- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One) [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-21850
BANKUNITED FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
FLORIDA 65-0377773
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
<TABLE>
<S> <C>
255 ALHAMBRA CIRCLE, CORAL GABLES, FLORIDA 33134
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) ZIP CODE
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (305) 569-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
CLASS A COMMON STOCK, $.01 PAR VALUE
8% NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES 1993
9% NONCUMULATIVE PERPETUAL PREFERRED STOCK
(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. [ ]
The aggregate market value of the Class A Common Stock held by
non-affiliates of the Registrant, based upon the average price on December 26,
1997, was $170,746,778.* The other voting securities of the Registrant are not
publicly traded.
The shares of the Registrant's common stock outstanding as of December 26,
1997 were as follows:
<TABLE>
<CAPTION>
CLASS NUMBER OF SHARES
- ----------------------------------------------- -----------------
<S> <C>
Class A Common Stock, $.01 par value 13,871,915
Class B Common Stock, $.01 par value 285,958
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Definitive Proxy Statement for its 1997 Annual Meeting of
Stockholders will be filed with the Securities and Exchange Commission not
later than 120 days after the end of the fiscal year covered by this Form 10-K
pursuant to Rule G(3) of the General Instructions for Form 10-K. Information
from such Definitive Proxy Statement will be incorporated by reference into
Part III, Items 10, 11, 12 and 13 hereof.
- ----------------
* Based on reported beneficial ownership of all directors and executive
officers of the Registrant; this determination does not, however, constitute
an admission of affiliated status for any of these individual stockholders.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART I
ITEM 1. BUSINESS
BUSINESS OF BANKUNITED FINANCIAL CORPORATION
GENERAL
BankUnited Financial Corporation (the "Company" or "BankUnited") is a
Florida corporation and the savings and loan holding company for BankUnited,
FSB (the "Bank"). The Company currently has seventeen branch offices in South
Florida and anticipates opening at least six additional branch offices by
September 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 operating 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 banks consolidate. Such product niches
include commercial business and commercial real estate lending and deposit
services for small to mid-sized businesses. The Company also focuses 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 when market opportunities are
favorable; (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 Federal Home Loan Bank of Atlanta (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 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 at
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 branch offices in its market area and may expand into
other parts of Florida.
In 1995, the Company sold its three branch offices on the west coast of
Florida, including their deposits which totaled $130.3 million at the date of
sale. The sale was pursuant to a strategy designed to take advantage of
consolidation trends in banking and growth opportunities in South Florida.
Also, as part of this strategy, the Company opened additional Florida branch
offices in Boynton Beach in June 1996, West Palm Beach in September 1996, Boca
Hamptons in August 1997, Coconut Creek in October 1997 and Aventura in November
1997. On March 29, 1996, the Company acquired The Bank of Florida with total
assets of $28.1 million which was merged into the Bank and consolidated into
the Bank's
1
<PAGE>
South Miami branch. On November 15, 1996, the Company acquired Suncoast Savings
and Loan Association, FSA ("Suncoast"), with total assets of $409.4 million,
which was merged into the Bank. On September 19, 1997 the Company signed a
definitive agreement to acquire Consumers Bancorp and merge its subsidiary,
Consumers Savings Bank, into the Bank. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Acquisitions."
The Company encounters strong competition in attracting deposits and in
its lending activities. Its most direct competition for deposits historically
has been from commercial banks, brokerage houses, other savings associations,
and credit unions located in the Company's market area, and the Company expects
continued strong competition from such financial institutions in the
foreseeable future. Within the Company's market area are branch offices 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 formerly independent and
operating in South Florida have recently been acquired by larger institutions
headquartered in other parts of the state or headquartered out of state. The
Company's goal is to compete for savings and other deposits by offering
depositors a higher level of personal service, together with a wide range of
deposit products offered at competitive rates. The Company believes that this
strategy will enable it to attract depositors as the number of local
institutions 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 types 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 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 increased its 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 higher
level of personal service and to position itself as a small- to middle-market
lender servicing businesses left underserved by larger institutions.
Management's strategy has included and continues to include evaluating
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. Earnings
generated from lending activities are affected by the demand for mortgages and
other types of loans, which is in turn affected by the interest rates at which
such loans may be offered, and other factors affecting the supply of housing
and the availability of funds. Sources and costs of funds, principally deposits
and borrowings, 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 between yields received on its
interest-earning assets and the rates paid on its interest-bearing liabilities
(the "interest rate spread") and (ii) the relative amounts of its
interest-earning assets and interest-bearing
2
<PAGE>
liabilities. When interest-earning assets equal or exceed interest-bearing
liabilities, any positive interest rate spread will generate net interest
income. When such liabilities exceed such assets, the greater the positive
interest rate spread must be in order to produce net interest 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.
The Company's exposure to interest rate risk is measured as the
sensitivity of the value of its financial instruments and net interest income
to changes in the level of interest rates. Generally, interest rate risk for a
financial institution results from differences in repricing intervals or
maturities between interest-earning assets and interest-bearing liabilities.
When such differences exist, a change in the level of interest rates will most
likely result in an increase or decrease in net interest income. The Company's
ability to manage interest rate risk depends upon a number of factors,
including competition for loans and deposits in its market area and conditions
prevailing in the secondary mortgage market.
To reduce the adverse impact of increases in market interest rates on the
Company's net interest income, the Company has emphasized the origination and
purchase of adjustable-rate mortgage loans. At September 30, 1997, 76.1% 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 strategy, and when market conditions are favorable, the
Company attempts to lengthen the maturities of its interest-bearing liabilities
(i) with longer term deposits or (ii) when advantageous, with longer term
borrowed funds.
The Company has rate-sensitive (maturing or subject to repricing within
one year) assets that exceed its rate-sensitive liabilities, resulting in a
positive cumulative one-year gap position of 4.9% of total assets as of
September 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. 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.
3
<PAGE>
GAP TABLE. The following table sets forth the amount of interest-earning
assets and interest-bearing liabilities outstanding at September 30, 1997,
which are expected to reprice or mature in each of the future time periods
shown.
<TABLE>
<CAPTION>
AT SEPTEMBER 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 ........................ $ 139,450 $ 23,108 $ 24,397
Mortgage-backed securities ........................ 24,058 7,013 46,488
Loans:
Adjustable-rate mortgages ........................ 789,494 416,262 115,574
Fixed-rate mortgages .............................. 72,257 26,124 152,548
Commercial and consumer loans ..................... 10,182 310 1,704
--------- --------- ---------
Total loans .................................... 871,933 442,696 269,826
--------- --------- ---------
Total interest-earning assets .................. 1,035,441 472,817 340,711
Total non-interest-earning assets ............... -- -- --
--------- --------- ---------
Total assets .................................... $1,035,441 $ 472,817 $ 340,711
========== ========= =========
Interest-bearing liabilities:
Customer deposits:
Money market and NOW accounts ..................... 2,916 2,918 23,344
Passbook accounts ................................. 6,018 6,020 48,160
Certificate accounts .............................. 613,825 195,619 126,429
---------- --------- ---------
Total customer deposