,
Florida in August 1997. 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. The Bank
currently meets the qualified thrift lender test.
54
<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 JUNE 30, AS OF SEPTEMBER 30,
--------------------- ----------------------------------------------------------------
1997 1996 1995 1994
--------------------- --------------------- --------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE BALANCE RATE
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PERIOD END BALANCES:
FHLB advances(l) ............... $446,484 5.90% $237,000 5.73% $241,000 5.92% $136,000 5.17%
Company Obligated Mandatorily
Redeemable Preferred
Securities of Subsidiary Trusts
Holding Solely Junior
Subordinated Deferrable
Interest Debentures of the
Company ........................ 116,000 10.16 -- -- -- -- -- --
Subordinated notes ............ 775 9.00 775 9.00 775 9.00 775 9.00
Securities sold under agreements
to repurchase(2) ............ -- -- -- -- -- -- 21,400 4.49
--------- ------ --------- ------ --------- ------ --------- ------
Total borrowings ............ $563,259 6.78% $237,775 5.74% $241,775 5.93% $158,175 5.10%
========= ====== ========= ====== ========= ====== ========= ======
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED SEPTEMBER 30,
--------------------- ----------------------------------------------------------------
1997 1996 1995 1994
--------------------- --------------------- --------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE BALANCE RATE
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE BALANCES:
FHLB advances(l) ............... $267,810 5.62% $234,489 5.77% $136,706 5.86% $116,493 4.03%
Company Obligated Mandatorily
Redeemable Preferred
Securities of Subsidiary Trusts
Holding Solely Junior
Subordinated Deferrable
Interest Debentures of the
Company ..................... 45,150 10.41 -- -- -- -- -- --
Subordinated notes ............ 775 9.00 775 9.00 775 9.00 775 9.00
Securities sold under agreements
to repurchase(2) ............ 4,390 5.71 -- -- 6,571 5.59 3,224 5.68
--------- ------ --------- ------ --------- ------ --------- ------
Total borrowings ............ $318,125 6.31% $235,264 5.78% $144,052 5.86% $120,492 4.11%
========= ====== ========= ====== ========= ====== ========= ======
</TABLE>
- ----------------
(1) The maximum amount of FHLB advances outstanding during the nine months
ended June 30, 1997 and the years ended September 30, 1996, 1995 and 1994
was $446.5 million, $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 nine months ended June 30, 1997 and the years ended
September 30, 1995 and 1994 was $19.3 million, $33.6 million and $21.4
million, respectively.
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 proceedings
exist, either individually or in the aggregate, which, if determined adversely
to the Company and its subsidiaries, would have a material effect on the
Company's consolidated financial condition, results of operations or cash
flows.
55
<PAGE>
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 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.
56
<PAGE>
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
I or core capital to risk-weighted assets ("Tier I 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 I 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 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 provided 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 provided for the merger of the BIF and the SAIF
on January 1, 1999 if no savings associations then exist. The special
assessment rate was 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 non-interest 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 initially reduced to 6.7 basis points, and as of June 30, 1997 to
6.3 basis points 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
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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 were 6.48 basis points assessment on SAIF deposits
and 1.30 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 their
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 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
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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 QTL's.
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 nonwithdrawable accounts and pledged
deposits, and minority interests in fully consolidated subsidiaries, 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
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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 June 30, 1997, the Bank's tangible, core and risk-based capital
ratios were 8.1%, 8.1% and 14.0%, 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 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 June 30, 1997, 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 of 5% or more and Tier I 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 |P`adequately capitalized|P' 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 more; "undercapitalized" if it has total risk-based capital of less than 8%,
Tier I 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"
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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 I 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) 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 I
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.
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
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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 June 30,
1997, 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 $22.3 million investment
in stock of the FHLB of Atlanta as of June 30, 1997.
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
June 30, 1997, advances from the FHLB of Atlanta totaled $446.5 million. The
FIRREA restricted the amount of FHLB advances that a member institution may
obtain, and in some 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
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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 June 1997, the Bank's liquidity ratio was 5.9%,
and its short-term liquidity ratio, which must be at least 1%, was 1.9%.
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 became mandatory and were deemed to replace the current
regulations described above effective July 1, 1997.
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 June 30, 1997, 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
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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.
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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.
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. Prior to legislation enacted in August 1996, the Internal
Revenue Code (the "Code") permitted 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 was 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
without regard to any deduction allowable for any addition to the reserve for
bad debt. Certain adjustments must also be made for gains on the sale of
corporate stock and tax exempt obligations. 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 of 1996, legislation was enacted that repealed the reserve
method of accounting (including the percentage of taxable income method) used
by many thrifts, including the Bank, to calculate their bad debt deduction for
federal income tax purposes. The legislation 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. As such, thrifts with assets
whose tax basis exceeds $500,000,000 must change to the specific charge off
method in computing its bad debt deduction. As such, the Bank must use the
specific charge off method in computing its bad debt deduction for tax years
beginning after December 31, 1995.
As a result of this change in accounting method, the Bank must recapture
the excess of its January 1, 1996 bad debt reserve over the reserve in
existence on December 31, 1987. This 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, the Bank's December 31, 1987 reserve must
be recaptured into taxable income as a result of certain non-dividend
distributions. 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
65
<PAGE>
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 difference between the taxpayer's adjusted
current earnings and AMTI (determined without regard to this preference and
prior to any deduction for net operating loss carryforwards or carrybacks). In
addition, net operating loss carryforwards cannot offset more than 90% of AMTI.
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 income tax on the Company, at a
rate of 5.5% of the Company's taxable income as determined for Florida income
tax purposes. Taxable income for this purpose is based on federal taxable
income with certain adjustments. A credit against the 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 tax liability.
FORECLOSURES
Tax legislation enacted in August of 1996 significantly changed the tax
treatment with respect to foreclosures for taxable years beginning after
December 31, 1995. Prior to this legislation, a thrift's acquisition of
property by means of foreclosure was not treated as a taxable event for federal
tax purposes. As such no gain or loss was recognized at the time of foreclosure
and no portion of the debt could be treated as worthless. In addition, prior to
the August 1996 legislation, thrift institutions were allowed a tax benefit for
write downs of foreclosed property to fair market value. Finally, for thrifts
that computed its bad debt deduction under the experience method, gains or
losses realized from the sale of foreclosed property were not taken into
account in computing taxable income, but were credited or charged to the
thrift's bad debt reserve.
As a result of the newly enacted tax legislation, thrift foreclosures are
treated as a taxable event for federal tax purposes for property acquired after
December 31, 1995. As such, a thrift may recognize gain, loss or a bad debt
deduction at the time of foreclosure depending on the method by which the
property was acquired. In addition, write downs of foreclosed property to fair
market value no longer give rise to a tax benefit. Finally, gains and losses
realized upon the sale of foreclosed property are included in taxable income of
the thrift.
66
<PAGE>
MANAGEMENT
The following table sets forth the name, business address, present
principal occupation or employment and any other material occupations,
positions, offices or employments during the last five years of the directors
and executive officers of the Company. Unless otherwise indicated, all
occupations, positions, offices or employments listed opposite any individual's
name were held by such individual during the course of the last five years.
Each individual listed below is a citizen of the United States.
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH COMPANY AND BUSINESS EXPERIENCE
- --------------------------- ----- -------------------------------------------------------------
<S> <C> <C>
Alfred R. Camner 53 Director, Chairman of the Board, Chief Executive Officer
255 Alhambra Circle Coral and President of the Company (1993 to present); Director,
Gables, FL 33134 Chairman of the Board and Chief Executive Officer (1984 to
present) and President (1984 to 1993, November 1994 to
present) of the Bank; Senior Managing Director (1996 to
present) and Managing Director (1973 to present) of Stuzin
and Camner, Professional Association, attorneys-at-law;
General Counsel to CSF Holdings, Inc. and its subsidiary,
Citizens Federal Bank, A Federal Savings Bank (1973 to
1996); 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 54 Director and Vice Chairman of the Board of the Company
Rachlin, Cohen & Holtz (1993 to present) and the Bank (1984 to present); Managing
1 S.E. 3rd Ave. Director (1992 to present) and partner (1974 to present) of
Miami, FL 33131 Rachlin, Cohen & Holtz, certified public accountants.
Albert J. Finch 59 Director and Vice Chairman of the Company and the Bank
1001 Colony Point Circle (November 1996 to present); President and sole owner of
Pembroke Pines, FL 33026 Finch Financial, Inc., a financial consulting firm (November
1996 to present); Director, Chairman of the Board and Chief
Executive Officer of Suncoast Savings and Loan Association,
FSA ("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
255 Alhambra Circle President (1994 to present) of the Company; Director,
Coral Gables, FL 33134 Executive Vice President and Chief Operating Officer of the
Bank (1994 to present); Executive Vice President of Retail
Banking, Intercontinental Bank (1989 to 1994).
Earline G. Ford 53 Director, Executive Vice President and Treasurer of the
255 Alhambra Circle Company (1993 to present); Director (1984 to present),
Coral Gables, FL 33134 Executive Vice President (1990 to present), Senior Vice
President--Administration (1988 to 1990), Treasurer (1984 to
present), Corporate Secretary (1996 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).
</TABLE>
67
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH COMPANY AND BUSINESS EXPERIENCE
- ----------------------------- ----- ---------------------------------------------------------------
<S> <C> <C>
Marc D. Jacobson 54 Director (1993 to present) and Secretary (1993 to 1996) of
Head-Beckham Ins. Agcy. the Company; Director (1984 to present) and Secretary (1985
3050 Biscayne Blvd. to 1996) of the Bank; Vice President of Head-Beckham
Miami, FL 33137 Insurance Agency, Inc. (1990 to present).
Allen M. Bernkrant 66 Director of the Company (1993 to present) and the Bank
Heritage Manufacturing (1985 to present); Private investor in Miami, Florida (1990 to
4600 N.W. 135 St. present).
Opalocka, FL 33054
Irving P. Cohen 56 Director of the Company and the Bank (1996 to present);
Thompson, Hine and Flory Director of Suncoast (1988 to 1996); Partner, Thompson Hine
1920 N Street, N.W. & Flory, attorneys at law (1995 to present); Partner, Semmes
Washington, DC 20036 Bowen & Semmes, attorneys at law (1990 to 1995).
Bruce Friesner 55 Director of the Company and the Bank (1996 to present);
F&G Associates Director of Loan America Financial Corporation, a national
5431 N. 36th Court mortgage banking company (1990-1994); Partner of F&G
Hollywood, FL 33021 Associates, a commercial real estate development company
(1972 to present).
Patricia L. Frost 57 Director of the Company (1993 to present) and the Bank
4400 Biscayne Boulevard (1990 to present); Private investor in Miami, Florida (1993 to
Miami, FL 33137 present); Principal, West Laboratory School, Coral Gables,
Florida (1970 to 1993).
Elia J. Giusti(l) 63 Director of the Company and the Bank (1996 to present);
Lee Giusti Realty, Inc. Director of Suncoast (1990 to 1996); President and principal
900 E. Broward Blvd. owner of Lee Giusti Realty, Inc., a real estate and mortgage
Ft. Lauderdale, FL 33301 brokerage firm (1982 to present).
Marc Lipsitz 55 Director and Secretary of the Company (1996 to present);
Stuzin & Camner P.A. Managing Director (1996 to present) of Stuzin & Camner,
550 Biltmore Way Professional Association, attorneys at law; General Counsel
Coral Gables, FL 33134 of Jefferson National Bank (1993 to 1996); Partner, Stroock
Stroock & Lavan, attorneys at law (1991 to 1993); Deputy
General Counsel and General Counsel of Southeast Bank,
N.A. (1985 to 1991).
Norman E. Mains(l) 54 Director of the Company and the Bank (1996 to present);
Chicago Mercantile Exchange Director of Suncoast (1985 to 1996); Chief Economist and
10 South Wacker Drive Director of Research for the Chicago Mercantile Exchange
North Tower (1994 to present); President and Chief Operating Officer of
Chicago, IL 60606 Rodman & Renshaw Capital Group, Inc., a securities broker/
dealer firm (1991 to 1994).
Neil Messinger, M.D. 59 Director of the Company and the Bank (1996 to present);
Baptist Hospital Radiologist; President, Radiological Associates, P.A. (1986 to
8900 N. Kendall Drive present); Chairman of Imaging Services of Baptist Hospital
Miami, FL 33176 (1986 to present).
Christina Cuervo 33 Director of the Company and the Bank (1995 to present);
Beacon Council Executive Vice President, the Beacon Council (1996 to
80 S.W. 8th Street present); Assistant City Manager and Chief of Staff of the
Miami, FL 33130 City of Miami (1992 to 1996); Assistant Vice President of
United National Bank (1992); Assistant Vice President, First
Union National Bank (formerly Southeast Bank, N.A.) (1986
to 1992).
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH COMPANY AND BUSINESS EXPERIENCE
- ------------------------ ----- ----------------------------------------------------------------
<S> <C> <C>
Anne W. Solloway 81 Director of the Company (1993 to present) and the Bank
8124 S.W. 87th Terrace (1985 to present); Private investor in Miami, Florida.
Miami, FL 33143
OFFICERS OF THE COMPANY
AND/OR THE BANK WHO ARE
NOT DIRECTORS:
Charles A. Arnett 48 Executive Vice President of the Bank (1995 to present);
255 Alhambra Circle Executive Vice President of Intercontinental Bank (1991 to
Coral Gables, FL 33134 1995); President and Chief Executive officer of Northridge
Bank (1990 to 1991).
Clifford A. Hope 49 Executive Vice President of the Bank (1997 to present);
255 Alhambra Circle banking industry consultant in private practice (1996 to 1997);
Coral Gables, FL 33134 Senior Vice President and Chief Accounting Officer of
Citizens Federal Bank (1987 to 1996).
Samuel A. Milne 47 Executive Vice President and Chief Financial Officer (1996 to
255 Alhambra Circle present) and Senior Vice President and Chief Financial
Coral Gables, FL 33134 Officer (1995 to 1996) of the Company and the Bank; Senior
Vice President and Chief Financial Officer, Consolidated
Bank (1992 to 1995); Senior Vice President, Southeast Bank,
N.A. (1984 to 1991).
Donald Putnam 40 Executive Vice President of the Company (1997 to present)
255 Alhambra Circle and the Bank (1996 to present); Senior Vice President and
Coral Gables, FL 33134 Regional Sales Manager, NationsBank of Florida, N.A.
(1996); Senior Vice President (1994 to 1996), and First Vice
President (1987 to 1994), of Citizens Federal Bank.
</TABLE>
All executive officers serve at the discretion of the Board of Directors
and are elected annually by the Board.
69
<PAGE>
EXECUTIVE COMPENSATION
ANNUAL COMPENSATION
The following table sets forth information regarding the total
compensation awarded to, earned by or paid to the Chief Executive Officer and
four additional officers of the Company and the Bank whose total annual salary
and bonus exceeded $100,000 (the "named executive officers"). There were no
other executive officers at the fiscal year ended September 30, 1996 whose
total annual salary and bonus for the fiscal year exceeded $100,000 for
services rendered to the Company and the Bank.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------------------------- --------------
SECURITIES
UNDERLYING
OTHER ANNUAL OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) (#)(A) COMPENSATION($)
- ------------------------------ ------ ----------------- ---------------- ----------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
ALFRED R. CAMNER 1996 $ 175,092(B) $ 54,039(D) (J) 65,986 $ 8,361(K)
Chairman of the Board, 1995 $ 153,750(C) $ 48,749(D) (J) 96,177 $ 8,942(K)
Chief Executive Officer 1994 $ 122,500 $ 91,040(D) (J) 43,369 $ 8,942(K)
and President of the
Company and the Bank
JAMES A. DOUGHERTY 1996 $ 126,067(E) $ 12,200(E) (J) 13,451 --
Executive Vice President 1995 $ 118,794 $ 6,050 (J) 14,907 --
of the Company; 1994 -- -- -- -- --
Executive Vice President
and Chief Operating Officer
of the Bank
EARLINE G. FORD 1996 $ 94,047(F) $ 23,350(G) (J) 13,486 --
Executive Vice President 1995 $ 77,250(L) $ 15,850(G) (J) 82,177 --
and Treasurer of the Bank 1994 $ 67,750(M) $ 13,000(G) (J) 36,402 --
and the Company
CHARLES A. ARNETT 1996 $ 112,250 $ 3,300(H) (J) -- --
Executive Vice President 1995 $ 48,333 -- (J) 4,000 --
of the Bank 1994 -- -- -- -- --
SAMUEL A. MILNE 1996 $ 105,000 $ 5,000(I) (J) 12,500 --
Executive Vice President 1995 $ 41,667 -- (J) 4,000 --
and Chief Financial Officer 1994 -- -- -- -- --
of the Company and the Bank
</TABLE>
- ----------------
<TABLE>
<S> <C>
# Number of shares granted.
$ Dollar amounts.
(A) All information provided relates to option grants. The Company does not grant stock appreciation rights ("SARs"). All
amounts are adjusted for stock splits. Includes options that were granted as a partial payment of the named executive
officers' directors' fees for service on the Boards of Directors of the Company and the Bank. See "Compensation of
Directors."
(B) Includes 6,000 shares of Class B Common with a fair market value of $43,425 on the date of grant that were granted in
lieu of cash salary for a portion of the officer's annual compensation.
(C) Includes 5,000 shares of Class B Common with a fair market value of $28,750 on the date of grant that were granted in
lieu of cash salary for a portion of the officer's annual compensation.
(D) Reflects a stock bonus of 7,466 shares of Class B Common with a fair market value on the date of grant of approximately
$54,035 paid in the 1996 fiscal year for services during the 1995 fiscal year; a stock bonus of 8,477 shares of Class B
Common with a fair market value on the date of grant of approximately $48,749 paid in the 1995 fiscal year for services
during the 1994 fiscal year; a cash bonus of $50,677 and a stock bonus of 5,383 shares of Class B Common with a fair
market value on the date of grant of approximately $40,372 paid in the 1994 fiscal year for services during the 1993
fiscal
year.
(E) Reflects a stock bonus of 1,685 shares of Class B Common with a fair market value of $12,195 on the date of grant paid
in
the 1996 fiscal year for services during the 1995 fiscal year.
(F) Includes 3,000 shares of Class B Common with a fair market value of $21,713 on the date of grant that were granted in
lieu of cash salary for a portion of the officer's annual compensation.
</TABLE>
70
<PAGE>
<TABLE>
<S> <C>
(G) Reflects a stock bonus of 3,225 shares of Class B Common with a fair market value on the date of grant of approximately
$23,341 paid in the 1996 fiscal year for services during the 1995 fiscal year; a stock bonus of 2,755 shares of Class B
Common with a fair market value on the date of grant of approximately $15,841 paid in the 1995 fiscal year for services
during the 1994 fiscal year, and a stock bonus of 200 shares with a fair market value of $1,500 on the date of grant and
a
cash bonus of $11,500 paid in fiscal 1994 for services during the 1993 fiscal year.
(H) Reflects a cash bonus of $1,652 and a stock bonus of 227 shares of Class A Common with a fair market value on the date
of grant of approximately $1,643 paid in the 1996 fiscal year for services during the 1995 fiscal year.
(I) Reflects a cash bonus of $2,503 and a stock bonus of 345 shares of Class A Common with a fair market value on the date
of grant of approximately $2,497 paid in the 1996 fiscal year for services during the 1995 fiscal year.
(J) The aggregate amount of such compensation for each fiscal year is less than 10% of the total of the named executive
officer's annual salary and bonus for such fiscal year.
(K) Reflects premiums paid on a life insurance policy for the benefit of Mr. Camner.
(L) Includes 2,000 shares of Class B Common with a fair market value of $11,500 on the date of grant that were granted in
lieu of salary for a portion of the officer's annual compensation.
(M) Includes 1,000 shares of Class B Common with a fair market value of $7,500 on the date of grant that were granted in lieu
of salary for a portion of the officer's annual compensation.
</TABLE>
71
<PAGE>
COMPENSATION PURSUANT TO PLANS
1996 STOCK OPTION GRANTS. The following table provides details regarding
stock options granted to the named executive officers during the 1996 fiscal
year. In addition, in accordance with the rules and regulations of the
Securities and Exchange Commission, the table describes the hypothetical gains
that would exist for the respective options based on assumed rates of annual
compound stock appreciation of 5% and 10% from the date of grant to the end of
the option term. These hypothetical gains are based on assumed rates of
appreciation and, therefore, the actual gains, if any, on stock option
exercises are dependent on the future performance of the Class A Common,
overall stock market conditions, and the named executive officer's continued
employment with the Company and the Bank. As a result, the amounts reflected in
this table may not necessarily be achieved.
OPTION/SAR GRANTS IN LAST FISCAL YEAR (A)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------------------
NUMBER OF
SECURITIES
UNDERLYING
OPTIONS/SARS PERCENT OF TOTAL
GRANTED(#) OPTIONS/SARS
---------------------------------- GRANTED TO EXERCISE OR
CLASS A CLASS B EMPLOYEES IN BASE PRICE EXPIRATION
NAME COMMON COMMON FISCAL YEAR(C) ($/SHARE) DATE
- -------------------- ------------------ --------------- ----------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
ALFRED R. CAMNER 182(D)(B) * $8.2750 11/26/05
276(D)(B) * $7.5875 2/22/06
10,000(F) 7.52% $8.9512 4/1/01
261(D)(B) * $7.8750 5/24/06
10,000(D) 7.52% $8.1375 4/01/06
45,000(F) 33.85% $8.00 7/18/01
267(D)(B) * $7.6750 8/28/06
JAMES A. DOUGHERTY 181(D)(B) * $8.2750 11/26/05
276(D)(B) * $7.5875 2/22/06
5,000(F) 3.76% $8.1375 4/1/06
228(D)(B) * $7.8750 5/24/06
7,500(F) 5.64% $7.2750 7/18/06
266(D)(B) * $7.6750 8/28/06
EARLINE G. FORD 182(D)(B) * $8.2750 11/26/05
276(D)(B) * $7.5875 2/22/06
5,000(F) 3.76% $8.1375 4/1/06
261(D)(B) * $7.8750 5/24/06
7,500(F) 5.64% $7.2750 7/18/06
267(D)(B) * $7.6750 8/28/06
SAMUEL A. MILNE 5,000(F) 3.76% $8.1375 4/1/06
7,500(F) 5.64% $7.2750 7/18/06
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATE OF
STOCK PRICE APPRECIATION
FOR OPTION TERM
----------------------------------
NAME 5%($) 10%($)
- -------------------- ---------------- -----------------
<S> <C> <C>
ALFRED R. CAMNER $ 947 $ 2,400
$ 1,317 $ 3,338
$ 51,176(E) $ 129,690(E)
$ 1,292 $ 3,275
$ 51,176(E) $ 129,690(E)
$ 226,402(E) $ 573,747(E)
$ 1,289 $ 3,266
JAMES A. DOUGHERTY $ 942 $ 2,387
$ 1,317 $ 3,338
$ 25,588 $ 64,845
$ 1,129 $ 2,862
$ 34,314 $ 86,959
$ 1,284 $ 3,254
EARLINE G. FORD $ 947 $ 2,400
$ 1,317 $ 3,338
$ 25,588(E) $ 64,845(E)
$ 1,293 $ 3,276
$ 34,314(E) $ 86,959(E)
$ 1,289 $ 3,266
SAMUEL A. MILNE $ 25,588 $ 64,845
$ 34,314 $ 86,959
</TABLE>
- ----------------
<TABLE>
<S> <C>
# Number of shares underlying options granted.
$ Dollar amounts.
* Less than 1%.
(A) All information provided relates to option grants. The Company does not grant SARs.
(B) These options were granted under the Company's 1992 Non-Statutory Stock Option Plan (the "Non-Statutory Plan") for
terms of 10 years and are exercisable immediately. The options terminate upon the termination of the option holder's
employment with the Company or the Bank, unless the option holder's option agreement provides otherwise in the event
of termination by retirement, disability, death or for reasons other than cause. The exercise price of the option is
the fair
market value of the stock covered by each such option on the date of grant. "Fair market value per share" is the
average
of the mean between the closing dealer bid and ask prices as quoted on the Nasdaq Stock Market for each of the last
five
days on which such stock was traded, including the date of grant.
(C) Does not include the options granted to employees who are also directors as partial payment for directors' fees. See
"Compensation of Directors" and Note (D).
(D) These options to acquire shares of Class A Common were granted as partial payment of the named executive officers'
directors' fees for their service on the Board of Directors of the Company and the Bank. See "Compensation of
Directors."
</TABLE>
72
<PAGE>
<TABLE>
<S> <C>
(E) The potential realizable values of the options to acquire Class B Common were calculated assuming that the underlying
shares of Class B Common were converted, pursuant to the terms of that class, into shares of Class A Common on a one-
for-one basis.
(F) These options were granted under the Company's 1994 Incentive Stock Option Plan (the "Incentive Plan"). Under the
terms of the grant, the option shall become exercisable for one-third of the total shares covered by the option in each
year
of the three-year period beginning January 1996.
</TABLE>
1996 STOCK OPTION EXERCISES. The named executive officers did not
exercise any stock options during the 1996 fiscal year.
COMPENSATION OF DIRECTORS
For service on the Company's Board of Directors during the 1996 fiscal
year, the directors of the Company each received a fee per meeting that
consisted of shares of Class A Common with a current market value of $100 and
options to acquire shares of Class A Common with a current market value of
$250. In addition, for service on the Bank's Board of Directors, the directors
received a fee per meeting consisting of $500 in cash, shares of Class A Common
with a current market value of $400 and options to acquire shares of Class A
Common with a current market value of $600. However, if any director of the
Bank missed more than two meetings of the Board of Directors, he or she
received directors' fees only for those meetings he or she actually attended
thereafter.
Non-employee directors who are members of a Board committee or of the
Bank's Community Reinvestment Act Committee received an additional fee per
meeting of the applicable committee (paid in cash, stock options and shares of
stock as indicated above) for service on those committees. Committee members
who are also employees did not receive additional compensation for their
service on such committees.
Beginning on November 14, 1996, the Compensation Committee and the Board
voted to change that portion of the fee which is paid in the form of an option
award. That portion of the fee will consist of a grant of options to acquire
125 shares of Class A Common for each Board and committee meeting of the Bank
and options to acquire 30 shares of Class A Common for each Board and committee
meeting of the Company. The portion of director and committee fees paid in cash
and stock will remain the same.
Pursuant to the Merger Agreement between the Company and Suncoast, the
Company entered into a consulting agreement with Albert J. Finch, the former
Chief Executive Officer and President of Suncoast. The terms of such consulting
agreement include payment of a monthly consulting fee at the rate of $100,000
per year for a three-year period for consulting services of up to 600 hours per
year. In addition, during the term of his consulting agreement the Company will
provide Mr. Finch with several benefits which he had received as an officer of
Suncoast. The Company has the right to terminate the consulting agreement for
cause.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time, the Bank makes loans in the ordinary course of business
to its directors, officers and employees, as well as members of their immediate
families and affiliates, to the extent consistent with applicable laws and
regulations. All of such loans are and have been made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons and do not involve more than the
normal risk of collectibility or present other unfavorable features.
During the 1996 fiscal year, the Company paid Head-Beckham Insurance
Agency, Inc. ("Head-Beckham") the sum of approximately $147,000 for insurance
premiums on the Company's and the Bank's directors' and officers' liability,
banker's blanket bond, commercial multi-peril and workers' compensation
policies, of which approximately $20,604 represented the agency's commissions.
The Company also obtains its group major medical, long-term disability and life
insurance through Head-Beckham, although all premiums for such policies are
paid directly to the insurer. Mr. Jacobson is a vice
73
<PAGE>
president of Head-Beckham. The Company believes that the premiums paid for
policies obtained through Head-Beckham are comparable to those that would be
paid for policies obtained through unaffiliated agencies. The Company expects
to continue using the services of Head-Beckham.
The Company and the Bank employ the law firm of Stuzin and Camner,
Professional Association ("Stuzin and Camner"), as general counsel. Alfred R.
Camner, Chief Executive Officer, President and a director of the Company and
the Bank, is the senior managing director of Stuzin and Camner. Earline G.
Ford, Executive Vice President, Treasurer and a director of the Company and the
Bank, was the legal administrator of Stuzin and Camner until October, 1996.
Marc Lipsitz, a director of the Company, is the managing director of Stuzin and
Camner. During the 1996 fiscal year, Stuzin and Camner received approximately
$986,000 in legal fees from the Company allocable to mortgage loan closings,
foreclosures, litigation, corporate and other matters. A substantial portion of
the fees allocable to mortgage loan closings are reimbursed by borrowers.
During the 1997 fiscal year, the Bank entered into a lease for property
located in a warehouse and commercial district adjacent to the Miami
International Airport, on which it intends to open a new branch. The property
is owned by a partnership, 25% of which is owned by Alfred Camner, 25% of which
is owned by Charles B. Stuzin, an owner of more than five percent of the
Company's Class B Common Stock, and the remaining 50% of which is owned by Ruth
Stuzin, Charles B. Stuzin's mother. The annual rent for the property is
approximately $126,000 for a term of three years. The lease may be renewed for
four additional three-year terms. In addition, the Bank will pay approximately
$450,000 in construction costs and termination of lease costs to unaffiliated
parties. The lease terms, including the early termination payment, are at
market rates comparable to those prevailing in the area for similar
transactions involving non-affiliated parties.
74
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of September 1, 1997
concerning (i) each director of the Company; (ii) the Chief Executive Officer;
(iii) all directors and executive officers of the Company and the Bank as a
group; and (iv) each other person known to management of the Company to be the
beneficial owner, as such term is defined in Rule 13d-3 under the Exchange Act,
of more than 5% of the outstanding shares of each class of the Company's voting
securities, according to filings by such persons with the Securities and
Exchange Commission.
<TABLE>
<CAPTION>
AMOUNT
AND NATURE
OF BENEFICIAL PERCENT OF
OWNERSHIP SERIES B
OF SERIES B PREFERRED
NAME AND ADDRESS PREFERRED(1) OUTSTANDING
- ---------------------------------- --------------- -------------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Charles Arnett -- --
Allen M. Bernkrant 23,560 12.82%
Lawrence H. Blum 23,560 12.82%
Alfred R. Camner 71,018 38.63%
Irving P. Cohen -- --
Christina Cuervo Migoya -- --
James A. Dougherty -- --
Albert J. Finch -- --
Earline G. Ford 5,000 2.72%
Samuel A. Milne -- --
Bruce Friesner -- --
Patricia L. Frost -- --
Clifford A. Hope -- --
Elia J. Giusti -- --
Marc D. Jacobson 10,000 5.44%
Marc Lipsitz -- --
Norman E. Mains -- --
Neil Messinger, M.D. -- --
<CAPTION>
AMOUNT AMOUNT
AND NATURE AND NATURE
OF BENEFICIAL PERCENT OF OF BENEFICIAL PERCENT OF
OWNERSHIP CLASS B OWNERSHIP CLASS A
OF CLASS B COMMON OF CLASS A COMMON
NAME AND ADDRESS COMMON(1) OUTSTANDING(1) COMMON(1) OUTSTANDING(1)
- ---------------------------------- ------------------------- ---------------- -------------------- ---------------
<S> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Charles Arnett -- -- 18,065 *
(5)(7)
Allen M. Bernkrant 37,860 12.07% 88,655 1.02%
(2)(3) (4)
Lawrence H. Blum 65,354 19.16% 205,720 2.36%
(2)(3)(6) (4)
Alfred R. Camner 809,585 87.42% 984,935 10.41%
(2)(6)(7) (9)
(8)
Irving P. Cohen -- -- 43,240 *
(4)
Christina Cuervo Migoya -- -- 3,364 *
(5)
James A. Dougherty -- -- 78,581 *
(7)
Albert J. Finch -- -- 27,045 *
(4)
Earline G. Ford 406,652 62.14% 438,262 4.86%
(2)(3)(6) (4)
(7)
Samuel A. Milne -- -- 59,496 *
(5)(7)
Bruce Friesner -- -- 10,343 *
(5)
Patricia L. Frost -- -- 7,554 *
(4)(10)
Clifford A. Hope -- -- 10,000 *
(5)
Elia J. Giusti -- -- 22,987 *
(4)
Marc D. Jacobson 43,540 13.64% 129,727 1.50%
(2)(3)(6) (4)
Marc Lipsitz -- -- 24,522 *
(5)
Norman E. Mains -- -- 46,183 *
(4)
Neil Messinger, M.D. -- -- 6,506 *
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
AND NATURE
OF BENEFICIAL PERCENT OF
OWNERSHIP SERIES B
OF SERIES B PREFERRED
NAME AND ADDRESS PREFERRED(1) OUTSTANDING
- ------------------------------------ --------------- -------------
<S> <C> <C>
Donald Putnam -- --
Anne W. Solloway -- --
All current directors and executive
officers of the Company and the
Bank as a group
(20 persons) 133,138 72.43%
OTHER 5% OWNERS:
Phillip Frost, M.D. -- --
4400 Biscayne Boulevard
Miami, Florida 33137
Charles B. Stuzin 16,560 9.01%
550 Biltmore Way
Suite 700
Coral Gables, Florida 33134
James M. Stuzin 7,000 3.81%
550 Biltmore Way (14)
Suite 700
Coral Gables, Florida 33134
Ruth E. Stuzin -- --
550 Biltmore Way
Suite 700
Coral Gables, Florida 33134
Harvey Miller 13,560 7.38%
SunTrust Building-10th Floor
1 Southeast Third Avenue
Miami, Florida 33131
Barry Shulman 13,560 7.38%
3999 N.E. 15th Avenue
Ft. Lauderdale, FL 33334
<CAPTION>
AMOUNT AMOUNT
AND NATURE AND NATURE
OF BENEFICIAL PERCENT OF OF BENEFICIAL PERCENT OF
OWNERSHIP CLASS B OWNERSHIP CLASS A
OF CLASS B COMMON OF CLASS A COMMON
NAME AND ADDRESS COMMON(1) OUTSTANDING(1) COMMON(1) OUTSTANDING(1)
- ------------------------------------ ---------------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Donald Putnam -- -- 15,000 *
(5)
Anne W. Solloway 31,856 10.50% 40,928 *
(3)(6) (9)
All current directors and executive
officers of the Company and the
Bank as a group
(20 persons) 1,362,993 93.90% 2,220,185 21.45%
(11) (11)
OTHER 5% OWNERS:
Phillip Frost, M.D. -- -- 997,888 11.60%
4400 Biscayne Boulevard (12)
Miami, Florida 33137
Charles B. Stuzin 81,563 24.07% 214,599 2.46%
550 Biltmore Way (6)(13)
Suite 700
Coral Gables, Florida 33134
James M. Stuzin 60,090 21.00% 61,802 *
550 Biltmore Way (15)
Suite 700
Coral Gables, Florida 33134
Ruth E. Stuzin 13,686 4.96% 13,686 *
550 Biltmore Way (16)
Suite 700
Coral Gables, Florida 33134
Harvey Miller 20,354 6.88% 40,520 *
SunTrust Building-10th Floor (17)
1 Southeast Third Avenue
Miami, Florida 33131
Barry Shulman 20,284 6.85% 92,521 1.07%
3999 N.E. 15th Avenue (17) (18)
Ft. Lauderdale, FL 33334
</TABLE>
- ----------------
<TABLE>
<S> <C>
* Less than 1%.
(1) The nature of the reported beneficial ownership as of September 1, 1997 is unshared voting and investment power unless
otherwise indicated in the footnotes to this table. Class B Common ownership of the persons listed includes shares of
Class B Common that would be issued upon the conversion of shares of Series B Preferred owned by such persons and
the exercise of options granted to such persons to acquire Class B Common. Ownership by the persons listed of Class A
Common, which is the Company's publicly traded class, includes shares of Class A Common that would be issued upon the
conversion of shares of Series B Preferred, Series 1993 Preferred, Series 1996 Preferred, and Class B Common beneficially
owned by them and the exercise of options to acquire Class A Common and Class B Common granted to them. Each
share of Series B Preferred is convertible into 1.4959 shares of Class B Common. Each share of Class B Common is
convertible into one share of Class A Common. At September 1, 1997, each share of Series 1993 Preferred and Series 1996
Preferred was convertible into one share and approximately 1.67 shares of Class A Common, respectively, subject to
adjustment upon the occurrence of certain events. Alfred Camner is Anne W. Solloway's son.
(2) Includes 35,243; 35,243; 106,235; 7,479 and 14,959 shares of Class B Common that would be issued upon the conversion of
shares of Series B Preferred held individually by each of Allen M. Bernkrant, Lawrence H. Blum, Alfred R. Camner,
Earline G. Ford and Marc D. Jacobson, respectively.
(3) Includes 2,617; 30,111; 371,274; 28,511 and 4,218 shares of Class B Common that may be acquired individually by each of
Allen M. Bernkrant, Lawrence H. Blum, Earline G. Ford, Marc D. Jacobson and Anne W. Solloway, respectively, through
currently exercisable options under the Company's Non-Statutory Plan.
(4) Includes 9,595; 31,975; 6,099; 5,051; 9,205; 7,335; 11,335; 16,335 and 16,025 shares of Class A Common that may be
acquired by each of Allen M. Bernkrant, Lawrence H. Blum, Earline G. Ford, Patricia L. Frost, Marc D. Jacobson, Irving
P. Cohen, Albert J. Finch, Elia J. Giusti and Norman Mains, respectively, through currently exercisable options granted
under the Company's Non-Statutory Plan.
</TABLE>
76
<PAGE>
<TABLE>
<S> <C>
(5) Includes 2,305; 2,269; 20,240; 2,347, 56,000; 10,000; 16,500; and 10,000 shares of Class A Common that may be acquired
by
each of Christina Cuervo Migoya, Bruce Friesner, Marc Lipsitz, Neil Messinger, Samuel A. Milne, Donald Putnam, and
Charles Arnett and Clifford Hope, respectively, through currently exercisable options granted under the Company's Non-
Statutory Plan.
(6) Includes 25,894 shares of Class B Common that may be acquired by each of the persons indicated through currently
exercisable options granted to the original organizers of the Bank.
(7) Includes 2,424; 2,424; 2,424, 969 and 9,848 shares of restricted stock held by Earline G. Ford, Samuel A. Milne, Jim
Dougherty, Charles Arnett and Alfred R. Camner, respectively, which were granted on November 14, 1996, subject to
shareholder approval of the 1996 Plan, which vest over a 5-year period, with one-third vesting 3 years from the date of
grant, one-third vesting 4 years from the date of grant and the remainder vesting 5 years from the date of grant.
(8) Includes 516,568 shares of Class B Common that may be acquired by Alfred R. Camner through currently exercisable
options under the Non-Statutory Plan. Also includes, pursuant to a durable power of attorney given by Mrs. Solloway to
Mr. Camner, 4,218 shares of Class B Common owned by her, 25,894 shares of Class B Common that may be acquired by
her through options described in Note (6) above, and 1,744 shares of Class B Common that may be acquired by her
through currently exercisable options under the Non-Statutory Plan. Also includes 1,914 shares of Class B Common
owned by Mr. Camner's wife, for which he has been granted a proxy, and 10,000 shares of Class B Common owned by an
irrevocable trust for the benefit of Mr. Camner's descendants. Does not include options to purchase 93,676 shares of
Class B Common Stock, which were transferred by Mr. Camner as a bona fide gift to the Camner Family Foundation, Inc,
a charitable non-profit foundation under Section 501(a) of the Internal Revenue Code.
(9) Includes 6,055 and 6,054 shares of Class A Common that may be acquired by each of Alfred R. Camner and Anne W.
Solloway, respectively, through currently exercisable options under the Non-Statutory Plan. Mr. Camner also has
beneficial
ownership of Mrs. Solloway's shares through a durable family power of attorney.
(10) Does not include the shares of Class A Common beneficially owned by Patricia L. Frost's husband (see Note 12).
(11) Includes an aggregate of 976,719 shares of Class B Common and 319,812 shares of Class A Common that may be acquired
through currently exercisable options, as described in this Note and in Notes (3) through (7) and (9) above.
(12) This amount includes 822,889 shares of Class A Common Stock which were received upon the conversion in February
1997, of shares of Series C and C-II Preferred Stock which were beneficially owned by Dr. Frost and Frost-Nevada,
Limited Partnership, but does not include shares beneficially owned by Patricia L. Frost, Dr. Frost's wife and a
director of
the Company and the Bank.
(13) Includes 24,772 shares of Class B Common that would be issued upon the conversion of the shares of Series B Preferred
held by Mr. Stuzin, 6,843 shares of Class B Common held by a family partnership of which Mr. Stuzin is a general
partner,
and 38,394 shares of Class B Common that may be acquired by Mr. Stuzin through currently exercisable options under the
Non-Statutory Plan.
(14) Reflects shares of Series B Preferred held as trustee of a trust for the benefit of certain family members.
(15) Includes 10,471 shares of Class B Common that would be issued upon the conversion of 7,000 shares of Series B Preferred
and 49,619 shares of Class B Common held as trustee of a family trust, and 6,843 shares of Class B Common held as
general partner of a family partnership.
(16) Includes 6,843 shares of Class B Common owned of record by a family partnership, of which Ruth E. Stuzin has been
given voting power pursuant to a revocable proxy.
(17) Includes 20,284 shares of Class B Common that would be issued upon the conversion of 13,560 shares of Series B
Preferred held by each of Barry Shulman and Harvey Miller.
(18) Includes 12,500 shares of Class A Common that would be issued upon the conversion of 12,500 shares of Series 1993
Preferred held by Barry Shulman.
</TABLE>
77
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Set forth below is a summary of certain terms and provisions of the
Company's capital stock, which is qualified in its entirety by reference to the
Company's Articles of Incorporation and to the Certificates of Designation
setting forth the resolutions establishing the rights and preferences of the
Company's stock. Copies of the Articles of Incorporation and Statements of
Designation have been filed as exhibits to, or incorporated by reference into,
the Registration Statement of which this Prospectus forms a part.
Under the Articles of Incorporation, the authorized but unissued and
unreserved shares of the Company's capital stock will be available for issuance
for general corporate purposes, including, but not limited to, possible stock
dividends, future mergers or acquisitions, or private or public offerings.
Except as may otherwise be required, stockholder approval will not be required
for the issuance of those shares.
The following table sets forth all classes of stock outstanding, and stock
options and warrants held, as of June 30, 1997, as well as the amount of Class
A Common Stock which would be outstanding upon exercise or conversion of all
outstanding options, warrants and convertible securities:
<TABLE>
<CAPTION>
SHARES, OPTIONS SHARES OF CLASS A
AND WARRANTS COMMON STOCK
OUTSTANDING CONVERTIBLE INTO
--------------- -----------------
<S> <C> <C>
Class A Common Stock ............ 8,593,356 8,593,356
Class B Common Stock ............ 275,685 275,685
Series 1993 Preferred Stock ...... 744,870 744,870
Series 1996 Preferred Stock ...... 920,000 1,533,333
Series B Preferred Stock ......... 183,818 275,727
9% Preferred Stock ............... 1,150,000 0
Stock Options ..................... 1,544,469 1,544,469
Warrants ........................ 80,000 134,876
----------- -----------
Total ........................... 13,492,198 13,102,316
=========== ===========
</TABLE>
CLASS A COMMON STOCK
The Company's Articles of Incorporation authorizes the issuance, in
series, of up to 30,000,000 shares of Class A Common Stock and permits the
Company's Board of Directors to establish the rights and preferences of each
series of Class A Common Stock. The Board of Directors has allocated 20,000,000
shares to the Series I Class A Common Stock, the only series of Class A Common
Stock outstanding. As of June 30, 1997, 8,593,356 shares of Class A Common
Stock were issued and outstanding and 4,694,095 shares were reserved for
issuance under the Company's stock option and stock bonus plans and upon the
conversion of other classes of stock, as described below.
DIVIDENDS. The holders of the Class A Common Stock are entitled to
dividends when, as, and if declared by the Company's Board of Directors out of
funds legally available therefor, which may be declared solely on the Class A
Common Stock or for not less than 110% of the amount per share of any dividend
declared on the Class B Common Stock. The payment of dividends by the Company
will depend on the Company's net income, financial condition, regulatory
requirements and other factors deemed relevant by the Board of Directors. See
"Risk Factors" for a discussion of certain factors relating to the ability of
the Company to pay dividends.
VOTING RIGHTS. Each share of Class A Common Stock entitles the holder
thereof to one-tenth vote on all matters upon which stockholders have the right
to vote. The Class A Common Stock does not have cumulative voting rights in the
election of directors.
LIQUIDATION. In the event of any liquidation, dissolution or winding up of
the Company, the holders of shares of Class A Common Stock are entitled to
share equally with the holders of shares of Class B Common Stock, after payment
of all debts and liabilities of the Company and subject to the prior rights of
holders of shares of the Company's Preferred Stock, in the remaining assets of
the Company.
78
<PAGE>
NO PREEMPTIVE RIGHTS; REDEMPTION; ASSESSABILITY. Holders of shares of
Class A Common Stock are not entitled to preemptive rights with respect to any
shares of any stock of the Company that may subsequently be issued. The Class A
Common Stock is not subject to call or redemption and, as to shares of Class A
Common Stock currently outstanding, are fully paid and non-assessable. When the
shares of Class A Common Stock offered hereby are issued upon payment of the
purchase price therefor, such shares will be fully paid and non-assessable.
CLASS B COMMON STOCK
The Company's Articles of Incorporation authorizes the issuance of up to
3,000,000 shares of Class B Common Stock, all of which have the rights and
preferences described below. The Class B Common Stock is held by directors,
executive officers and other certain stockholders of the Company. As of June
30, 1997, 275,685 shares of Class B Common Stock were issued and outstanding
and 1,848,831 shares were reserved for issuance under the Company's stock
option and stock bonus plans and upon the conversion of Series B Preferred
Stock, as described below.
DIVIDENDS. The holders of Class B Common Stock are entitled to dividends
when, as, and if declared by the Company's Board of Directors out of funds
legally available therefor. The payment of dividends on the Class B Common
Stock is subject to the right of the holders of the Class A Common Stock to
receive a dividend per share of 110% of the amount per share of any dividend
declared on the Class B Common Stock.
VOTING RIGHTS. Each share of Class B Common Stock entitles the holder
thereof to one vote on all matters upon which stockholders have the right to
vote. The Class B Common Stock does not have cumulative voting rights in the
election of directors.
CONVERTIBILITY. Each share of Class B Common Stock is convertible into one
share of Class A Common Stock, subject to adjustment upon the occurrence of
certain events.
LIQUIDATION. In the event of any liquidation, dissolution or winding up of
the Company, the holders of shares of Class B Common Stock are entitled to
share equally with the holders of shares of Class A Common Stock, after payment
of all debts and liabilities of the Company and subject to the prior rights of
holders of shares of the Company's Preferred Stock, in the remaining assets of
the Company.
NO PREEMPTIVE RIGHTS; REDEMPTION; ASSESSABILITY. Holders of shares of
Class B Common Stock are not entitled to preemptive rights with respect to any
shares of any stock of the Company that may be issued. The Class B Common Stock
is not subject to call or redemption and is fully paid and non-assessable.
PREFERRED STOCK
The Company's Articles of Incorporation authorizes the issuance, in
series, of up to 10,000,000 shares of Preferred Stock and permits the Company's
Board of Directors to establish the rights and preference of each of such
series and to increase the number of shares in any of the series. As of June
30, 1997, 744,870 shares of 8% Noncumulative Convertible Preferred Stock,
Series 1993 (the "Series 1993 Preferred Stock"), 920,000 of 8% Noncumulative
Convertible Preferred Stock, Series 1996 (the "Series 1996 Preferred Stock"),
183,818 shares of Series B Preferred Stock, and 1,150,000 shares of 9%
Noncumulative Perpetual Preferred Stock (the "9% Preferred Stock"), were issued
and outstanding. After the Company's purchase of 448,583 shares of its 9%
Preferred Stock, pursuant to the tender offer which expired on August 15, 1997,
701,417 shares of the 9% Preferred Stock remained outstanding.
The Company is in the process of redeeming the outstanding shares of the
Series 1996 Preferred Stock effective October 10, 1997. Holders of shares of
Series 1996 Preferred Stock may convert them to shares of Class A Common Stock.
If all outstanding Shares of the Series 1996 Preferred Stock are converted,
approximately 1,537,333 additional shares of Class A Common Stock will be
outstanding.
79
<PAGE>
The shares of Series B Preferred Stock are held by directors, executive
officers and other stockholders of the Company. The shares of Series 1993
Preferred Stock and Series 1996 Preferred Stock (together, the "8% Preferred
Stock") and the 9% Preferred Stock are publicly held.
DIVIDENDS. The total annual dividend requirement for all series of the
Company's Preferred Stock outstanding as of June 30, 1997 is $2.8 million.
After the Series 1996 Preferred Stock is redeemed or converted, the total
annual dividend requirement for all series of the Company's Preferred Stock
will be $1.3 million. In August 1997 the Board of Directors decreased the
dividend rate on the Series B Preferred Stock to 7.5% per annum. See Note 13 to
the Company's Consolidated Financial Statements incorporated by reference into
this Prospectus.
VOTING RIGHTS. Each share of Series B Preferred Stock is entitled to two
and one-half votes per share on all matters submitted to the vote of
stockholders. The Series B Preferred Stock does not have cumulative voting
rights in the election of directors. The 8% Preferred Stock and the 9%
Preferred Stock are non-voting.
The Series B Preferred Stock, Series 1993 Preferred Stock, the Series 1996
Preferred Stock and the 9% Preferred Stock are each permitted to elect two
directors for their respective classes to the Board, if the Company fails to
declare and pay dividends for six dividend periods, whether or not those
periods are consecutive. The right to elect directors would be revoked once the
Company paid dividends in four consecutive periods.
CONVERSION RIGHTS. Each share of Series B Preferred Stock is convertible
into 1.4959 shares of Class B Common Stock, subject to adjustment on the
occurrence of certain events. Each share of Series 1993 Preferred Stock is
convertible into one share of Class A Common Stock, subject to adjustment upon
the occurrence of certain events, and each share of Series 1996 Preferred Stock
is convertible into approximately 1.67 shares of Class A Common Stock, subject
to adjustment upon the occurrence of certain events.
LIQUIDATION. In the event of any liquidation, dissolution or winding up of
the Company, voluntary or involuntary, the 9% Preferred Stock, the Series 1993
Preferred Stock, and the Series 1996 Preferred Stock shall be entitled to a
distribution of $10.00, $10.00 and $15.00 per share, respectively, out of the
assets of the Company available for distribution to stockholders prior to any
distribution being made on any other class of stock of the Company. In the
event of liquidation, dissolution, or winding up of the Company, after payment
of any debts and other liabilities of the Company, after the per share
distributions to the 8% Preferred Stock and the 9% Preferred Stock, and prior
to any distribution of assets to the holders of Class A Common Stock or Class B
Common Stock, the holders of the Series B Preferred Stock will be entitled to a
preference on liquidation of $7.375 per share, if the liquidation is
involuntary. Such holders shall be entitled to receive the redemption price per
share applicable to such stock at the time of liquidation if the liquidation is
involuntary.
REDEMPTION. Pursuant to its original terms, the Series B Preferred Stock
was redeemable at the Company's option at $7.5225 per share to January 31,
1996, declining thereafter at $.07375 per share during each year through
January 31, 1998, and thereafter at $7.375 per share. In connection with the
recent decrease in the dividend rate, the Board agreed that the Series B
Preferred Stock would not be redeemed for a ten year period (until August 2008)
without the consent of at least 51% of the voting stock of such series.
The Series 1993 Preferred Stock is not redeemable prior to July 1, 1998
unless certain criteria are met in which case the redemption price is $10.00
per share. After June 30, 1998 redemption is at the option of the Company at a
redemption price of $10.40 per share, declining thereafter at $.08 per share
during each year through July 1, 2003 and thereafter at $10.00 per share.
The Series 1996 Preferred Stock is currently being redeemed by the
Company, effective October 10, 1997, at a price of $15.00 per share. The Series
1996 Preferred Stock is redeemable at any
80
<PAGE>
time if the Class A Common Stock shall have a closing price which is at least
120% of the conversion price for at least 20 out of 30 consecutive trading days
ending within 5 days of the giving of notice of redemption. The conversion
price is $9.00, subject to adjustment upon the occurrence of certain events.
The 9% Preferred Stock is redeemable after September 30, 1998 at the
option of the Company at a redemption price of $10.00 per share.
RANK. The 9% Preferred Stock, the Series 1993 Preferred Stock and the
Series 1996 Preferred Stock rank senior to all other classes of stock of the
Company with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company. The Series B Preferred Stock ranks
senior to the Class A Common Stock and Class B Common Stock, as to dividend
rights, rights upon liquidation, dissolution or winding up of the Company, and
redemption rights.
NO PREEMPTIVE RIGHTS; ASSESSABILITY. Holders of the Company's Preferred
Stock are not entitled to preemptive rights with respect to any shares of any
stock of the Company that may be issued. The outstanding Preferred Stock is
fully paid and non-assessable.
NO OTHER RIGHTS
The shares of Class A Common Stock shall not have any preferences, voting
powers or relative, participating, option or other special rights, except as
set forth above and in the Company's Articles of Incorporation or as otherwise
required by law.
TRANSFER AGENT
The Company's transfer agent is American Stock Transfer & Trust Company,
New York, New York.
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Articles of Incorporation and Bylaws,
as well as certain provisions of Florida law, could have the effect of
deterring takeovers. The Board of Directors believes that the provisions of the
Company's Articles of Incorporation and Bylaws described below are prudent and
in the best interests of the Company and its stockholders. Although these
provisions may discourage a future takeover attempt in which stockholders might
receive a premium for their shares over the then current market price and may
make removal of incumbent management more difficult, the Board of Directors
believes that the benefits of these provisions outweigh their possible
disadvantages. Management is not aware of any current effort to effect a change
in control of the Company. In addition, the Company has opted not to be
governed by the affiliated transactions and control-share acquisitions sections
of the Florida Business Corporation Act.
DIRECTORS. The Board of Directors is divided into three classes of
directors serving staggered three-year terms. Vacancies on the Board may be
filled for the remainder of the unexpired term by a majority vote of the
directors then in office. The maximum number of members of the Company's Board
of Directors is 20.
Stockholders entitled to vote may nominate persons for election as
directors only if written notice is given not later than (i) with respect to an
annual meeting, 60 days in advance of the meeting, and (ii) with respect to a
special meeting, the close of business on the seventh day following the date on
which notice of the meeting is first given.
CUMULATIVE VOTING. Stockholders may not cumulate their votes in the
election of directors.
CAPITAL STRUCTURE. The Board of Directors may authorize for issuance
various series of Class A Common Stock and Preferred Stock with different
voting rights. The Board of Directors is authorized to establish the rights and
preferences of such stock and issue such shares, subject to stockholder
approval in certain circumstances.
81
<PAGE>
UNDERWRITING
The underwriters named below (the "Underwriters"), represented by
Friedman, Billings, Ramsey & Co., Inc. and PaineWebber Incorporated (the
"Representatives"), have severally agreed to purchase, subject to the terms and
conditions of the underwriting agreement (the "Underwriting Agreement"), and
the Company has agreed to sell, the number of shares of Class A Common Stock
set forth opposite the name of each Underwriter.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ---------------------------------------------- ----------
<S> <C>
Friedman, Billings, Ramsey & Co., Inc. ......
PaineWebber Incorporated .....................
Total ....................................
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the shares of Class A Common
Stock if any shares are purchased.
The Representatives have advised the Company that the Underwriters propose
initially to offer the Class A Common Stock to the public on the terms set
forth on the cover page of this Prospectus, and to certain dealers at such
price less a concession not in excess of $ per share. After the shares of
Class A Common Stock have been released for sale to the public, the offering
price and concession may be changed. The Class A Common Stock is offered
subject to receipt and acceptance by the Underwriters, and to certain other
conditions, including the right to reject orders in whole or in part. The
Representatives have informed management that they do not expect to make sales
to accounts over which they exercise discretionary authority in excess of 5% of
the number of shares of Class A Common Stock offered hereby.
The Company and its officers, directors, and employees, have agreed not to
offer, sell or otherwise dispose of ("Offer") any shares of Class A Common Stock
for periods of either 120 or 180 days, depending upon the purpose of the Offer,
and 90 days, respectively, after the date of this Prospectus without the prior
written consent of the Representatives.
The Company has granted an option to the Underwriters, exercisable during
the 30 day period after the date of this Prospectus, to purchase up to a
maximum of 480,000 additional shares of the Class A Common Stock at the public
offering price less underwriting discounts and commissions shown on the cover
of this Prospectus. The Underwriters may exercise this option only to cover
over-allotments made in connection with the sale of the Class A Common Stock
offered hereby. If purchased, the Underwriters will offer such additional
shares of Class A Common Stock on the same terms as those on which the
3,200,000 shares of Class A Common Stock are being offered.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments that the Underwriters may be required to make with respect thereto.
The Company has also agreed to reimburse the Representatives for their actual
out of pocket expenses incurred in connection with the Offering up to a maximum
amount of $75,000.
The Representatives intend to make a market in the Class A Common on
completion of the Offering, as permitted by applicable laws and regulations.
The Representatives, however, are not obligated to make a market in such shares
and any such market making may be discontinued at any time at the sole
discretion of each individual Representative.
82
<PAGE>
Alfred R. Camner, Chairman of the Board, Chief Executive Officer,
President, and a director of the Company, is the senior managing director and a
shareholder of Stuzin and Camner, and Marc Lipsitz, the Secretary and a
director of the Company, is the managing director of Stuzin and Camner. As of
August 1997 directors and employees of Stuzin and Camner directly and
indirectly owned in the aggregate approximately 302,945 shares of the Company's
Class A Common Stock, 760,141 shares of the Company's Class B Common Stock and
109,778 shares of the Company's Preferred Stock (including shares that may be
acquired by the exercise of options, but not including shares received upon the
conversion of other classes of stock).
EXPERTS
The consolidated financial statements of the Company and subsidiaries as
of September 30, 1996 and 1995 and for each of the three years in the period
ended September 30, 1996 incorporated by reference into this Prospectus have
been so incorporated in reliance upon the report of Price Waterhouse LLP,
independent certified public accountants, given on the authority of said firm
as experts in auditing and accounting.
The consolidated financial statements of Suncoast and subsidiaries as of
June 30, 1996 and 1995 and for each of the three years in the period ended June
30, 1996 incorporated by reference into this Prospectus have been so
incorporated in reliance upon the report of Price Waterhouse LLP, independent
certified public accountants, given on the authority of said firm as experts in
auditing and accounting.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission located at
7 World Trade Center, 13th Floor, Suite 1300, New York, New York 10048 and
Suite 1400, Citicorp Center, 14th Floor, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can also be obtained at prescribed
rates by writing to the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov. Reports, proxy statements and other information filed by
Suncoast pursuant to the informational requirements of the Exchange Act, prior
to the acquisition of Suncoast by the Company, can be inspected and copied at
the public reference facilities maintained by the OTS at 1700 G Street, N.W.,
Washington, D.C. 20552 or at the OTS Southeast Regional Office, 1475 Peachtree
Street, N.E., Atlanta, Georgia 30309.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments thereto, the "Registration Statement"), of
which this Prospectus is a part, under the Securities Act of 1933, as amended
(the "Securities Act"). This Prospectus does not contain all of the information
set forth in the Registration Statement, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission. In
addition, certain documents filed by the Company with the Commission have been
incorporated in this Prospectus by reference. See "Incorporation of Certain
Documents by Reference." For further information with respect to the Company,
reference is made to the Registration Statement, including the exhibits thereto
and the documents incorporated herein by reference. Any statements contained
herein concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission or incorporated
by reference herein are not necessarily complete, and, in each instance,
reference is made to the copy of such document so filed for a more complete
description of the matter involved. Each such statement is qualified in its
entirety by such reference; provided that such
83
<PAGE>
statements, even though summaries, contain all material information with
respect to such documents. The Registration Statement may be inspected without
charge at the principal office of the Commission in Washington, D.C, and copies
of all or part of it may be obtained from the Commission upon payment of the
prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company are incorporated by reference
herein (Commission File No. 5-43936):
(1) The Company's Annual Report on Form 10-K/A for the year ended
September 30, 1996 filed with the Commission on December 23, 1996.
(2) The Company's Quarterly Reports on Form 10-Q for the quarters ended
December 31, 1996, March 31, 1997 and June 30, 1997 filed with the Commission
on February 14, 1997, May 15, 1997 and August 12, 1997, respectively.
(3) The Company's Current Reports on Form 8-K dated November 15, 1996,
December 30, 1996, February 25, 1997, March 24, 1997, April 2, 1997 and
September 12, 1997 filed with the Commission on December 2, 1996, January 9,
1997, February 25, 1997, March 26, 1997, April 4, 1997 and September 16, 1997,
respectively.
(4) The description of the Class A Common Stock contained in The Company's
Current Report on Form 8-K dated March 5, 1993, filed with the Commission to
register The Company's Class A Common stock under Section 12(g) of the
Securities Exchange Act of 1934, as amended.
The following Suncoast documents are incorporated by reference herein (OTS
File No. 8147):
Suncoast's Annual Report on Form 10-K for the year ended June 30, 1996
filed with the OTS on September 27, 1996, is also incorporated by reference
herein.
Suncoast's Quarterly Report on Form 10-Q for the quarter ended September
30, 1996 filed with the OTS on November 13, 1996, is also incorporated by
reference herein.
Any statement contained in this Prospectus or in a document incorporated
or deemed to be incorporated by reference herein will be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded will not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
All documents subsequently filed by the Registrant pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the
Offering, shall be deemed to be incorporated by reference into this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS, OTHER
THAN EXHIBITS THERETO, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING
ANY BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS IS DELIVERED UPON WRITTEN OR ORAL
REQUEST TO BANKUNITED FINANCIAL CORPORATION, 255 ALHAMBRA CIRCLE, CORAL GABLES,
FLORIDA 33134, ATTENTION: NANCY L. ASHTON, (305) 569-2000.
84
<PAGE>
---------------------------- ----------------------------
---------------------------- ----------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, OR THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH
IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary .......................................... 1
Summary Consolidated
Financial Information and Other Data.............. 6
Risk Factors ....................................... 8
The Company ....................................... 13
Use of Proceeds .................................... 13
Capitalization .................................... 14
Price Range of Class A Common Stock
and Dividends .................................... 15
Selected Consolidated Financial Information and
Other Data .................................... 16
Management's Discussion and Analysis of
Financial Condition and Operating Results ...... 18
Business .......................................... 38
Regulation .......................................... 56
Taxation .......................................... 65
Management .......................................... 67
Executive Compensation .............................. 70
Security Ownership of Certain Beneficial
Owners and Management ........................... 75
Description of Capital Stock ........................ 78
Underwriting ....................................... 82
Experts ............................................. 83
Available Information .............................. 83
Incorporation of Certain Documents
by Reference .................................... 84
</TABLE>
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
BANKUNITED FINANCIAL
CORPORATION
3,200,000 SHARES OF
CLASS A COMMON STOCK
PROSPECTUS
FRIEDMAN, BILLINGS,
RAMSEY & CO., INC.
PAINEWEBBER
INCORPORATED
, 1997
---------------------------- ----------------------------
---------------------------- ----------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the offering of the securities to which
this Registration Statement relates which will be borne by the Company, are as
set forth below. With the exception of the Securities and Exchange Commission
("SEC") and National Association of Securities Dealers, Inc. filing fes, all
amounts shown are estimates.
<TABLE>
<CAPTION>
AMOUNT
------------
<S> <C>
SEC registration fee ..................... $ 14,113.64
NASD filing fee ........................... $ 5,158.00
NASDAQ listing fee ..................... $ 17,500.00
Transfer agent's fees and expenses ...... $ 3,500.00
Legal fees and expenses .................. $225,000.00
Accounting fees and expenses ............ $ 50,000.00
Printing and mailing expenses ............ $ 75,000.00
Blue Sky fees and expenses ............... $ 5,000.00
Miscellaneous ........................... $ 15,000.00
------------
TOTAL ................................. $410,271.64
============
</TABLE>
- ----------------
* To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article IX of the Articles of Incorporation of the Company provides that
the Company shall indemnify its officers and directors to the fullest extent
permitted by law.
The Bylaws of the Company provide that the Company will indemnify any
person against whom an action is brought or threatened because that person is
or was a director, officer or employee of the Company for any amount for which
that person becomes liable under a judgment in such action and reasonable costs
and expenses, including attorneys' fees. Such indemnification may only be made,
however, if (i) final judgment on the merits is in his or her favor or (ii) in
case of settlement, final judgment against him or her or final judgment in his
or her favor, other than on the merits, if a majority of the Board of Directors
of the Company determines that he or she was acting in good faith within the
scope of his or her duties and for a purpose he or she could have reasonably
believed under the circumstances was in the best interests of the Company.
Section 607.0831 of the Florida Business Corporation Act provides, among
other things, that a director is not personally liable for monetary damages to
a company or any other person for any statement, vote, decision, or failure to
act, by the director, regarding corporate management or policy, unless the
director breached or failed to perform his or her duties as a director and such
breach or failure constitutes (a) a violation of criminal law, unless the
director had reasonable cause to believe his or her conduct was lawful or had
no reasonable cause to believe his or her conduct was unlawful; (b) a
transaction from which the director derived an improper personal benefit; (c) a
circumstance under which the liability provisions of Section 607.0834 of the
Florida Business Corporation Act (relating to the liability of the directors
for improper distributions) are applicable; (d) willful misconduct or a
conscious disregard for the best interest of the company in the case of a
proceeding by or in the right of the company to procure a judgment in its favor
or by or in the right of a shareholder; or (e) recklessness or an act or
omission in bad faith or with malicious purpose or with wanton and willful
disregard of human rights, safety or property, in a proceeding by or in the
right of someone other than such company or a shareholder.
Section 607.0850 of the Florida Business Corporation Act authorizes, among
other things, the Company to indemnify any person who was or is a party to any
proceeding (other than an action by or in the right of the Company) by reason
of the fact that he is or was a director, officer, employee or agent
II-1
<PAGE>
of the Company (or is or was serving at the request of the Company in such a
position for any entity) against liability incurred in connection with such
proceeding, if he or she acted in good faith and in a manner reasonably
believed to be in the best interests of the Company and, with respect to
criminal proceedings, had no reasonable cause to believe his or her conduct was
unlawful.
Florida law requires that a director, officer or employee be indemnified
for expenses (including attorneys' fees) to the extent that he or she has been
successful on the merits or otherwise in the defense of any proceeding. Florida
law also allows expenses of defending a proceeding to be advanced by a company
before the final disposition of the proceedings, provided that the officer,
director or employee undertakes to repay such advance if it is ultimately
determined that indemnification is not permitted.
Florida law states that the indemnification and advancement of expenses
provided pursuant to Section 607.0850 is not exclusive and that indemnification
may be provided by a company pursuant to other means, including agreements or
bylaw provisions. Florida law prohibits indemnification or advancement of
expenses, however, if a judgment or other final adjudication establishes that
the actions of a director, officer or employee constitute (i) a violation of
criminal law, unless he or she had reasonable cause to believe his or her
conduct was lawful or had no reasonable cause to believe his or her conduct was
unlawful; (ii) a transaction from which such person derived an improper
personal benefit; (iii) willful misconduct or conscious disregard for the best
interests of the company in the case of a derivative action or a proceeding by
or in the right of a shareholder, or (iv) in the case of a director, a
circumstance under which the liability provisions of Section 607.0834 of the
Florida Business Corporation Act (relating to the liability of directors for
improper distributions) are applicable.
The Company has purchased director and officer liability insurance that
insures directors and officers against liabilities in connection with the
performance of their duties.
ITEM 16. EXHIBITS.*
The following is a list of Exhibits to this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement.
2.1 Agreement and Plan of Merger, dated July 15, 1996, between BankUnited Financial
Corporation ("BankUnited") and Suncoast Savings and Loan Association, FSA. (Exhibit 2.1
to BankUnited's Form S-4 Registration Statement, File No. 333-13211, as filed with the
Securities and Exchange Commission on October 1, 1996).
4.1 Articles of Incorporation of BankUnited (Exhibit 4.1 to the Company's Form S-2
Registration Statement, File No. 333-27597, as filed with the Securities and Exchange
Commission on May 22, 1997).
4.2 Statement of Designation of Series I Class A Common Stock and Class B Common Stock of
the Company (included as an appendix to Exhibit 4.1).
4.3 Statement of Designation of Noncumulative Convertible Preferred Stock, Series A of the
Company (included as an appendix to Exhibit 4.1).
4.4 Statement of Designation of Noncumulative Convertible Preferred Stock, Series B of the
Company (included as appendix to Exhibit 4.1).
4.5 Statement of Designation of 8% Noncumulative Convertible Preferred Stock, Series 1993 of
the Company (included as an appendix to Exhibit 4.1).
4.6 Statement of Designation of 9% Noncumulative Perpetual Preferred Stock of the Company
(included as an appendix to Exhibit 4.1).
4.7 Statement of Designation of 8% Noncumulative Convertible Preferred Stock, Series 1996 of
the Company (included as an appendix to Exhibit 4.1).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------------------------------------------------------------------------
<S> <C>
5.1 Opinion of Stuzin and Camner, P.A. as to the validity of the issuance of the Class A
Common Stock.
12.1 Statement regarding calculation of ratios.**
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Stuzin and Camner, P.A. (set forth in Exhibit 5.1 to this Registration Statement).
</TABLE>
- ----------------
* Exhibits containing a parenthetical reference in their description are
incorporated herein by reference from the documents described in the
parenthetical reference.
** Included with the original filing of the Registration Statement.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Company's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities and Exchange Act of 1934) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to Item 15 of this Registration Statement,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit, or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(c)(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424 (b) (1) or (4) or 497
(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
FILING INCORPORATING SUBSEQUENT EXCHANGE ACT DOCUMENTS BY REFERENCE. The
undersigned registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Coral Gables, State of Florida on
September 30, 1997.
BANKUNITED FINANCIAL CORPORATION
By: /s/ ALFRED R. CAMNER
Alfred R. Camner
Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed on September 30, 1997 by
the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------ -------------------------------------------------
<S> <C>
* Chairman of the Board, Chief Executive
Officer, President and Director (Principal
Alfred R. Camner
Executive Officer)
* Vice Chairman of the Board and Director
Lawrence H. Blum
* Executive Vice President, Treasurer and Director
Earline G. Ford
* Executive Vice President and Chief Financial
Officer (Principal Financial Officer and
Samuel A. Milne
Principal Accounting Officer)
* Director
Marc D. Jacobson
* Director
Allen M. Bernkrant
Director
Patricia L. Frost
Director
Neil Messinger
* Corporate Secretary and Director
Marc Lipsitz
Director
Anne W. Solloway
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------- ------------------------------------------
<S> <C>
Vice Chairman of the Board and Director
Albert J. Finch
Director
Norman Mains
Director
Irving P. Cohen
Director
E.J. Giusti
Director
Bruce Friesner
* Director
Christina Cuervo
* Executive Vice President, Chief Operating
Officer and Director
James A. Dougherty
* By: /s/ ALFRED R. CAMNER
Alfred R. Camner
Attorney-in-fact
</TABLE>
II-5
<PAGE>
BANKUNITED FINANCIAL CORPORATION
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION* PAGE
- --------- ----------------------------------------------------------------------------------- -------------
<S> <C> <C>
1.1 Form of Underwriting Agreement.
5.1 Opinion of Stuzin and Camner, P.A. as to the validity of the issuance of the
Class A Common Stock.
12.1 Statement regarding calculation of ratios.**
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Stuzin and Camner, P.A. (set forth in Exhibit 5.1 to this Registration
Statement).
24.1 Power of attorney (set forth on the signature page in Part II of this Registration
Statement).
</TABLE>
- ----------------
* Exhibits containing a parenthetical reference in their description are
incorporated herein by reference from the documents described in the
parenthetical reference.
** Included with the original filing of the Registration Statement.
EXHIBIT 1.1
3,200,000 SHARES
BANKUNITED FINANCIAL CORPORATION
CLASS A COMMON STOCK
UNDERWRITING AGREEMENT
________, 1997
Friedman, Billings, Ramsey & Co., Inc.
PaineWebber, Incorporated
c/o Friedman, Billings, Ramsey & Co., Inc.
Potomac Tower
1001 Nineteenth Street North
Arlington, Virginia 22209
Dear Sirs:
BankUnited Financial Corporation, a Florida corporation (the "Company")
confirms its agreement with you and the other underwriters named in Schedule A
annexed hereto (the "Underwriters", which term shall also include any
underwriter substituted as hereinafter in Section 9 provided), for whom you are
acting as Representatives, whereby the Company proposes to issue and sell
3,200,000 shares of its authorized but unissued Class A Common Stock, $.01 par
value per share (the "Common Stock"). Said 3,200,000 shares are herein called
the "Firm Common Shares." In addition, the Company proposes to grant to the
Underwriters an option to purchase up to 480,000 additional shares of Common
Stock (the "Optional Common Shares"), as provided in Section 1 hereof. The Firm
Common Shares and, to the extent such option is exercised, the Optional Common
Shares are hereinafter collectively referred to as the "Common Shares."
You have advised the Company that the Underwriters propose to make a
public offering of their respective portions of the Common Shares on the
effective date of the registration statement hereinafter referred to, or as soon
thereafter as in your judgment is advisable (the "Offering").
The Company hereby confirms its agreement with respect to the purchase
of the Common Shares by you and the Underwriters, as the case may be, as
follows:
SECTION 1. PURCHASE, SALE AND DELIVERY OF COMMON SHARES. On the basis
of the representations, warranties and agreements herein contained, but subject
to the terms and conditions herein set forth, (i) the Company agrees to issue
and sell to you and the Underwriters, as the case may be, all of the Firm Common
Shares, and (ii) you and the Underwriters agree, severally and not jointly, to
purchase from the Company such Firm Common Shares. The purchase price per share
to be paid by the Underwriters to the Company shall be $____ per share.
<PAGE>
Delivery of the Firm Common Shares to be purchased by you or the
Underwriters and payment therefor shall be made at the offices of Friedman,
Billings, Ramsey & Co., Inc., Potomac Tower, 18th Floor, 1001 Nineteenth Street
North, Arlington, Virginia (or such other place as may be agreed upon by the
Company and the Representatives) on the third (or, if the purchase set forth in
the above paragraph is determined after 4:30 p.m., Washington, D.C. time, the
fourth) business day following the first date that any of the Common Shares are
released by you for sale to the public (the "First Closing Date"); provided,
however, that if the Prospectus is at any time prior to the First Closing Date
recirculated to the public, the First Closing Date shall occur upon the later of
the third full business day following the first date that any of the Common
Shares are released by you for sale to the public or the date that is 48 hours
after the date that the Prospectus has been so recirculated.
Delivery of certificates for the Firm Common Shares shall be made by or
on behalf of the Company to you, for your account or for the respective accounts
of the Underwriters, as the case may be, against payment by you for your account
or for the accounts of the several Underwriters, as the case may be, of the
purchase price therefor by wire transfer or certified or official bank checks
payable in next day funds to the order of the Company. The certificates for the
Firm Common Shares shall be registered in such names and denominations as you
shall have requested at least two full business days prior to the First Closing
Date, and shall be made available for checking and packaging on the business day
preceding the First Closing Date at a location in Arlington, Virginia, as may be
designated by you. Time shall be of the essence, and delivery at the time and
place specified in this Agreement is a further condition to your obligation or
the obligations of the Underwriters, as the case may be.
In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants an option to you or to the several
Underwriters, as the case may be, to purchase, severally and not jointly, up to
an aggregate of 480,000 Optional Common Shares at the purchase price per share
to be paid for the Firm Common Shares, for use solely in covering any
over-allotments made by you for your account or the account of the Underwriters,
as the case may be, in the sale and distribution of the Firm Common Shares. The
option granted hereunder may be exercised at any time (but not more than once)
within 30 days after the first date that any of the Common Shares are released
by you for sale to the public, upon notice by you to the Company setting forth
the aggregate number of Optional Common Shares as to which you or the
Underwriters, as the case may be, are exercising the option, the names and
denominations in which the certificates for such shares are to be registered and
the time and place at which such certificates will be delivered. Such time of
delivery (which may not be earlier than the First Closing Date), being herein
referred to as the "Second Closing Date," shall be determined by you, but if at
any time other than the First Closing Date shall not be earlier than three nor
later than five full business days after delivery of such notice of exercise.
The number of Optional Common Shares to be purchased by each Underwriter shall
be determined by multiplying the number of Optional Common Shares to be sold by
the Company pursuant to such notice of exercise by a fraction, the numerator of
which is the number of Firm Common Shares to be purchased by such Underwriter as
set forth opposite its name in Schedule A and the denominator of which is
3,200,000 (subject to such adjustments to eliminate any fractional share
purchases as you in your discretion may make). Certificates for the Optional
Common Shares will be made available
2
<PAGE>
for checking and packaging on the business day preceding the Second Closing Date
at a location in Arlington, Virginia, as may be designated by you. The manner of
payment for and delivery of the Optional Common Shares shall be the same as for
the Firm Common Shares purchased from the Company as specified in the two
preceding paragraphs. At any time before lapse of the option, you may cancel
such option by giving written notice of such cancellation to the Company.
If applicable, you have advised the Company that each Underwriter has
authorized you to accept delivery of its Common Shares, to make payment and
receipt therefor. If applicable, you, individually and not as the
Representatives of the Underwriters, may (but shall not be obligated to) make
payment for any Common Shares to be purchased by any Underwriter whose funds
shall not have been received by you by the First Closing Date or the Second
Closing Date, as the case may be, for the account of such Underwriter, but any
such payment shall not relieve such Underwriter from any of its obligations
under this Agreement.
Subject to the terms and conditions hereof, you or the Underwriters, as
the case may be, agree to make a public offering of the Common Shares as soon
after the effective date of the Registration Statement (as hereafter defined) as
in your judgment is advisable and at the public offering price set forth on the
cover page of and on the terms set forth in the Prospectus.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the several Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-35781)
with respect to the Common Shares has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, and has been filed with the Commission. The
Company has prepared and has filed or proposes to file prior to the
effective date of such registration statement an amendment or
amendments to such registration statement, which amendment or
amendments have been or will be similarly prepared. There has been
delivered to you one signed copy of such registration statement and
amendments, together with two copies of each exhibit filed therewith.
Conformed copies of such registration statement and amendments (but
without exhibits) and of the related Preliminary Prospectus (as defined
below) have been delivered to you in such reasonable quantities as you
have requested. The Company will next file with the Commission one of
the following: (i) prior to effectiveness of such registration
statement, a further amendment thereto, including the form of final
prospectus, or (ii) a final prospectus in accordance with Rules 430A
and 424(b) of the Rules and Regulations. As filed, such amendment and
form of final prospectus, or such final prospectus, shall include all
Rule 430A Information (as defined below) and, except to the extent that
you shall agree to a modification, shall be in all substantive respects
in the form furnished to you prior to the date and time that this
Agreement was executed and delivered by the parties hereto, or, to the
extent not completed at such date and time, shall contain only such
specific
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additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as the Company shall have previously
advised you in writing would be included or made therein.
The term "Registration Statement" as used in this Agreement
shall mean such registration statement at the time such registration
statement becomes effective and, in the event any post-effective
amendment thereto becomes effective prior to the First Closing Date,
shall also mean such registration statement as so amended; provided,
however, that such term shall also include all Rule 430A Information
deemed to be included in such registration statement at the time such
registration statement becomes effective as provided by Rule 430A of
the Rules and Regulations. The term "Preliminary Prospectus" shall mean
any preliminary prospectus referred to in the preceding paragraph and
any preliminary prospectus included in the Registration Statement at
the time it becomes effective that omits Rule 430A Information. The
term "Prospectus" as used in this Agreement shall mean the prospectus
relating to the Common Shares in the form in which it is first filed
with the Commission pursuant to Rule 424(b) of the Rules and
Regulations or, if no filing pursuant to Rule 424(b) of the Rules and
Regulations is required, shall mean the form of final prospectus
included in the Registration Statement at the time such registration
statement becomes effective. The term "Rule 430A Information" means
information with respect to the Common Shares and the offering thereof
permitted to be omitted from the Registration Statement when it becomes
effective pursuant to Rule 430A of the Rules and Regulations.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus, and the most recent
Preliminary Prospectus has conformed in all material respects to the
requirements of the Act and the Rules and Regulations and, as of its
date, has not included any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; and at the time the Registration Statement becomes
effective, and at all times subsequent thereto up to and including each
Closing Date hereinafter mentioned, the Registration Statement and the
Prospectus, and any amendments or supplements thereto, will contain all
material statements and information required to be included therein by
the Act and the Rules and Regulations and will in all material respects
conform to the requirements of the Act and the Rules and Regulations,
and neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will include any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided,
however, no representation or warranty contained in this subsection
2(b) shall be applicable to information contained in or omitted from
any Preliminary Prospectus, the Registration Statement, the Prospectus
or any such amendment or supplement in reliance upon and in conformity
with written
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information furnished to the Company by or on behalf of you or any
Underwriter specifically for use in the preparation thereof.
(c) The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than its
wholly owned subsidiaries, BankUnited, FSB (the "Bank") and BU
Ventures, Inc., and the Bank's wholly owned subsidiaries, T&D
Properties of South Florida, Inc., and Bay Holdings Inc. (BU Ventures,
Inc., the Bank and the Bank's wholly owned subsidiaries are
collectively referred to herein as the "Subsidiaries"). Neither the
Company nor the Subsidiaries own any equity interests in any other
entities except as disclosed in the Prospectus. The Company and the
Subsidiaries have been duly incorporated and are validly existing as
corporations in good standing under the laws of their respective
jurisdictions of incorporation, with full power and authority
(corporate and other) to own and lease their properties and conduct
their respective businesses as described in the Prospectus; the Company
owns all of the outstanding capital stock of the Bank and BU Ventures,
Inc. and the Bank owns all of the outstanding capital stock of T&D
Properties of South Florida, Inc., and Bay Holdings, Inc., each owning
said stock free and clear of all claims, liens, charges and
encumbrances; the Company and the Subsidiaries are in possession of and
operating in compliance with all authorizations, licenses, permits,
consents, certificates and orders material to the conduct of their
respective businesses, all of which are valid and in full force and
effect; the Company and the Subsidiaries are duly qualified to do
business and are in good standing as foreign corporations in each
jurisdiction in which the ownership or leasing of properties or the
conduct of their respective businesses requires such qualification
except where the failure to be so qualified would not have a material
adverse effect on the business, properties, financial condition or
results of operations of the Company and the Subsidiaries, taken as a
whole, and no proceeding has been instituted in any such jurisdiction,
revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification.
(d) The Company has, and upon consummation of the Offering,
will have, authorized and outstanding capital stock as set forth under
the heading "Description of Capital Stock" in the Prospectus; the
issued and outstanding shares of the Company's capital stock have been
duly authorized and validly issued, are fully paid and nonassessable,
have been issued in compliance with all federal and state securities
laws, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities (except
as may be disclosed in the Prospectus), and conform in all material
respects to the description thereof contained in the Prospectus. The
issued and outstanding Class A Common Stock is duly listed on the
Nasdaq Stock Market. All issued and outstanding shares of capital stock
of the Subsidiaries have been duly authorized and validly issued and
are fully paid and nonassessable. Except as disclosed in or
contemplated by the Prospectus and the financial statements of the
Company, and the related notes thereto, included in the Prospectus,
neither the Company nor the Subsidiaries have outstanding any
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options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible
into, or any contracts or commitments to issue or sell, shares of its
capital stock or any such options, rights, convertible securities or
obligations. The description of the Company's stock option and other
stock plans or arrangements, and the options or other rights granted
and exercised thereunder, set forth in the Prospectus accurately and
fairly presents the information required to be shown with respect to
such plans, arrangements, options and rights.
(e) The Common Shares to be sold by the Company hereunder have
been duly authorized and, when issued, delivered and paid for in the
manner set forth in this Agreement, will be validly issued, fully paid
and nonassessable, and will conform to the description thereof
contained in the Prospectus. No preemptive rights or other rights to
subscribe for or purchase exist with respect to sale of the Common
Shares by the Company pursuant to this Agreement. The certificates used
to evidence shares of Common Stock are in due and proper form.
(f) The deposits of the Bank are insured by the Federal
Deposit Insurance Corporation (the "FDIC") up to legally applicable
limits, and no proceedings for the termination or revocation of such
insurance are pending or, to the best knowledge of the Company or the
Bank, threatened; no approvals by or filings with the FDIC, except such
as have been obtained, are necessary to consummate the Offering; and
neither the Company nor the Subsidiaries is a party to or otherwise the
subject of any consent decree, memorandum of understanding, written
commitment or other supervisory agreement with the Office of Thrift
Supervision, Department of Treasury ("OTS") or any other federal or
state authority or agency charged with the supervision or insurance of
depository institutions or their holding companies.
(g) No approval, consent or authority of the stockholders of
the Company or the Board of Directors of the Company or any
governmental agency or any other third party will be required for the
issuance and sale of the Common Shares to be sold by the Company as
contemplated herein, except such as have been obtained.
(h) The Company has full legal right, power and authority to
enter into this Agreement and to perform the transactions contemplated
hereby. This Agreement has been duly and validly authorized by the
Company and upon due execution and delivery by the Company and the
other parties thereto will constitute the valid and binding obligations
of the Company, enforceable against the Company in accordance with
their terms, subject to limitations imposed by general principles of
equity (regardless of whether such enforceability is considered in a
proceeding at law or in equity) and subject to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other
laws, now or hereafter in effect, relating to or limiting creditors'
rights generally and Section 8(b)(6)(D) of the Federal Deposit
Insurance Act. The making and performance of this Agreement by the
Company and the
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consummation of the transactions herein contemplated will not violate
any provisions of the articles of incorporation or bylaws, or other
organizational documents of the Company or the Subsidiaries and will
not conflict with, result in the breach or violation of, or constitute,
either by itself or upon notice or the passage of time or both, a
default under any agreement, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument to which the Company or
any of the Subsidiaries is a party or by which the Company or the
Subsidiaries or any of their respective properties may be bound or
affected, any statute or any authorization, judgment, decree, order,
rule or regulation of any court or any regulatory body, administrative
agency or other governmental body applicable to the Company or any of
the Subsidiaries or any of their respective properties, except where
any violation, conflict, breach or default, whether individually or in
the aggregate, would not have a material adverse effect on the
condition (financial or otherwise), business, properties, results of
operations, management or prospects of the Company and the
Subsidiaries, taken as a whole (hereinafter, a "Material Adverse
Effect"). No consent, approval, authorization or other order of any
court, regulatory body, administrative agency or other governmental
body is required for the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except for
compliance with the Act, the Blue Sky laws applicable to the public
offering of the Common Shares by you or the Underwriters, the clearance
of such offering with the National Association of Securities Dealers,
Inc. (the "NASD"), and the listing of the Common Shares to be sold by
the Company on the Nasdaq Stock Market.
(i) Price Waterhouse, LLP, who have expressed their opinion
with respect to the financial statements and schedules filed with the
Commission as a part of the Registration Statement and included in the
Prospectus and in the Registration Statement, are independent
accountants as required by the Act and the Rules and Regulations.
(j) The consolidated financial statements and schedules of the
Company, the Subsidiaries and Suncoast Savings and Loan Association,
FSA ("Suncoast"), and the related notes thereto, included in the
Registration Statement and the Prospectus, or incorporated by reference
therein, present fairly the financial position of the Company, the
Subsidiaries and Suncoast, as the case may be, as of the respective
dates of such financial statements and schedules, and the consolidated
results of operations and changes in cash flows of the Company, the
Subsidiaries or Suncoast for the respective periods covered thereby.
Such statements, schedules and related notes have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis (and with regard to the Company and the Subsidiaries,
as certified by the independent accountants named in subsection 2(i)).
No other financial statements or schedules are required to be included
in the Registration Statement, or incorporated by reference therein.
The other financial, statistical and pro forma information and related
notes included in the Registration
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Statement and the Prospectus, or incorporated by reference therein (i)
present fairly the information shown therein on a basis consistent
(except as otherwise noted therein) with the audited financial
statements of the Company included therein; and (ii) are in compliance
in all material respects with the requirements of the Act.
(k) Neither the Company nor any of the Subsidiaries is in
violation or default of any provision of its articles of incorporation,
bylaws, or other organiza tional documents, or except as disclosed in
the Prospectus, and except as to defaults which individually or in the
aggregate would not have a Material Adverse Effect, in breach of or
default with respect to any provision of any agreement, judgment,
decree, order, mortgage, deed of trust, lease, franchise, license,
indenture, permit or other instrument to which it is a party or by
which it or any of its properties are bound; and except as to defaults
that individually or in the aggregate would not have a Material Adverse
Effect, there does not exist any state of facts which constitutes an
event of default on the part of the Company or any such Subsidiary as
defined in such documents or which, with notice or lapse of time or
both, would constitute such an event of default.
(l) There are no contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to
the Registration Statement by the Act or by the Rules and Regulations
which have not been described or filed as required. The contracts so
described in the Prospectus are in full force and effect on the date
hereof; the descriptions thereof or references thereto are correct in
all material respects; and neither the Company nor any of the
Subsidiaries, nor, to the knowledge of the Company, any other party is
in breach of or default under any of such contracts.
(m) Except as disclosed in the Prospectus, there are no legal
or governmental actions, suits or proceedings pending or, to the
knowledge of the Company, threatened to which the Company or any of the
Subsidiaries is or may be a party or of which property owned or leased
by the Company or any of the Subsidiaries is or may be the subject, or
related to environmental, discrimination or financial regulatory
matters, which actions, suits or proceedings might, individually or in
the aggregate, prevent or adversely affect the transactions
contemplated by this Agreement or are likely to result in a Material
Adverse Effect and no labor disturbance by the employees of the Company
or the Subsidiaries exists or is imminent which might be expected to
affect adversely such condition, properties, business, results of
operations or prospects of the Company and the Subsidiaries, taken as a
whole. Except as disclosed in the Prospectus, no enforcement
proceeding, whether formal or informal, has been commenced against the
Company or any of the Subsidiaries by the FDIC or, to the Company's and
the Subsidiaries' knowledge, any other governmental authority, nor have
any such proceedings been instituted, threatened or recommended. Except
as disclosed in the Prospectus, neither the Company, nor any of the
Subsidiaries, or any of their respective officers, employees
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or directors is a party or subject to the provisions of any regulatory
action, injunction, judgment, decree or order of any court, regulatory
body, administrative agency or other governmental body affecting the
business of the Company or any of the Subsidiaries.
(n) The Company or the Subsidiaries has good and marketable
title to all their properties and assets, free and clear of all liens,
charges, encumbrances or restrictions, except such as do not materially
adversely affect the value of such properties and assets and do not
interfere with the use made or proposed to be made of such properties
and assets by the Company and the Subsidiaries; all of the leases and
subleases material to the business of the Company or the Subsidiaries
or under which the Company holds properties described in the Prospectus
are in full force and effect; and the Company or the Subsidiaries has
no notice of any material claim of any sort which has been asserted by
anyone adverse to the rights of the Company or the Subsidiaries as
owner or as lessee or sublessee under any of the leases or subleases
mentioned above, or materially affecting or questioning the rights of
the Company or the Subsidiaries to the continued possession of the
leased or subleased premises under any such lease or sublease. Except
as disclosed in the Prospectus and other than such leases and
properties as are immaterial in the aggregate, the Company or the
Subsidiaries owns or leases all such properties as are necessary to its
operations as now conducted or, as proposed to be conducted.
(o) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as
described in or specifically contemplated by the Prospectus: (i) the
Company and the Subsidiaries have not incurred any material liabilities
or obligations, indirect, direct or contingent, or entered into any
material verbal or written agreement or other transaction whether or
not arising in the ordinary course of business or which could result in
a material reduction in the future earnings of the Company and the
Subsidiaries (taken as a whole); (ii) there has not been any material
increase in the long-term debt of the Company and the Subsidiaries
(taken as a whole) or in the aggregate dollar or principal amount of
the Company's and the Subsidiaries (taken as a whole) assets which are
classified as substandard, doubtful or loss or loans which are 90 days
or more past due or real estate acquired by foreclosure; (iv) there has
not been any Material Adverse Effect on the aggregate dollar amount of
the Company's and the Subsidiaries' (taken as a whole) deposits or
their consolidated net worth or spread; (v) there has been no material
adverse change in the Company's and the Subsidiaries relationship with
its insurance carriers, including, without limitation, cancellation or
other termination of the Company's or the Subsidiaries fidelity bond or
any other type of insurance coverage; (vi) except as disclosed in the
Prospectus there has been no material change in management of the
Company or the Subsidiaries; (vii) the Company
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and the Subsidiaries have not sustained any material loss or
interference with their respective business or properties from fire,
flood, windstorm, earthquake, accident or other calamity, whether or
not covered by insurance; (viii) the Company has not paid or declared
any dividends or other distributions with respect to its capital stock
and the Company and the Subsidiaries are not in default in the payment
of principal or interest on any outstanding debt obligations; (ix)
there has not been any change in the capital stock (other than upon the
sale of the Common Shares hereunder); and (x) there has not been any
material adverse change in the condition (financial or otherwise),
business, properties, results of operations or prospects of the Company
and the Subsidiaries, taken as a whole, other than changes resulting
from changes in the economy or the Company's and the Subsidiaries
industry generally.
(p) Except as disclosed in or specifically contemplated by the
Prospectus, the Company and the Subsidiaries have sufficient
trademarks, trade names, patent rights, copyrights, licenses, approvals
and governmental authorizations to conduct their businesses as now
conducted; the expiration of any trademarks, trade names, patent
rights, copyrights, licenses, approvals or governmental authorizations
would not have a Material Adverse Effect; and the Company and the
Subsidiaries have no knowledge of any material infringement by it of
trademark, trade name rights, patent rights, copyrights, licenses,
trade secret or other similar rights of others, and, to the Company's
and the Subsidiaries knowledge, there is no claim being made against
the Company or any of the Subsidiaries regarding trademark, trade name,
patent, copyright, license, trade secret or other infringement which
could have a Material Adverse Effect.
(q) The Company has not been advised, and has no reason to
believe, that either it or any of the Subsidiaries is not conducting
business in compliance with all applicable laws, rules and regulations
of the jurisdictions in which it is conducting business, including,
without limitation, all applicable local, state and federal financial
institution and environmental laws and regulations; except where
failure to be so in compliance would not have a Material Adverse
Effect. Neither the Company nor any of its affiliates (including the
Subsidiaries) is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended, or applicable regulations
promulgated thereunder. The Company is a savings and loan holding
company within the meaning of the Home Owners' Loan Act. The Bank is an
insured depository institution within the meaning of the Federal
Deposit Insurance Act, as amended.
(r) Except as disclosed in the Prospectus, the Bank is not in
violation of any directive from the FDIC or any other governmental
authority and the Bank is in compliance with all federal and state laws
and regulations that regulate or are concerned with its business
including, without limitation, the Financial Institutions Recovery,
Reform and Enforcement Act of 1989 ("FIRREA"), the Federal Deposit
Insurance Act (the "FDIA"), the National Housing Act (the "NHA"), the
Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") and all other applicable laws and regulations where the
failure to comply would have a Material Adverse Effect.
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(s) The Company and the Subsidiaries have filed or caused to
be filed all material federal, state and foreign income and franchise
tax returns and have paid all taxes shown as due thereon; and the
Company has no knowledge of any tax deficiency which has been or might
be asserted or threatened against the Company or the Subsidiaries which
would have a Material Adverse Effect.
(t) The Company is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended (the
"Investment Company Act").
(u) The Company has not distributed any offering material in
connection with the offering and sale of the Common Shares other than
the Preliminary Prospectus, the Prospectus, the Registration Statement
and the other materials permitted by the Act.
(v) The Company and the Bank maintain insurance of the types
and in the amounts generally deemed adequate for their respective
businesses, including, but not limited to, general liability insurance,
fidelity bond insurance and insurance covering real and personal
property owned or leased by the Company or the Bank against theft,
forgery, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force
and effect.
(w) Neither the Company nor the Bank has, directly or
indirectly, at any time during the last five years (i) made any
unlawful contribution to any candidate for public office, or failed to
disclose fully any contribution in violation of law, or
(ii) made any payment to any federal or state governmental officer or
official, or other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws of the
United States or any jurisdiction thereof.
(x) All material transactions between the Company and the Bank
and the officers, directors and major stockholders of the Company that
are required to be disclosed under the Act and the Rules and
Regulations have been accurately disclosed in the Prospectus; and the
terms of each such transaction are fair to the Company and no less
favorable to the Company than the terms that could have been obtained
from unrelated parties, except as disclosed in the Prospectus.
(y) Except as disclosed in the Prospectus, neither the Company
nor the Bank has: (i) placed any securities within the last 18 months
(except for notes to evidence other bank loans and reverse repurchase
agreements); (ii) had any material dealings with any member of the NASD
or any person related to or associated with such member, other than
discussions and meetings relating to the proposed Offering and routine
purchases and sales of U.S. Government and agency securities and other
assets; (iii) entered into a financial or management consulting
agreement except as contemplated hereunder and except for the
engagement letter with Friedman, Billings, Ramsey & Co., Inc., dated
December 5, 1995; or (iv) engaged any
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intermediary between the Representatives and the Company in connection
with the Offering, and no person is being compensated in any manner for
such service.
(z) The Company has not taken directly or indirectly, any
action designed to cause or result in, or which has constituted or
which reasonably might be expected to constitute, the stabilization or
manipulation of the price of the Class A Common Stock to facilitate the
sale or resale of the Class A Common Stock.
(aa) The Company has not relied upon the Representatives or
legal counsel for the Representatives for any legal, tax or accounting
advice in connection with the Offering.
Any certificate signed by any officer of the Company and delivered to
you or to your counsel shall be deemed a representation and warranty by the
Company to you as to the matters covered thereby. Any certificate delivered by
the Company to its counsel for purposes of enabling such counsel to render the
opinions referred to in Section 7(c) will also be furnished to the Underwriters
and its counsel and shall be deemed to be additional representations and
warranties by the Company to the Underwriters as to the matters covered thereby
and the Underwriters and its counsel are entitled to rely thereon.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITERS. You, for
yourselves or on behalf of the Underwriters, as the case may be, represent and
warrant to the Company that the information set forth in the Prospectus (i) on
the cover page of the Prospectus with respect to price, underwriting discounts
and commissions and terms of offering, (ii) on the inside cover page with
respect to stabilization and (iii) under the caption "Underwriting" in the
Prospectus was furnished to the Company by and on behalf of the Underwriters for
use in connection with the preparation of the Registration Statement and the
Prospectus and is complete and correct in all material respects. If applicable,
the Representatives represent and warrant you have been authorized by each of
the other Underwriters as the Representatives to enter into this Agreement on
its behalf and to act for it in the manner herein provided.
SECTION 4. COVENANTS OF THE COMPANY. The Company covenants and agrees
that:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at
the time and date that this Agreement is executed and delivered by the
parties hereto, to become effective. If the Registration Statement has
become or becomes effective pursuant to Rule 430A of the Rules and
Regulations, or the filing of the Prospectus is otherwise required
under Rule 424(b) of the Rules and Regulations, the Company will file
the Prospectus, properly completed, pursuant to the applicable
paragraph of Rule 424(b) of the Rules and Regulations within the time
period prescribed and will provide evidence satisfactory to you of such
timely filing. The Company will promptly advise you in writing (i) of
the receipt of any comments of the Commission, (ii) of any request of
the Commission for amendment of or supplement to the Registration
Statement
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(either before or after it becomes effective), any Preliminary
Prospectus or the Prospectus or for additional information, (iii) when
the Registration Statement shall have become effective and (iv) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the institution of
any proceedings for that purpose. If the Commission shall enter any
such stop order at any time, the Company will use its best efforts to
obtain the lifting of such order at the earliest possible moment. The
Company will not file any amendment or supplement to the Registration
Statement (either before or after it becomes effective), any
Preliminary Prospectus or the Prospectus of which you have not been
furnished with a copy a reasonable time prior to such filing or to
which you reasonably object or which is not in compliance with the Act
and the Rules and Regulations.
(b) The Company will prepare and file with the Commission,
promptly upon your request, any amendments or supplements to the
Registration Statement or the Prospectus which in your reasonable
judgment may be necessary or advisable to enable the Underwriter to
continue the distribution of the Common Shares and will use its best
efforts to cause the same to become effective as promptly as possible.
The Company will fully and completely comply with the provisions of
Rule 430A of the Rules and Regulations with respect to information
omitted from the Registration Statement in reliance upon such Rule.
(c) If at any time within the nine-month period referred to in
Section 10(a)(3) of the Act during which a prospectus relating to the
Common Shares is required to be delivered under the Act any event
occurs, as a result of which the Prospectus, including any amendments
or supplements, would include an untrue statement of a material fact,
or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
then existing, not misleading, or if it is necessary at any time to
amend the Prospectus, including any amendments or supplements, to
comply with the Act or the Rules and Regulations, the Company will
promptly advise you thereof and will promptly prepare and file with the
Commission, at its own expense, an amendment or supplement which will
correct such statement or omission or an amendment or supplement which
will effect such compliance and will use its best efforts to cause the
same to become effective as soon as possible; and, in case you or any
Underwriters are required to deliver a Prospectus after such nine-month
period, the Company upon request, but at the expense of you or such
Underwriters, will promptly prepare such amendment or amendments to the
Registration Statement and such Prospectus or Prospectuses as may be
necessary to permit compliance with the requirements of Section
10(a)(3) of the Act.
(d) As soon as practicable, but not later than 45 days after
the end of the first quarter ending after one year following the
"effective date of the Registration Statement" (as defined in Rule
158(c) of the Rules and Regulations), the Company
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will make generally available to its security holders an earnings
statement (which need not be audited) covering a period of 12
consecutive months beginning after the effective date of the
Registration Statement which will satisfy the provisions of the last
paragraph of Section 11(a) of the Act.
(e) During such period as a Prospectus is required by law to
be delivered in connection with sales by an Underwriter or dealer, the
Company, at its expense, but only for the nine-month period referred to
in Section 10(a)(3) of the Act, will furnish to you or mail to your
order copies of the Registration Statement, the Prospectus, the
Preliminary Prospectus and all amendments and supplements to any such
documents in each case as soon as available and in such quantities as
you may request, for the purposes contemplated by the Act.
(f) The Company shall cooperate with you and your counsel in
order to qualify or register the Common Shares for sale under (or
obtain exemptions from the application of) the Blue Sky laws of such
jurisdictions as you designate, will comply with such laws and will
continue such qualifications, registrations and exemptions in effect so
long as reasonably required for the distribution of the Common Shares.
The Company shall not be required to qualify as a foreign corporation
or to file a general consent to service of process in any such
jurisdiction where it is not presently qualified or where it would be
subject to
taxation as a foreign corporation. The Company will advise you promptly
of the suspension of the qualification or registration of (or any such
exemption relating to) the Common Shares for offering, sale or trading
in any jurisdiction or any initiation or threat of any proceeding for
any such purpose, and in the event of the issuance of any order
suspending such qualification, registration or exemption, the Company,
with your cooperation, will use its best efforts to obtain the
withdrawal thereof.
(g) The Company shall promptly prepare and file with the
Commission, from time to time, such reports as may be required to be
filed by the Act and the Exchange Act including, without limitation,
reports with respect to the sale of the Common Shares and the
application of the proceeds thereof as may be required in accordance
with Rule 463 under the Act.
(h) During the period of five years hereafter, the Company
will furnish to you: (i) at the same time as such are furnished to its
Stockholders generally, copies of the Annual Report of the Company
containing the consolidated balance sheet of the Company and the
Subsidiaries as of the close of such fiscal year and consolidated
statements of income, stockholders' equity and cash flows for the year
then ended and the opinion thereon of the Company's independent public
accountants; (ii) as soon as practicable after the filing thereof,
copies of each proxy statement, Annual Report on Form 10-K, Quarterly
Report on Form 10-Q, Current Report on Form 8-K or other report filed
by the Company with the Commission, the NASD or any securities
exchange; (iii) as soon as available, copies of any report or
communication
14
<PAGE>
of the Company mailed generally to holders of its Common Stock; (iv) as
soon as practicable after the filing thereof, of each non-confidential
report or other statement or document filed by the Company with the
Commission, or with any national securities exchange or quotation
system on which any securities of the Company may be listed or quoted;
and (v) from time to time, such other non-confidential information
concerning the Company as you may reasonably request.
(i) During the period of 180 days after the date the
Registration Statement is declared effective by the Commission, without
your prior written consent, which consent may be withheld at your sole
discretion, the Company will not, directly or indirectly, issue, offer,
sell, grant options to purchase or otherwise dispose of any of the
Company's equity securities or any other securities convertible into,
exchangeable for or exercisable for its Class A Common Stock or other
equity security of the Company, other than (i) shares of Class A Common
Stock or Class B Common Stock issued upon the exercise of outstanding
stock options disclosed in the Prospectus; (ii) shares of Class A
Common Stock or Class B Common Stock issued upon conversion of
outstanding convertible securities disclosed in the Prospectus, (iii)
options to purchase Class A Common Stock or Class B Common
Stock to be granted under the Company's stock option plans or approved
as of September 30, 1997 by the Company's Board of Directors, as
described under the caption "Capitalization" in the Prospectus, and the
shares of Class A Common Stock issued upon exercise of such options,
and (iv) shares of Class A Common Stock or Class B Common Stock issued
as fees to directors of the Company, salary to employees of the
Company, dividends on the Company's stock, or bonuses under the
Company's employee bonus plan.
(j) The Company will apply the net proceeds of the sale of the
Common Shares sold by it substantially in accordance with its
statements under the caption "Use of Proceeds" in the Prospectus.
(k) The Company will use its best efforts to list, subject to
notice of issuance, the Common Shares as a national market system
security on the Nasdaq Stock Market.
(l) The Bank shall continue to maintain a system of internal
accounting controls as required under FDICIA.
(m) The Company will not distribute prior to the First Closing
Date any offering material in connection with the offering and sale of
the Common Shares other than the Preliminary Prospectus, the
Prospectus, the Registration Statement and the other materials
permitted by the Act.
(n) The Company will not take, directly or indirectly, any
action designed to cause or result in, or which has constituted or
which reasonably might be expected
15
<PAGE>
to constitute, the stabilization or manipulation of the price of the
Class A Common Stock to facilitate the sale or resale of the Common
Shares.
(o) The Company will not rely upon the Representatives or
legal counsel for the Representatives for any legal, tax or accounting
advice in connection with the Offering.
You may, in your sole discretion, waive in writing the performance by
the Company of any one or more of the foregoing covenants or extend the time for
their performance.
SECTION 5. PAYMENT OF EXPENSES. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective or is
terminated, the Company agrees to pay all costs, fees and expenses incurred in
connection with the performance of its obligations hereunder and in connection
with the transactions contemplated hereby, including without limiting the
generality of the foregoing, (i) all expenses incident to the issuance and
delivery of the Common Shares (including all printing and engraving costs), (ii)
all fees and expenses of the registrar and transfer agent of the Class A Common
Stock, (iii) all necessary issue,
transfer and other stamp taxes in connection with the issuance and sale of the
Common Shares to you and the Underwriters, (iv) all fees and expenses of the
Company's counsel and the Company's independent accountants, (v) all costs and
expenses incurred in connection with the preparation, printing, filing, shipping
and distribution of the Registration Statement, each Preliminary Prospectus and
the Prospectus (including all exhibits and financial statements) and all
amendments and supplements provided for herein, (vi) all filing fees, attorneys'
fees and expenses incurred by the Company or the Underwriters in connection with
qualifying or registering (or obtaining exemptions from the qualification or
registration of) all or any part of the Common Shares for offer and sale under
the Blue Sky laws, (vii) the filing fee of the National Association of
Securities Dealers, Inc., (viii) all the costs and expenses incurred by the
Company in making road show presentations with respect to the Offering, (ix) all
costs of preparing, printing and distribution of bound volumes of the
transaction documents for you and your counsel, (x) all fees, costs and expenses
of the Representatives, including fees and expenses of their counsel and road
show costs and expenses (which shall not exceed $75,000 without prior permission
of the Company) and (xi) all other fees, costs and expenses referred to in Item
14 of the Registration Statement provided, however, that the Company shall pay
all of the foregoing costs, fees and expenses related to a second closing, if
any. Except as provided in this Section 6, and Section 9 hereof, each of you and
the Underwriters shall pay all of your own expenses.
SECTION 6. CONDITIONS TO THE OBLIGATIONS OF YOU AND THE UNDERWRITERS.
The obligations of you and the Underwriters to purchase and pay for the Firm
Common Shares on the First Closing Date and the Optional Common Shares on the
Second Closing Date shall be subject to the accuracy in all material respects of
the representations and warranties on the part of the Company herein set forth
as of the date hereof and as of the First Closing Date or the Second Closing
Date, as the case may be, to the accuracy in all material respects of the
statements of Company and Bank officers made pursuant to the provisions hereof,
to the performance in all material respects by the Company of its obligations
hereunder, and to the following additional conditions:
16
<PAGE>
(a) The Registration Statement shall have become effective not
later than 5:00 P.M., Washington, D.C. Time, on the date of this
Agreement, or at such later time as shall have been consented to by
you; if the filing of the Prospectus, or any supplement thereto, is
required pursuant to Rule 424(b) of the Rules and Regulations, the
Prospectus shall have been filed in the manner and within the time
period required by Rule 424(b) of the Rules and Regulations; and prior
to such Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for
that purpose shall have been instituted or shall be pending or, to the
knowledge of the Company or you, shall be contemplated by the
Commission; and any request of the Commission for inclusion of
additional information in the Registration Statement, or otherwise,
shall have been complied with to your reasonable satisfaction.
(b) You shall be reasonably satisfied that since the
respective dates as of which information is given in the Registration
Statement and Prospectus, (i) there
shall not have been any change in the capital stock of the Company or
the Subsidiaries or any material change in the indebtedness (other than
in the ordinary course of business) of the Company or the Subsidiaries,
(ii) except as set forth or contemplated by the Registration Statement
or the Prospectus, no material verbal or written agreement or other
transaction shall have been entered into by the Company or the
Subsidiaries, which is not in the ordinary course of business and which
could result in a material reduction in the future earnings of the
Company and the Subsidiaries, taken as a whole, (iii) no loss or damage
(whether or not insured) to the property of the Company or the
Subsidiaries shall have been sustained which materially and adversely
affects the condition (financial or otherwise), business, results of
operations or prospects of the Company and the Subsidiaries, taken as a
whole, (iv) no legal or governmental action, suit or proceeding
affecting the Company or the Subsidiaries which is material to the
Company and the Subsidiaries, taken as a whole, or which affects or may
affect the transactions contemplated by this Agreement shall have been
instituted or threatened, (v) no enforcement proceeding, whether formal
or informal, shall have been commenced against the Company or the Bank
by the FDIC or any other governmental agency nor shall any such
proceeding have been instituted, threatened or recommended, and (vi)
there shall not have been any material change in the condition
(financial or otherwise), business, management, results of operations
or prospects of the Company and the Subsidiaries, taken as a whole,
which makes it impractical or inadvisable in your judgment to proceed
with the public offering or purchase the Common Shares as contemplated
hereby.
(c) There shall have been furnished to you, individually or as
Representatives of the Underwriters, as the case may be, on each
Closing Date, in form and substance reasonably satisfactory to you,
except as otherwise expressly provided below:
17
<PAGE>
(i) An opinion of Stuzin & Camner, counsel for the
Company, addressed to you, or you as Representatives of the
Underwriters, as the case may be, and dated the First Closing
Date, or the Second Closing Date, as the case may be, in the
form of Exhibit A to this Agreement.
(ii) Such opinion or opinions of Silver, Freedman &
Taff, L.L.P., counsel for the Underwriters dated the First
Closing Date or the Second Closing Date, as the case may be,
with respect to the incorporation of the Company, the
sufficiency of all corporate proceedings and other legal
matters relating to this Agreement, the validity of the Common
Shares, the Registration Statement and the Prospectus and
other related matters as you may reasonably require, and such
counsel shall have received such documents and shall have
exhibited to them such papers and records as they may
reasonably request for the purpose of enabling them to pass
upon such matters. In connection with such opinions, such
counsel may rely on the opinion of Stuzin & Camner and
representations or certificates of officers of the Company and
the Bank and governmental officials.
(iii) A certificate of the Company executed by the
Chairman of the Board or President and the Chief Financial or
Accounting Officer, dated the First Closing Date or the Second
Closing Date, as the case may be, to the effect that:
(1) The representations and warranties of
the Company set forth in Section 2 of this Agreement
are true and correct in all material respects as of
the date of this Agreement and as of the First
Closing Date or the Second Closing Date, as the case
may be, and the Company has complied in all material
respects with all the agreements and satisfied all
the conditions on its part to be performed or
satisfied on or prior to such Closing Date;
(2) The Commission has not issued any order
preventing or suspending the use of the Prospectus or
any Preliminary Prospectus filed as a part of the
Registration Statement or any amendment thereto; no
stop order suspending the effectiveness of the
Registration Statement has been issued; and to the
best of the knowledge of the respective signers, no
proceedings for that purpose have been instituted or
are pending or contemplated under the Act;
18
<PAGE>
(3) Neither the Registration Statement nor
the Prospectus nor any amendment or supplement
thereto includes any untrue statement of a material
fact or omits to state any material fact required to
be stated therein, or necessary to make the
statements therein, in the light of the circumstances
under which they were made, not misleading;
(4) Since the initial date on which the
Registration Statement was filed with the Commission,
no agreement, written or oral, transaction or event
has occurred which should have been set forth in an
amendment to the Registration Statement or in a
supplement to or amendment of any prospectus which
has not been disclosed in such a supplement or
amendment;
(5) Since the respective dates as of which
information is given in the Registration Statement
and the Prospectus and except as disclosed in or
contemplated by the Prospectus, the Company and the
Subsidiaries, taken as a whole, have not sustained a
material loss or damage by strike, fire, flood,
windstorm, accident or other calamity (whether or not
insured).
(iv) On the date before this Agreement is executed
and also on the First Closing Date and the Second Closing Date
a letter addressed to you or to you as Representatives of the
Underwriters, as the case may be, from Price Waterhouse LLP,
independent accountants, the first one to be dated the day
before the date of this Agreement, the second one to be dated
the First Closing Date and the third one (in the event of a
Second Closing) to be dated the Second Closing Date, in form
and substance reasonably satisfactory to you to the effect
that:
(1) They are independent accountants within the
meaning of the Act and the applicable
published rules and regulations thereunder;
(2) In their opinion, the consolidated financial
statements of the Company and its
subsidiaries audited by them and included in
the Registration Statement comply as to form
in all material respects with the applicable
accounting requirements of the Act and the
published rules and regulations thereunder
with respect to registration statements on
Form S-3;
19
<PAGE>
(3) On the basis of procedures (but not an audit
in accordance with generally accepted
auditing standards) consisting of:
(a) Reading the minutes of meetings of
the stockholders and the Board of
Directors of the Company and its
consolidated subsidiaries since
September 30, 1994 as set forth in
the minute books through a
specified date not more than five
business days prior to the date of
delivery of any such letter;
(b) Performing the procedures specified
by the American Institute of
Certified Public Accountants for a
review of interim financial
information as described in SAS No.
71, interim Financial Information,
on the unaudited condensed interim
financial statements of the Company
and its consolidated subsidiaries
included in the Registration
Statement under the caption
"Summary of Recent Developments"
and reading the unaudited interim
financial data for the period from
the date of the latest audited
balance sheet included in the
Registration Statement to the date
of the latest available interim
financial data; and
(c) Making inquires of certain
officials of the Company who have
responsibility for financial and
accounting matters regarding the
specific items for which
representations are requested
below;
nothing has come to their attention as a
result of the foregoing procedures that
caused them to believe that:
(i) the unaudited condensed
interim financial
statements, included in the
Registration Statement,
under the caption "Summary
of Recent Developments", do
not comply as to form in
all material respects with
the applicable accounting
requirements of
20
<PAGE>
the Act and the published
rules and
regulations thereunder;
(ii) any material modifications
should be made to the
unaudited condensed
interim financial
statements, included in
the Registration Statement
under the caption "Summary
of Recent Developments",
for them to be in
conformity with generally
accepted accounting
principles;
(iii) (i) at the date of the
latest available
interim financial data
and at a specified date
not more than five
business days prior to
the date of delivery of
such letter, there was
any change in the
capital stock, increase
in long-term debt or any
decreases in
consolidated net current
assets (working capital)
or stockholders' equity
of the Company and
subsidiaries
consolidated as compared
with amounts shown in
the latest balance sheet
included in the
Registration Statement
or (ii) for the
period from the date of
the latest available
financial data to a
specified date not more
than five business days
prior to delivery of
such letter, there were
any decreases, as
compared with the
corresponding period in
the preceding year, in
consolidated net
interest income or in
the total or per share
amounts of net income,
except in all instances
for changes or decreases
which the Registration
Statement discloses have
occurred or may occur,
or they shall state any
specific changes or
decreases.
(4) The letter shall also state that they have:
21
<PAGE>
(a) Read the dollar amounts and percentages and
other financial information of the Company
contained in the Registration Statement or
incorporated by reference therein and agreed
such dollar amounts and percentages
respectively to appropriate accounts in the
Company's accounting records subject to its
system of internal accounting controls and
to schedules prepared by the Company
therefrom;
(b) Read the dollar amounts listed as
outstanding under "Capitalization" and
agreed such amounts or totals thereof to the
Company's accounting records subject to its
system of internal accounting controls; and
(c) Read the dollar and per share amounts listed
under "Selected Financial Information and
Other Data" and "Summary Financial
Information and Other Data" and agreed such
amounts to audited financial
statements.
(v) On or before the First Closing Date, letters from
each director and executive officer of the Company, in form
and substance satisfactory to you, confirming that for a
period of ninety (90) days after the first date that any of
the Common Shares are released by you for sale to the public,
such person will not directly or indirectly sell, offer to
sell, contract to sell or otherwise dispose of any shares of
Common Stock or any right to acquire such shares without the
prior written consent of the Representatives, which consent
may be withheld at the sole discretion of the Representatives.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are reasonably satisfactory
to you and to Silver, Freedman & Taff, L.L.P., counsel for the Underwriters. The
Company shall furnish you with such manually signed or conformed copies of such
opinions, certificates, letters and documents as you reasonably request. The
letter described in subparagraph (c)(v) above may be an original or facsimile of
the original.
If any condition to you or the Underwriters' obligations hereunder to
be satisfied prior to or at the First Closing Date is not so satisfied, this
Agreement at your election will terminate upon written notification by you as
Representatives to the Company without liability on the part of any Underwriter
or the Company, except for the expenses to be paid or reimbursed by the Company
pursuant to Section 5 hereof and except to the extent provided in Section 9
hereof.
SECTION 7. EFFECTIVENESS OF REGISTRATION STATEMENT. Each party to this
Agreement will use its best efforts to cause the Registration Statement to
become effective, to prevent the issuance of
22
<PAGE>
any stop order suspending the effectiveness of the Registration Statement and,
if such stop order be issued, to obtain as soon as possible the lifting thereof.
SECTION 8. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls an Underwriter, as
the case may be, within the meaning of the Act against any losses,
claims, damages, liabilities or expenses, joint or several, to which an
Underwriter or such controlling person may become subject, under the
Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if
such settlement is effected with the written consent of the Company),
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof as contemplated below) arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or
based upon written information supplied by the Company filed in any
state or jurisdiction to register or qualify any or all of the Common
Shares or to claim an exemption therefrom, or provided to any state or
jurisdiction to exempt the Company as a broker-dealer or its officers,
directors and employees as broker-dealers or agents, under the
securities laws thereof (collectively, the "Blue Sky Application") or
arise out of or are based upon the omission or alleged omission to
state in any of them a material fact required to be stated therein or
necessary to make the statements in any of them not misleading, or
arise from any theory of liability whatsoever relating to or arising
from or based upon the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or
arise out of or are based in whole or in part on any inaccuracy in the
representations and warranties of the Company contained herein or any
failure of the Company to perform its obligations hereunder or under
law; and will reimburse each Underwriter and each such controlling
person for any legal and other expenses as such expenses are reasonably
incurred by such Underwriter or such controlling person in connection
with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action; provided,
however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage, liability or expense arises
out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto in reliance upon and in conformity with the information
furnished to the Company pursuant to Section 3 hereof; provided,
further, that the foregoing indemnity with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter from whom
the person asserting any such loss, claim, damage or liability
purchased the Common Shares that are the subject thereof if such person
did not receive a copy of the Prospectus (or the Prospectus as
supplemented) at or prior to the confirmation of
23
<PAGE>
the sale to such person in any case where such delivery is required
by the Act and the untrue statement or omission of a material fact
contained in such Preliminary Prospectus was corrected in the
Prospectus (or the Prospectus as supplemented). In addition to its
other obligations under this Section 9(a), the Company agrees that, as
an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, or any
inaccuracy in the representations and warranties of the Company herein
or failure to perform its obligations hereunder, all as described in
this Section 8(a), it will reimburse each Underwriter (and, to the
extent applicable, each controlling person) on a quarterly basis for
all reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation,
inquiry or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Company's
obligation to reimburse each Underwriter (and, to the extent applicable
each controlling person) for such expenses and the possibility that
such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, such
Underwriter (and, to the extent applicable each controlling person)
shall promptly return it to the Company together with interest,
compounded daily, determined on the basis of the prime rate (or other
commercial lending rate for borrowers of the highest credit standing)
announced from time to time by The Wall Street Journal (the "Prime
Rate"). Any such interim reimbursement payments which are not made to
an Underwriter within 30 days of a request for reimbursement, shall
bear interest at the Prime Rate from the date of such request. This
indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) You or each Underwriter, as the case may be, will
severally indemnify and hold harmless the Company, each of its
directors, each of its officers who signed the Registration Statement,
and each person, if any, who controls the Company within the meaning of
the Act, against any losses, claims, damages, liabilities or expenses
to which the Company or any such director, officer, or controlling
person may become subject, under the Act, the Exchange Act, or other
federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter),
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof as contemplated below) arise out of or are
based upon any untrue or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each such case to the extent, but
only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registra tion
Statement, any Preliminary
24
<PAGE>
Prospectus, the Prospectus, or any amendment or supplement thereto, in
reliance upon and in conformity with the information furnished to the
Company pursuant to Section 3 hereof; and will reimburse the Company or
any such director, officer, or controlling person for any legal and
other expense reasonably incurred by the Company, or any such director,
officer, or controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action. In addition to the other
obligations under this Section 8(b), you or each Underwriter, as the
case may be, severally agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or
any alleged statement or omission, described in this Section 8(b) which
relates to information furnished to the Company pursuant to Section 3
hereof, it will reimburse the Company (and, to the extent applicable,
each officer, director, controlling person) on a quarterly basis for
all reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation,
inquiry or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of your or the
Underwriters' obligation to reimburse the Company (and, to the extent
applicable, each officer, director, controlling person) for such
expenses and the possibility that such payments might later be held to
have been improper by a court of competent jurisdiction. To the extent
that any such interim reimbursement payment is so held to have been
improper, the Company (and, to the extent applicable, each officer,
director or controlling person) shall promptly return it to the
Underwriters together with interest, compounded daily, determined on
the basis of the Prime Rate. Any such interim reimbursement payments
which are not made to the Company within 30 days of a request for
reimbursement, shall bear interest at the Prime Rate from the date of
such request. This indemnity agreement will be in addition to any
liability which you or such Underwriter, as the case may be, may
otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section, notify the indemnifying party in
writing of the commencement thereof, but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party for indemnity, contribution or otherwise
except to the extent the indemnifying party is prejudiced as a
proximate result of such failure. In case any such action is brought
against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying
25
<PAGE>
party, the indemnifying party will be entitled to participate in, and,
to the extent that it may wish, jointly with all other indemnifying
parties similarly notified, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however,
if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be a conflict between the positions
of the indemnifying party and the indemnified party in conducting the
defense of any such action or that there may be legal defenses
available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate
counsel to assume such legal defenses and to otherwise participate in
the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such
indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under
this Section for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless
(i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the
proviso to the next preceding sentence or (ii) the indemnifying party
shall not have employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a
reasonable time after notice of commencement of the action, in each of
which cases the fees and expenses of counsel shall be at the expense of
the indemnifying party (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than
one separate counsel representing the indemnified parties who are
parties to such action; provided, however, if an indemnified party in
any such action shall have concluded that there may be legal defenses
or rights available to it which are different from, in actual or
potential conflict with, or additional to those available to other
indemnified parties, such party shall have the right to select an
additional law firm to act as its separate counsel).
(d) If the indemnification provided for in this Section 8 is required
by its terms but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an indemnified party under
subsections (a), (b) or (c) of this Section 8 in respect of any losses,
claims, damages, liabilities or expenses referred to herein, then each
applicable indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of any losses, claims,
damages, liabilities or expenses referred to herein (i) in such
proportion as is appropriate to reflect the relative benefits received
by the Company and you or the Underwriters, as the case may be, from
the offering of the Common Shares or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to
in clause (i) above but also the relative fault of the Company and you
or the Underwriters, as the case may be, in connection with the
statements or omissions or inaccuracies in the representations and
warranties herein which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the
one hand, and the Underwriters, on the other hand, shall be deemed to
be in the same respective proportions as the total proceeds (net of
underwriting commissions, but before deducting expenses) from the
offering of the Common Stock received by the Company and the total
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underwriting commissions received by the Underwriters bear to the
aggregate public offering price of the Common Stock. The relative fault
of the Company and the Underwriters shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a
material fact or the inaccurate or the alleged inaccurate
representation and/or warranty relates to information supplied by the
Company or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include, subject to the
limitations set forth in subsection (c) of this Section 8, any legal or
other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim. The provisions set
forth in subsection (c) of this Section 8 with respect to notice of
commencement of any action shall apply if a claim for contribution is
to be made under this subsection (d); provided, however, that no
additional notice shall be required with respect to any action for
which notice has been given under subsection (c) for purposes of
indemnification. The Company and you or the Underwriters, as the case
may be, agree that it would not be just and equitable if contribution
pursuant to this Section 8 were determined solely by pro rata
allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in this paragraph.
Notwithstanding the provisions of this Section 8, no Underwriter shall
be required to contribute any amount in excess of the amount of the
total underwriting discounts and commissions received by such
Underwriter in connection with the Common Shares underwritten by it and
distributed to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
(e) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in
Sections 8(a) and 8(b) hereof, including the amounts of any requested
reimbursement payments and the method of determining such amounts,
shall be settled by arbitration conducted under the provisions of the
Constitution and Rules of the Board of Governors of the New York Stock
Exchange, Inc. or pursuant to the Code of Arbitration Procedure of the
NASD. Any such arbitration must be commenced by service of a written
demand for arbitration or written notice of intention to arbitrate,
therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration
tribunal in such demand or notice, then the party responding to said
demand or notice is authorized to do so. Such an arbitration
would be limited to the operation of the interim reimbursement
provisions contained in Sections 8(a) and 8(b) hereof and would not
resolve the ultimate propriety or enforceability of the obligation to
reimburse expenses which is created by the provisions of such Sections
8(a) and 8(b) hereof.
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SECTION 9. DEFAULT OF UNDERWRITERS. It shall be a condition to this
Agreement and the obligation of the Company to sell and deliver the Common
Shares hereunder, and a condition of your obligations or the obligation of each
Underwriter, as the case may be, to purchase the Common Shares in the manner as
described herein, that, except as hereinafter in this paragraph provided, each
of you or the Underwriters, as the case may be, shall purchase and pay for all
the Common Shares agreed to be purchased by you or such Underwriter hereunder
upon tender to you individually or as the Representatives of the Underwriters,
of all such shares in accordance with the terms hereof. If any Underwriter or
Underwriters default in your or their obligations to purchase Common Shares
hereunder on either the First or Second Closing Date and the aggregate number of
Common Shares which such defaulting Underwriter or Underwriters agreed but
failed to purchase on such Closing Date does not exceed 10% of the total number
of Common Shares which the Underwriters are obligated to purchase on such
Closing Date, the non-defaulting Underwriters shall be obligated severally, in
proportion to their respective commitments hereunder, to purchase the Common
Shares which such defaulting Underwriters agreed but failed to purchase on such
Closing Date. If any Underwriter or Underwriters so default and the aggregate
number of Common Shares with respect to which such default occurs is more than
the above percentage and arrangements satisfactory to the Representatives and
the Company for the purchase of such Common Shares by other persons are not made
within 48 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company except
for the expenses to be paid by the Company pursuant to Section 5 hereof and
except to the extent provided in Section 9 hereof.
If applicable, in the event that Common Shares to which a default
relates are to be purchased by the nondefaulting entities or by another party or
parties, you or the Company shall have the right to postpone the First or Second
Closing Date, as the case may be, for not more than five business days in order
that the necessary changes in the Registration Statement, Prospectus and any
other documents, as well as any other arrangements, may be effected. As used in
this Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section. Nothing herein will relieve you or a defaulting
Underwriter from liability for its default.
SECTION 10. EFFECTIVE DATE. This Agreement shall become effective
immediately as to Sections 5, 8, 11 and 12 and, as to all other provisions, (i)
if at the time of execution of this Agreement the Registration Statement has not
become effective, at 5:00 P.M., New York time, on the first full business day
following the effectiveness of the Registration Statement, or (ii) if at the
time of execution of this Agreement the Registration Statement has been declared
effective, at 9:00 A.M., New York time, on the first full business day following
the date of execution of this Agreement; but this Agreement shall nevertheless
become effective at such earlier time after the Registration Statement becomes
effective as you may determine on and by notice to the Company
or by release of any of the Common Shares for sale to the public. For the
purposes of this Section 10, the Common Shares shall be deemed to have been so
released upon the release for publication of any newspaper advertisement
relating to the Common Shares or upon the release by you of telegrams (i)
advising the Underwriters that the Common Shares are released for public
offering or (ii) offering the Common Shares for sale to securities dealers,
whichever may occur first.
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SECTION 11. TERMINATION. The obligations of the several Underwriters
hereunder shall be subject to termination in the absolute discretion of the
Representatives, at any time prior to the Closing Time or any Date of Delivery,
(i) if any of the conditions specified in Section 6 shall not have been
fulfilled when and as required by this Agreement to be fulfilled, or (ii) if
there has been since the respective dates as of which information is given in
the Registration Statement, any material adverse change, or any development
involving a prospective material adverse change, in or affecting the business,
prospects, management, properties, assets, results of operations or condition
(financial or otherwise) of the Company, whether or not arising in the ordinary
course of business, or (iii) if there has occurred any outbreak or escalation of
hostilities or other national or international calamity or crisis or change in
economic, political or other conditions the effect of which on the financial
markets of the United States is such as to make it, in the judgment of the
Representatives, impracticable to market the Common Shares or enforce contracts
for the sale of the Common Shares, or (iv) if trading in any securities of the
Company has been suspended by the Commission or by Nasdaq or if trading
generally on the New York Stock Exchange or in the Nasdaq over-the-counter
market has been suspended (including automatic halt in trading pursuant to
market-decline triggers other than those in which solely program trading is
temporarily halted), or limitations on prices for trading (other than
limitations on hours or numbers of days of trading) have been fixed, or maximum
ranges for prices for securities have been required, by such exchange or the
NASD or Nasdaq or by order of the Commission or any other governmental
authority, or (v) if there has been any downgrading in the rating of any of the
Company's debt securities or preferred stock by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
the Securities Act), or (vi) any federal or state statute, regulation, rule or
order of any court or other governmental authority has been enacted, published,
decreed or otherwise promulgated which in the reasonable opinion of the
Representatives materially adversely affects or will materially adversely affect
the business or operations of the Company, or (viii) any action has been taken
by any federal, state or local government or agency in respect of its monetary
or fiscal affairs which in the reasonable opinion of the Representatives has a
material adverse effect on the securities markets in the United States.
If the Representatives elect to terminate this Agreement as provided in
this Section 11, the Company and the Underwriters shall be notified promptly by
telephone, promptly confirmed by facsimile.
If the sale to the Underwriters of the Common Shares, as contemplated
by this Agreement, is not carried out by the Underwriters for any reason
permitted under this Agreement or if such sale is not carried out because the
Company shall be unable to comply in all material respects with any of the terms
of this Agreement, the Company shall not be under any obligation or liability
under this Agreement (except to the extent provided in Sections 5 and 9 hereof)
and the Underwriters shall be under no obligation or liability to the Company
under this Agreement (except to the extent provided in Section 9 hereof) or to
one another hereunder.
SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the parties hereto and of their respective officers set forth in
or made pursuant to this Agreement will remain in full force
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and effect, regardless of any investigation made by or on behalf of the
Underwriters, the Company or any of its or their partners, officers or directors
or any controlling person, as the case may be, and will survive delivery of and
payment for the Common Shares sold hereunder and any termination of this
Agreement.
SECTION 13. NOTICES. All communications hereunder shall be in writing
and, if sent to the Representatives shall be mailed, delivered or telegraphed
and confirmed to you at Friedman, Billings, Ramsey & Co., Inc., 1001 Nineteenth
Street, North, Arlington, Virginia 22209 Attention: Melinda Harris, with a copy
to Silver, Freedman & Taff, L.L.P., 1100 New York Avenue, N.W., Suite 700 East,
Washington, D.C. 20005, Attention: Dave M. Muchnikoff, P.C.; and if sent to the
Company shall be mailed, delivered or telegraphed and confirmed to the Company
at 255 Alhambra Circle, Coral Gables, Florida 33134, Attention: Alfred R.
Camner, with a copy to Stuzin and Camner, Professional Association, 1221
Brickell Avenue, 25th Floor, Miami, Florida 33131; Attention: Marsha D. Bilzin,
Esq. The Company or you may change the address for receipt of communications
hereunder by giving notice to the others.
SECTION 14. SUCCESSORS. This Agreement will inure to the benefit of and
be binding upon the parties hereto, and to the benefit of the officers and
directors and controlling persons referred to in Section 9, and in each case
their respective successors, personal representatives and assigns, and no other
person will have any right or obligation hereunder. Notwithstanding the
foregoing, this Agreement shall not be assignable by the parties. The term
"successors" shall not include any purchaser of the Common Shares as such from
the Underwriters merely by reason of such purchase.
SECTION 15. PARTIAL UNENFORCEABILITY. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 16. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the laws pertaining to
conflicts of laws) of the State of Virginia.
SECTION 17. GENERAL. This Agreement constitutes the entire agreement of
the parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. This Agreement may be executed in several
counterparts, each one of which shall be an original, and all of which shall
constitute one and the same document.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company and you.
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If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed copies hereof, whereupon it
will become a binding agreement between the Company and the Underwriters, all in
accordance with its terms.
Very truly yours,
BANKUNITED FINANCIAL CORPORATION
By:
---------------------------------
Name: Alfred R. Camner
Title: Chairman of the Board
The foregoing Underwriting Agreement
is hereby confirmed and accepted by us
in Arlington, Virginia as of the date
first above written.
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
- ---------------------------------------
If applicable, acting as Representative
of the Several Underwriters in the
attached Schedule A.
BY: FRIEDMAN, BILLINGS, RAMSEY &
CO., INC.
By:
---------------------------
Name:
Title: Managing Director
BY: PAINEWEBBER, INC.
By:
---------------------------
Name:
Title:
32
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EXHIBIT A
FORM OF OPINION OF STUZIN AND CAMNER,
PROFESSIONAL ASSOCIATION
___________, 1997
Friedman, Billings, Ramsey & Co., Inc.
PaineWebber, Incorporated
c/o Friedman, Billings, Ramsey & Co., Inc.
Potomac Tower
1001 Nineteenth Street North
Arlington, Virginia 22209
Re: BANKUNITED FINANCIAL CORPORATION
Sirs:
We have acted as counsel for BankUnited Financial Corporation, a
Florida Corporation (the "Company"), in connection with its offering of (i)
3,200,000 shares of Class A Common Stock, $.01 par value per share (the "Firm
Shares"), and (ii) an aggregate of an additional 480,000 shares of Common Stock
(collectively with the Firm Shares, the "Shares"), issuable upon exercise of an
over-allotment option, pursuant to the Underwriting Agreement, dated
___________, 1997 (the "Underwriting Agreement"), by and among the Company and
you, as the Representatives of the several Underwriters named in Schedule A to
the Underwriting Agreement. We are rendering this opinion pursuant to Section
6(c)(i) of the Underwriting Agreement. Unless otherwise defined herein, each
capitalized term used herein shall have the same meaning ascribed to such term
in the Underwriting Agreement.
As counsel to the Company, we have reviewed the Registration Statement
on Form S-3 (Registration No. 333-35781) filed by the Company on September 17,
1997 with the Commission pursuant to the Act, [AS WELL AS AMENDMENT NO. 1
THERETO FILED BY THE COMPANY WITH THE COMMISSION ON _________, 1997] for the
purpose of registering the Shares under the Act. The Registration Statement,
together with all exhibits thereto, as amended and existing at __________, 1997,
the effective date thereof, is hereinafter referred to as the "Registration
Statement."
In our capacity as such counsel, we have examined, among other things,
original, certified copies or copies otherwise identified to our satisfaction as
being true copies, of the following:
(1) The Registration Statement;
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(2) The Prospectus dated ___________, 1997 included in the
Registration Statement (the "Prospectus");
(3) The Preliminary Prospectus dated ___________, 1997;
(4) Advice from the Commission that (a) the Registration Statement
was declared effective under the Act by the Commission on
____________, 1997 and (b) as of ____________, 1997, no stop
order relating to the Registration Statement had been issued;
(5) The Articles of Incorporation of the Company as in effect on
the date hereof;
(6) The Bylaws of the Company as in effect on the date hereof;
(7) Resolutions adopted by the Board of Directors of the Company
in connection with the registration of the Shares under the
Act, the issuance of the Shares and other matters;
(8) A Certificate of the Secretary of the Company dated
___________, 1997, relating to the Bylaws of the Company,
certain resolutions, incumbency of officers and certain other
matters;
(9) The Underwriting Agreement;
(10) Certificate of the Chairman of the Board or President and
Chief Financial or Accounting Officer of the Company pursuant
to Section 6(c)(iv) of the Underwriting Agreement;
(11) Certificates and advice relating to the good standing of the
Company;
(12) A Certificate of the Federal Deposit Insurance Corporation
dated ___________________ certifying that the Company is an
insured depository institution under the Federal Deposit
Insurance Act; and
(13) A specimen of the certificate representing the Common Shares
filed through incorporation by reference as Exhibit 4.3 to the
Registration Statement.
In addition, we have obtained from public officials and from officers
and representatives of the Company such other certificates and assurances as we
consider necessary for the purpose of rendering this opinion. On the basis of
the foregoing and our examination of such other matters of fact and questions of
law as we have deemed relevant under the circumstances, and in reliance thereon,
we are of the opinion that:
(A) Each of the Company and T&D Properties of South Florida,
Inc., Bay Holdings, Inc. and BU Ventures, Inc., has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and the Bank is
duly organized under the laws of the United States and each is duly
qualified to do business as a foreign corporation and is in good
standing in all other jurisdictions where the ownership or leasing of
properties or the conduct of its business requires such qualification,
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except where the failure to be so qualified would not have a Material
Adverse Effect on the Company and Subsidiaries, taken as a whole, and
the Company and the Subsidiaries have all necessary corporate power and
authority to own their properties and conduct their business as
described in the Registration Statement and Prospectus; the Bank is a
wholly owned savings and loan subsidiary of the Company;
(B) To the best of our knowledge, the authorized, issued and
outstanding capital stock of the Company is as set forth under the
caption "Capitalization" in the Prospectus at the dates indicated
therein; the outstanding shares of the Company's capital stock conform
in all material respects to the description thereof contained in the
Prospectus; all necessary and proper corporate proceedings have been
taken in order to authorize validly the Common Shares; the shares of
capital stock outstanding prior to the issuance of the Common Shares
have been duly and validly issued and are fully paid and nonassessable;
the Common Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be
validly issued and outstanding and will constitute the valid and
legally binding obligations of the Company, except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, receivership, conservatorship or
other similar laws, regulations or procedures of general applicability
relating to or effecting enforcement of the rights of creditors of the
Company or savings and loan holding companies, the accounts of whose
subsidiaries are insured by the FDIC, or by general equity principles
and the discretion of the court before which any proceeding is brought
(regardless of whether enforceability is considered in a proceeding in
equity or at law); the Common Shares will not be issued in violation of
or subject to any statutory preemptive rights or any preemptive rights
set forth in the certificate of incorporation or by-laws of the Company
or, to the best of our knowledge, other rights to subscribe for or
purchase any securities; without limiting the foregoing, there are no
statutory preemptive or any preemptive rights set forth in the
certificate of incorporation or by-laws of the Company or, to the best
of our knowledge, other rights to subscribe for or purchase any of the
Common Shares;
(C) All of the issued and outstanding shares of capital stock
of the Subsidiaries have been duly and validly authorized and issued
and are fully paid and nonassessable and are owned of record, and to
the best of our knowledge beneficially, by the Company with respect to
the Bank and by the Bank with respect to T&D Properties of South
Florida, Inc., Bay Holdings, Inc. and BU Ventures, Inc., free and clear
of all perfected and, to the best of our knowledge, other liens,
encumbrances, equities, claims, security interests, voting trusts or
other defects of title whatsoever and, to our knowledge, except as
disclosed in the Prospectus neither the Company nor the Subsidiaries
own any equity interests in any other equity;
(D) Except as disclosed in or specifically contemplated by the
Prospectus to the best of our knowledge, there are no outstanding
options, warrants or other rights calling for the issuance of, and no
commitments, plans or arrangements to issue, any shares of capital
stock of the Company or any securities convertible into or exchangeable
for capital stock of the Company and to the best of our knowledge, no
options, warrants or other rights to purchase, agreements or other
obligations to issue or other rights to convert any obligations into
shares of capital stock or ownership interests in the Subsidiaries are
outstanding;
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(E)(1) The Registration Statement has become
effective under the Act, and, to the best of our knowledge, no
stop order suspending the effectiveness of the Registration
Statement or preventing the use of the Prospectus has been
issued and no proceedings for that purpose have been
instituted or are pending or contemplated by the Commission;
any required filing of the Prospectus and any supplement
thereto pursuant to Rule 424(b) of the Rules and Regulations
has been made in the manner and within the time period
required by such Rule 424(b);
(2) The Registration Statement, the Prospectus and
each amendment or supplement thereto (except for the financial
statements, schedules and other financial or statistical
information contained or included therein as to which we need
express no opinion) comply as to form in all material respects
with the requirements of the Act and the Rules and
Regulations;
(3) To the best of our knowledge, there are no
franchises, leases, contracts, agreements or documents of a
character required to be disclosed in the Registration
Statement on Form S-3 or Prospectus or to be filed as exhibits
to the Registration Statement or to the Company's Annual
Report on Form 10-K which are not disclosed or filed, as
required;
(4) To the best of our knowledge, there are no legal
or governmental actions, suits or proceedings pending or
threatened against the Company which are required to be
described in the Prospectus which are not described as
required;
(5) To the best of our knowledge, there are no
material cease and desist orders, memoranda of understanding
or other regulatory agreement, order or understanding to which
the Company or the Subsidiaries is a part or by which the
Company or the Subsidiaries is bound or to which any of the
properties or assets of the Company or any subsidiary is
subject, which are required to be described in the
Registration Statement and the Prospectus that are not
described as required;
(6) To our knowledge, the Company and the
Subsidiaries have obtained all material licenses, permits and
other governmental authorizations currently required for the
conduct of their business except where the failure to obtain
the same would not have a Material Adverse Effect on the
Company; and to such counsel's knowledge, all material
licenses, permits and other governmental authorizations,
leases and subleases are in full force and effect and the
Company is in all material respects complying therewith.
(7) We do not know of any statutes or regulations
required to be described in the Prospectus which are not so
described. Except as disclosed in the Prospectus, to our
knowledge, there are no legal or governmental proceedings
pending to which the Company or any Subsidiary is a party or
of which any property of the Company or any Subsidiary is the
subject which, if determined adversely to the Company or any
such Subsidiary, would individually or in the aggregate have a
Material Adverse Effect on the Company; and, except as
disclosed in the Prospectus, to our knowledge, no such
proceedings are threatened or contemplated by governmental
authorities or threatened by others.
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<PAGE>
(F) The Company has all necessary corporate power and
authority to enter into the Underwriting Agreement and to sell and
deliver the Common Shares to be sold by it to you or the Underwriters,
as the case may be; the Underwriting Agreement has been duly and
validly authorized by all necessary corporate action of the Company,
has been duly and validly executed and delivered by and on behalf of
the Company, and is a valid and binding agreement of the Company
enforceable in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, receivership, conservatorship or other similar
laws, regulations or procedures of general applicability relating to or
effecting enforcement of the rights of creditors of the Company or
savings and loan holding companies, the accounts of whose subsidiaries
are insured by the FDIC, or by general equity principles and the
discretion of the court before which any proceeding is brought
(regardless of whether enforceability is considered in a proceeding in
equity or at law) and, with respect to the Underwriting Agreement,
except as to those provisions relating to indemnity or contribution for
liabilities arising under the Act as to which no opinion need be
expressed; and no approval, authorization, order, consent,
registration, filing, qualification, license or permit of or with any
court, regulatory, administrative or other governmental body is
required for the execution and delivery of the Underwriting Agreement
by the Company or the consummation of the transactions contemplated by
the Underwriting Agreement, except such as have been obtained and are
in full force and effect under the Act and such as may be required
under applicable blue sky laws in connection with the purchase and
distribution of the Common Shares by the Underwriters, the clearance of
such offering with the NASD, and the listing of the Common Shares by
the Nasdaq Stock Market.
(G) The execution and performance of the Underwriting
Agreement and the consummation of the transactions therein contemplated
will not conflict with, result in the breach of, or constitute, either
by themselves or upon notice or the passage of time or both, a default
under, any agreement, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument known to us to which the
Company or any of the Subsidiaries is a party or by which the Company
or any of the Subsidiaries or any of its or their property may be bound
or affected or, so fare as is known to such counsel, violated any
statute, judgment, decree, order, rule or regulation of any court or
governmental body having jurisdiction over the Company or the
Subsidiaries or any of its or their property; which conflict, breach,
default or violation would have a Material Adverse Effect on the
Company and the Subsidiaries, taken as a whole, or violate any of the
provisions of the Certificate or Articles of Incorporation or by-laws
of the Company or the Subsidiaries or the Bank's charter or by-laws;
(H) To the best of our knowledge, there is no regulatory cease
and desist order or other order, memorandum of understanding or
agreement between the Company or the Subsidiaries and any regulatory
authority which would govern, limit or prohibit the Company from
entering into and performing its obligations under the Underwriting
Agreement;
(I) Neither the Company nor any Subsidiary is in violation nor
will the Company's performance of its obligations under this Agreement
result in a violation of its Certificate or Articles of Incorporation
or by-laws or the Bank's charter or by-laws, or to the best of our
knowledge, be in breach of or default with respect to any provision of
any agreement, mortgage, deed of trust, lease, franchise, license,
indenture, permit or other instrument filed
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<PAGE>
as an exhibit to the Registration Statement to which the Company or any
of the Subsidiaries is a party or by which it or any of its properties
may be bound or affected, except where such breach or default would not
have a Material Adverse Effect on the Company and the Subsidiaries,
taken as a whole; and, to the best of our knowledge, the Company and
the Subsidiaries are in compliance with all laws, rules, regulations,
judgments, decrees, orders and statutes of any court or jurisdiction to
which they are subject, except where noncompliance would not have a
Material Adverse Effect on the Company and the Subsidiaries, taken as a
whole; neither the Company nor any of its affiliates (including the
Subsidiaries) is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended, or applicable regulations
promulgated thereunder; and the Bank is an insured depository
institution within the meaning of the Federal Deposit Insurance Act, as
amended;
(J) The Company is duly registered as a savings and loan
holding company under the Home Owners' Loan Act;
(K) To the best of our knowledge, except as set forth in the
Prospectus under the caption "Description of Capital Stock," no holders
of securities of the Company have rights which have not lapsed or been
waived to the registration of shares of Class A Common Stock or other
securities of the Company, because of the filing of the Registration
Statement by the Company or the offering contemplated hereby;
(L) The Company's Common Stock, including the Shares, have
been approved for quotation on the Nasdaq National Market upon notice
of issuance.
(M) The form of share certificate evidencing the Common
Shares, as filed through incorporation by reference as Exhibit 4.3 to
the Registration Statement, is in due and proper form under the laws of
the State of Florida.
(N) The Company is not an "investment company" as such term is
defined in the Investment Company Act.
(O) No transfer taxes are required to be paid by the
Underwriters in connection with the sale and delivery of the Common
Shares by the Company to the Underwriters pursuant to the Underwriting
Agreement.
We have participated in conferences with officers and other
representatives of the Company and the Company's independent public accountants
and with your representatives and your counsel, at which conferences the
contents of the Registration Statement, the Prospectus and related matters were
discussed. We have advised the Company, concerning the requirements of the Act
and the Rules and Regulations but have not independently verified the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or Prospectus. Because the purpose of our professional engagement was
not to establish or confirm factual matters and because the scope of our
examination of the affairs of the Company did not permit us to verify the
accuracy, completeness or fairness of the statements set forth in the
Registration Statement or Prospectus, we are not passing upon, and do not assume
any responsibility for, the accuracy, completeness or fairness of such
statements. However, no facts have come to our attention that would lead us to
believe that the Registration Statement, at the time it was declared effective
by the Commission, or the Prospectus as of the date it was filed with the
Commission, contained any untrue statement of
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a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or that, as of the date
hereof, the Registration Statement or Prospectus contains an untrue statement of
a material fact, or that the Registration Statement or the Prospectus omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading, it being understood that we make no comment with respect to the
financial statements, the notes thereto and related schedules or any other
financial or statistical data included in the Registration Statement or
Prospectus.
Whenever our opinion herein with respect to the existence or absence of
facts is stated to be based upon our knowledge or awareness, it is intended to
signify that during the course of our representation of the Company, no
information has come to our attention that would give us actual knowledge of the
existence or absence of such facts. However, except to the extent expressly set
forth herein, we have not undertaken any independent investigation to determine
the existence or absence of such facts, and no inference as to our knowledge of
the existence or absence of such facts should be drawn from our representation
of the Company or from our participation in the referenced transaction.
We render no opinion herein as to matters involving the laws of any
jurisdiction other than the State of Florida and the United States of America.
This opinion is limited to the effect of the present state of the laws of the
State of Florida and of the United States of America, to present judicial
interpretations thereof and to facts as they presently exist. In rendering this
opinion, we assume no obligation to revise or supplement it should the current
laws of the State of Florida and the United States be changed by legislative
action, judicial decision or otherwise.
We have assumed that the signatures on all documents examined by us are
genuine, which fact we have not independently verified. We have also assumed the
due authorization, execution and delivery of the Underwriting Agreement by the
Underwriters.
This letter is furnished by us as counsel for the Company to you in
connection with the Underwriting Agreement and the transactions contemplated
thereby and may not be relied upon by any other party other than your counsel,
and may not be relied upon by you or them in any other context or for any other
purpose. This opinion may not be quoted in whole or in part or delivered to any
other person without our prior written consent.
Very truly yours,
[DRAFT]
STUZIN AND CAMNER,
PROFESSIONAL ASSOCIATION
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BANKUNITED FINANCIAL CORPORATION
Class A Common Stock
AGREEMENT AMONG UNDERWRITERS
____________, 1997
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
As Representative of the
Several Underwriters
1001 Nineteenth Street North
Arlington, Virginia 22209
Dear Sirs:
1. UNDERWRITING AGREEMENT. The undersigned Underwriters
("Underwriters") agree among themselves as follows with reference to their
proposed purchases severally from BankUnited Financial Corporation (the
"Company") of 3,200,000 shares of Class A Common Stock, par value $.01 per
share, of the Company (the "Firm Shares") and the proposed purchase, severally
of up to an additional 480,000 shares of Common Stock (the "Option Shares") from
the Company. The Firm Shares and the Option Shares are collectively referred to
herein as the "Shares." Each Underwriter will agree to purchase (a) the number
of Firm Shares set forth opposite its name in Schedule A to the Underwriting
Agreement, and (b) that portion of the Option Shares as to which the option is
exercised equal to the proportion which such Underwriter's share of the number
of the Firm Shares bears to the total number of Firm Shares.
2. REGISTRATION STATEMENT AND PROSPECTUS. The Shares are more
particularly described in a registration statement (Registration No. 333-_____)
filed with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "1933 Act"). Amendments to such
registration statement have been or are being filed in which, with our consent
hereby confirmed, we have been named as one of the Underwriters of the Shares. A
copy of the registration statement as filed and a copy of each amendment as
filed (excluding exhibits) have heretofore been delivered to us. We confirm that
we have examined the registration statement, including amendments thereto,
relating to the Shares, as filed with the Commission, that we are willing to
accept the responsibilities of an Underwriter under the 1933 Act in respect of
the registration statement and we are willing to proceed with a public offering
of the Shares in the manner described in the registration statement. The
registration statement and the related prospectus may be further amended, but no
such amendment or change shall release or affect our obligations hereunder or
under the Underwriting Agreement. As used herein, the terms "Registration
Statement" and "Prospectus" shall have the same meaning as that specified in the
Underwriting Agreement.
3. AUTHORITY OF THE REPRESENTATIVE. We hereby authorize you, acting on
our behalf, as our representatives (the "Representatives") (a) to complete,
execute and deliver the Underwriting Agreement, to determine the public offering
price of the Shares and the underwriting discount with respect thereto and to
make such variations, if any, as in your judgment are appropriate and are not
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material, provided that the respective aggregate number of Firm Shares set forth
opposite our respective names in Schedule A thereto shall not be increased
without our consent, except as provided herein, (b) to waive performance or
satisfaction by the Company of obligations or conditions included in the
Underwriting Agreement if in your judgment such waiver will not have a material
adverse effect upon the interests of the Underwriters and (c) to take such
actions as in your discretion may be necessary or advisable to carry out the
Underwriting Agreement, this Agreement and the transactions for the accounts of
the several Underwriters contemplated thereby and hereby. We also authorize you
to determine all matters relating to the public advertisement of the Shares. The
parties on whose behalf you execute the Underwriting Agreement are herein called
the "Underwriters."
4. PUBLIC OFFERING. We authorize you, with respect to any Shares which
we so agree to purchase, to reserve for sale, and on our behalf to sell, to
dealers selected by you (including you or any of the other Underwriters, such
dealers so selected being hereinafter called "Selected Dealers") and to others
all or part of our Shares as you may determine. Reservations for sales to
persons other than Selected Dealers shall be as nearly as practicable in
proportion to the respective underwriting obligations of the Underwriters,
unless you agree to a smaller proportion at the request of an Underwriter.
Reservations for sales to Selected Dealers need not be in such proportion. All
sales of reserved Shares shall be as nearly as practicable in proportion to the
respective reservations as calculated from day to day.
In your discretion, from time to time, you may add to the reserved
Shares any Shares retained by us remaining unsold, and you may upon our request
release to us any of our Shares reserved but not sold. Any Shares so released
shall not thereafter be deemed to have been reserved. Upon termination of this
Agreement, or prior thereto at your discretion, you shall deliver to us any of
our Shares reserved but not sold and delivered, except that if the aggregate of
all reserved but unsold and undelivered Shares is less than 10%, you are
authorized to sell such Shares for the accounts of the several Underwriters at
such price or prices as you may determine. Sales of reserved Shares shall be
made to Selected Dealers at the public offering price less a concession
initially not in excess of $.__ per share (the "Selected Dealers' Concession")
and to others at the public offering price. Underwriters and Selected Dealers
may reallow a portion of such concession not in excess of $___ per share to any
other members of the National Association of Securities Dealers, Inc. ("NASD"),
acting as principal or buyer's agent, provided such member agrees that the
reallowance is to be retained and not reallowed in whole or in part and also
agrees in writing to comply with Section 24 of Article III of the Rules of Fair
Practice of the NASD.
After advice from you that the Shares are released for sale to the
public, we will offer to the public in conformity with the terms of the offering
set forth in the Prospectus such of our Shares as you advise us are not
reserved. We authorize you after the Shares are released for sale to the public,
in your discretion, to change the public offering price of the Shares and the
concession, and to buy Shares for our account from Selected Dealers at the
public offering price less such amount not in excess of the Selected Dealers'
Concession as you may determine.
Sales of Shares between Underwriters may be made with your prior
consent, or as you deem advisable for state securities laws purposes.
We agree that we will not sell to any accounts over which we exercise
discretionary authority any Shares which we have agreed to purchase under the
Underwriting Agreement.
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5. ADDITIONAL PROVISIONS REGARDING SALES. Any Shares sold by us
(otherwise than through you) which you contract for or purchase in the open
market or otherwise for the account of any Underwriter shall be repurchased by
us on demand at the cost of such purchase plus commissions and taxes on
redelivery. Shares delivered on such repurchase need not be the identical Shares
purchased by you. In lieu of demanding repurchase by us, you may in your
discretion (a) sell for our account the Shares so purchased by you, at such
price and upon such terms as you may determine, and debit or credit our account
with the loss and expense or net profit resulting from such sale or (b) charge
our account with an amount not in excess of the Selected Dealers' Concession
with respect to such Shares. If we are a member of, or clear through a member
of, the Depository Trust Company ("DTC"), you, in your discretion, may deliver
our Shares through the facilities of DTC.
6. PAYMENT AND DELIVERY. At or before the First Closing Date (as
defined in the Underwriting Agreement) and on the Second Closing Date (as
defined in the underwriting Agreement), we will deliver to you at DTC or at your
office at 1001 Nineteenth Street North, Arlington, Virginia 22209, a certified
or bank cashiers' check payable to your order, in clearing house funds, in the
amount equal to the offering price set forth in the Prospectus less the Selected
Dealers' Concession in respect of the number of Firm Shares or Option Shares, as
the case may be, to be purchased by us pursuant to the Underwriting Agreement.
We authorize you for our account to make payment of the purchase price for the
Firm Shares or Option Shares, as the case may be, to be purchased by us against
delivery to you of such Shares, and the difference between such price and the
amount of our check delivered to you therefor shall be credited to our account.
Unless we notify you at least three (3) full business days prior to such First
Closing Date or Second Closing Date, as appropriate, to make other arrangements,
you may, in your discretion, advise the Company to prepare our certificates in
our name. If you have not received our funds as requested, you may in your
discretion make such payment on our behalf, in which even we will reimburse you
promptly. Any such payment by you shall not relieve us from any of our
obligations hereunder or under the Underwriting Agreement.
We authorize you for our account to accept delivery of our Shares from
the Company to hold such of our Shares as you have reserved for sale to Selected
Dealers and others and to deliver such Shares against such sales. You will
deliver to us our unreserved Shares as promptly as practicable.
Notwithstanding the foregoing provisions of this Section 6, payment for
our Shares may be made through the facilities of DTC, if we are a member, unless
we have otherwise notified you prior to a date to be specified by you, or, if we
are not a member, settlement may be made through a correspondent who is a member
pursuant to instructions we may send to you prior to such specified date.
As promptly as practicable after you receive payment for reserved
Shares sold for our account, you will remit to us the purchase price paid by us
for such Shares and credit or debit our account with the difference between the
sale price and such purchase price.
7. AUTHORITY TO BORROW. In connection with the transactions
contemplated in the Underwriting Agreement or this Agreement, we authorize you,
in your discretion, to advance your own funds for our account, charging current
interest rates, to arrange loans for our account and in connection therewith to
execute and deliver any notes or other instruments and hold or pledge as
security therefor any of our Shares purchased for our account. Any lender may
rely upon your instructions in all matters relating to any such loan.
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Any of our Shares purchased for our account held by you may from time
to time be delivered to us for carrying purposes, and any such securities will
be redelivered to you upon demand.
8. STABILIZATION AND OTHER MATTERS. We authorize you in your discretion
to make purchases and sales of the Shares for our account in the open market or
otherwise, for long or short account, on such terms as you deem advisable and in
arranging sales to over-allot. If you have purchased Shares for stabilizing
purposes prior to the execution of this Agreement, such purchases shall be
treated as having been made pursuant to the foregoing authorization. We also
authorize you, either before or after the termination of the offering provisions
of this Agreement, to cover any short position incurred pursuant to this Section
8 on such terms as you deem advisable. All such purchases and sales and
over-allotments shall be made for the accounts of the several Underwriters as
nearly as practicable in proportion to their respective underwriting
obligations. Our net commitment under this Section 8 (excluding any commitment
incurred under the Underwriting Agreement upon exercise of the right to purchase
Option Shares) shall not, at the end of any business day, exceed [15%] of our
underwriting obligation. We will on your demand take up and pay for at cost any
Shares so purchased or sold or overalloted for our account, and, if any other
Underwriter defaults in its corresponding obligation, we will assume our
proportionate share of such obligation without relieving the defaulting
Underwriter from liability. We will be obligated in respect of purchases and
sales made for our account hereunder whether or not any proposed purchase of
Shares is consummated. The existence of this provision is no assurance that the
price of the Shares will be stabilized or that if stabilizing is commenced, it
may not be discontinued at any time.
We agree to advise you, from time to time upon your request, during the
term of this Agreement, of the number of Shares retained by us remaining unsold,
and will, upon your request, sell to you for the accounts of one or more of the
several Underwriters such number of such Shares as you may designate at such
prices, not less than the net price to Selected Dealers nor more than the public
offering price, as you may determine.
If you effect any stabilizing purchase pursuant to this Section 8, you
will notify us promptly of the date and time when the first stabilizing purchase
was effected and the date and time when stabilizing was terminated. We authorize
you on our behalf to file any reports required to be filed with the Commission
in connection with any transactions made by you for our account pursuant to this
Section 8 and we agree to furnish you with any information needed for such
reports. We agree to transmit to you for filing with the Commission any and all
reports required to be made by us pursuant to paragraph (c) of Rule 17a-2 under
the Securities Exchange Act of 1934, as amended (the "1934 Act"), as a result of
any transactions in connection with the offering of the Shares.
With respect to the Underwriting Agreement, you are also authorized in
your discretion (a) to exercise the option therein as to all or any part of the
Option Shares, and to terminate such option in whole or in part prior to its
expiration, (b) to postpone either or both the First Closing Date and the Second
Closing Date referred to in the Underwriting Agreement, and any other time or
date specified therein, (c) to exercise any right of cancellation or
termination, (d) to arrange for the purchase by other persons (including
yourself or any other Underwriter) of any Shares not taken up by any defaulting
Underwriter and (e) to consent to such other changes in the Underwriting
Agreement as in your judgment do not materially adversely affect the substance
of our rights and obligations thereunder.
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We further agree that (a) prior to the termination of this Agreement we
will not, directly or indirectly, bid for or purchase any Shares for our own
account, except as provided in this Agreement and in the Underwriting Agreement
and (b) prior to the completion (as defined in Rule 10b-6 under the 1934 Act) of
our participation in the distribution, we will otherwise comply with Rule 10b-6
under the 1934 Act.
9. ALLOCATION OF EXPENSES AND SETTLEMENT. We authorize you to charge
our account with (a) all transfer taxes on Shares purchased by us pursuant to
the Underwriting Agreement and sold by you for our account, (b) Selected
Dealers' Concessions in connection with the purchase, marketing and sale of the
Shares for our account and (c) our proportionate share (based upon our
underwriting obligation) of all other expenses incurred by the Underwriters in
connection with the purchase, carrying, sale and distribution of the Shares.
Your determination of the amount and allocation of such expenses shall be
conclusive. In the event of the default of any Underwriter in carrying out its
obligations hereunder, the expenses chargeable to such Underwriter pursuant to
this Agreement and not paid by it, as well as any additional losses or expenses
arising from such default, may be proportionately charged by you against the
other Underwriters not so defaulting, without, however, relieving such
defaulting Underwriter from its liability therefor.
As soon as practicable after termination of this Agreement, the
accounts hereunder will be settled, but you may reserve from distribution such
amount as you deem necessary to cover possible additional expenses. You may at
any time make partial distributions of credit balances or call for payment of
debt balances. Any of our funds in your hands may be held with your general
funds without accountability for interest. Notwithstanding the termination of
this Agreement or any settlement, we will pay on demand (a) our proportionate
share (based on our underwriting obligation) of all expenses and liabilities
which may be incurred by or for the accounts of the Underwriters, including any
liability based on the claim that the Underwriters constitute an association,
unincorporated business or other separate entity, and of any expenses incurred
by you or any other Underwriter with your approval in contesting any such claim
or liability and (b) any transfer taxes paid after such settlement on account of
any sale or transfer for our account.
10. TERMINATION. This Agreement shall terminate thirty (30) days after
the Shares are released by you for sale to the public unless extended by you.
You may extend said provisions for a period or periods not exceeding an
additional thirty (30) days in the aggregate, provided the Selected Dealer
Agreements, if any, are similarly extended. Whether said provisions may be
terminated in whole or in party by notice from you, you may, in your discretion,
on notice to us prior to such time, terminate the effectiveness of this
Agreement or any portion of it.
11. DEFAULT BY UNDERWRITERS. Default by one or more Underwriters in
respect of their obligations hereunder or under the Underwriting Agreement shall
not release us from any of our obligations or in any way affect the liability of
any defaulting Underwriter to the other Underwriters for damages resulting from
such default. In case of such default by one or more Underwriters for damages
resulting from such default, you are authorized to increase PRO RATA with other
non-defaulting Underwriters, the number of Shares which we shall obligated to
purchase pursuant to the Underwriting Agreement, provided that the aggregate
amount of all such increases for our account shall not exceed our pro rata
shares (together with other non-defaulting Underwriters) of 3,200,000 Shares;
and you are further authorized to arrange, but shall not be obligated to
arrange, for the purchase by other persons, who may include yourselves or other
Underwriters, of all or a portion of any aggregate number not taken up. If any
such arrangements are made, the amount of Shares
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to be purchased by the non-defaulting Underwriters and by any such other persons
shall be taken as the basis for the underwriting obligations under this
Agreement.
12. POSITION OF THE REPRESENTATIVE. Except as in this Agreement
otherwise specifically provided, you shall have full authority to take such
action as you may deem advisable in respect of all matters pertaining to the
Underwriting Agreement and this Agreement and in connection with the purchase,
carrying, sale and distribution of the Shares (including authority to terminate
the Underwriting Agreement as provided therein). You shall be under no liability
to us for or in respect of the value of the Shares or the validity or the form
thereof, the Registration Statement, the Prospectus, the Underwriting Agreement
or other instruments executed by the Company or others; or for in respect of the
issuance, transfer or delivery of the Shares; or for the performance by the
Company or others of any agreement on its or their part; nor shall you, as
Representatives or otherwise, be liable under any of the provisions hereof or
for any matters connected herewith, except for your own want of good faith, for
obligations expressly assumed by you in this Agreement and for any liabilities
imposed upon you by the 1933 Act. No obligations on your part shall be implied
or inferred herefrom. Authority with respect to matters to be determined by you,
or by you and the Company, pursuant to the Underwriting Agreement, shall survive
the termination of this Agreement.
In taking all actions hereunder, except in the performance of your own
obligations hereunder and under the Underwriting Agreement, you shall act only
as Representatives of each of the Underwriters. The commitments and liabilities
of each of the several Underwriters are several in accordance with their
respective purchase obligations and are not joint or joint and several. Nothing
contained herein shall constitute the Underwriters partners or render any of
them liable to make payments otherwise than as herein provided. If for federal
income tax purposes the Underwriters should be deemed to constitute a
partnership, then each Underwriter elects to be excluded from the application of
Subchapter & Chapter 1, Subtitle A, of the Internal Revenue Code of 1986, as
amended, and agrees not to take any position inconsistent with such election.
You, as Representative of the several Underwriters, are authorized, in your
discretion, to execute such evidence of such election as may be required by the
Internal Revenue Service.
13. COMPENSATION TO THE REPRESENTATIVES. As compensation for the
services of the managing underwriter in connection with the purchase of the
Shares and the management of the public offering of the Shares we agree to pay
you and authorize you to charge our account with an amount equal to [$___] for
each Share which we have agreed to purchase pursuant to the Underwriting
Agreement.
14. INDEMNIFICATION AND FUTURE CLAIMS. Each Underwriter, including
yourselves, agrees to indemnify, hold harmless and reimburse each other
Underwriter and each person, if any, who controls any other Underwriter within
the meaning of Section 15 of the 1933 Act, and any successor of any other
Underwriter, to the extent that, and upon the terms upon which, each Underwriter
agrees to indemnify, hold harmless and reimburse the Company and other specified
persons as set forth in the Underwriting Agreement.
In the event that at any time any person other than an Underwriter
asserts a claim against one or more of the Underwriters or against you as
Representatives of the Underwriters arising out of an alleged untrue statement
or omission in the Registration Statement (or any amendment thereto) or in the
Prospectus (or any amendment or supplement thereto) or any Blue Sky Application
or relating to any transaction contemplated by this Agreement, we authorize you
to make such investigation, to retain such counsel for the Underwriters and to
take such action in the defense of such claim as
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you may deem necessary or advisable. You may settle such claim with the approval
of a majority in interest of the Underwriters. We will pay our proportionate
share (based upon our underwriting obligation) of all expenses incurred by you
(including the fees and expenses of counsel for the Underwriters) in
investigating and defending against such claim and our proportionate share of
the aggregate liability incurred by all Underwriters in respect of such claim
(after deducting any contribution or indemnification obtained pursuant to the
Underwriting Agreement, or otherwise, from persons other than Underwriters),
whether such liability is the result of a judgment against one or more of the
Underwriters or the result of any such settlement there shall be credited
against any amount paid or payable by us pursuant to this paragraph any loss,
damage, liability or expense which is incurred by us as a result of any such
claim asserted against us, and if such loss, claim, damage, liability or expense
which is incurred by us as a result of any such claim asserted against us, and
if such loss, claim, damage, liability or expense is incurred by us subsequent
to any payment by us pursuant to this paragraph, appropriate provisions shall be
made to effect such credit, by refund or otherwise. Any Underwriter may retain
separate counsel at its own expense. A claim against or liability incurred by a
person who controls an Underwriter shall be deemed to have been made against or
incurred by such Underwriter. In the event of default by any Underwriter in
respect of its obligations under this Section 14, the non-defaulting
Underwriters shall be obligated to pay the full amount thereof in the
proportions that their respective underwriting obligations bear to the
underwriting obligations of all non-defaulting Underwriters, without relieving
such defaulting Underwriter of its liability hereunder. Our agreements contained
in this Section 14 will remain in full force and effect regardless of any
investigation made by or on behalf of such other Underwriter or controlling
person and will survive the delivery of and payment for the Shares and the
termination of this Agreement and the similar agreements entered into with the
other Underwriters. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
15. BLUE SKY AND OTHER MATTERS. You will not have any responsibility
with respect to the right of any Underwriter or other person to sell the Shares
in any jurisdiction notwithstanding any information you may furnish in that
connection. We authorize you to file a New York Further State Notice, if
required, and to make and carry out on our behalf any agreements which you may
deem necessary in order to procure registration or qualification of any of the
Shares in any jurisdiction, and we will at your request make such payments, and
furnish to you such information, as you may deem required by reason of any such
agreements.
We authorize you to file on behalf of the several Underwriters with the
NASD such documents and information, if any, which are available or have been
furnished to you for filing pursuant to applicable rules, statements and
interpretations of the NASD.
16. TITLE OF SHARES. The Shares purchased by the respective
Underwriters and any other securities purchased by you hereunder for their
respective accounts shall remain the property of such Underwriters until sold an
no title to any such Shares or other securities shall in any event pass to you,
as Representatives, by virtue of any of the provisions of this Agreement.
17. CAPITAL REQUIREMENTS. We confirm that our net capital and the ratio
of our aggregate indebtedness to our net capital is such that we may, in
accordance with and pursuant to Rule 15c3-1 under the 1934 Act, obligate
ourselves to purchase, and purchase, the Shares which we agree to purchase under
the Underwriting Agreement and hereunder.
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18. LIABILITY FOR FUTURE CLAIMS. Neither any statement by you, as
Representatives of the several Underwriters, of any credit or debit balance in
our account nor any reservation from distribution to cover possible additional
expenses relating to the Shares will constitute any representation by you as to
the existence or nonexistence of possible unforeseen expenses or liabilities of
or charges against the several Underwriters. Notwithstanding the distribution of
any net credit balance to us, we will be and remain liable for, and will pay on
demand, (a) our proportionate share (based upon our underwriting obligation) of
all expenses and liabilities which may be incurred by or for the accounts of the
Underwriters, including any liability which may be incurred by the Underwriters
or any of them based on the claim that the Underwriters constitute an
association, unincorporated business, partnership or any separate entity, and
(b) any transfer taxes paid after such settlement on account of any sale or
transfer for our account.
19. ACKNOWLEDGMENT OF REGISTRATION STATEMENT, ETC. We hereby confirm
that we have examined the Registration Statement (including any amendments or
supplements thereto) relating to the Shares filed with the Commission, that we
are willing to accept the responsibilities of an underwriter thereunder and that
we are willing to proceed as therein contemplated. We confirm that we have
authorized you to advise the Company on our behalf (a) as to the statements to
be included in the Prospectus relating to the Shares under the heading
"Underwriting," insofar as they relate to us, and (b) that there is no
information about us required to be stated in said Registration Statement or the
Prospectus other than as set forth in the Underwriters' Questionnaire previously
delivered by us to you. We understand that the aforementioned documents are
subject to further change and that we will be supplied with copies of any
amendment or amendments to such documents promptly, if and when received by you,
but the making of such changes and amendments will not release us or affect our
obligations hereunder or under the Underwriting Agreement.
20. NOTICES AND GOVERNING LAW. Any notice from you to us shall be
mailed, telephoned, sent by facsimile or telegraphed to us at our address as set
forth in the Underwriters' Questionnaire. Any notice from us to you shall be
deemed to have been duly given if mailed, telephoned, sent by facsimile or
telegraphed to you at 1001 Nineteenth Street North, Arlington, Virginia 22209,.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Virginia.
21. OTHER PROVISIONS. We represent that we are actually engaged in the
investment banking and securities business and are a member in good standing of
the NASD or, if we are not such a member, that we are a foreign dealer not
eligible for membership in said Association and that we will not offer or sell
any Shares in, or to persons who are nationals or residents of, the United
States of America. In making sales of Shares, if we are such a member, we agree
to comply will all applicable rules of the NASD, including, without limitation,
the NASD's Interpretation With Respect to Free-Riding and Withholding and
Section 24 of Article III of the NASD's Rules of Fair Practice, or if we are a
foreign bank, dealer or institution, we agree to comply with such Interpretation
and Sections 8, 24, 25 (as such Section applies to foreign nonmembers) and 36 of
the Article III as that Section applies to a non-member broker or dealer in a
foreign country. We confirm that we have complied or will comply with
requirements of the 1933 Act concerning delivery of the Prospectus. We are aware
of our statutory responsibilities under the 1933 Act, and you are authorized on
our behalf to so advise the Commission.
2. COUNTERPARTS. This Agreement may be signed in any number of
counterparts which, taken together, shall constitute one and the same
instrument.
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Very truly yours,
As Attorney-in-Fact for each of the several
Underwriters named in Schedule A to the
Underwriting Agreement
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Confirmed as of the date first above written.
As Representative of the
Several Underwriters:
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
By:
Title: Managing Director
49
EXHIBT 5.1
September 30, 1997
BankUnited Financial Corporation
255 Alhambra Circle
Coral Gables, Florida 33134
Ladies and Gentlemen:
We are acting as your counsel with regard to the offering by BankUnited
Financial Corporation (the "Company") of shares of its Series I Class A Common
Stock, $.01 par value (the "Class A Common Stock"). The Class A Common Stock is
being offered pursuant to a Registration Statement on Form S-3 filed with the
Securities and Exchange Commission on September 17, 1997. The Class A Common
Stock will be issued and delivered as described in the Registration Statement.
We are familiar with the relevant documents and materials used in
preparing the Registration Statement. Based on our review of such relevant
documents and materials, and of such other documents and materials as we have
deemed necessary and appropriate, we are of the following opinion:
The Class A Common Stock when issued and delivered in the
manner described in the Registration Statement against payment of the
applicable consideration therefor, will be legally issued, fully paid
and non-assessable.
We hereby consent to the use of our opinion as an Exhibit to the
Registration Statement on Form S-3 (together with all pre-effective amendments
thereto, the "Form S-3") and to the use of our name under the caption "Legal
Matters" in the Prospectus that is a part of the Form S-3.
Very truly yours,
STUZIN AND CAMNER,
PROFESSIONAL ASSOCIATION
/s/ Stuzin and Camner,
Professional Association
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Amendment No. 1 to Registration Statement on Form S-3
of our report dated November 4, 1996, except as to Note 18, which is as of
November 15, 1996, appearing on page 54 of BankUnited Financial Corporation's
Annual Report on Form 10-K/A for the year ended September 30, 1996, and our
report dated August 12, 1996 appearing on page 56 of Suncoast Savings and Loan
Association, FSA's Annual Report on Form 10-K for the year ended June 30, 1996.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
PRICE WATERHOUSE LLP
Miami, Florida
September 26, 1997
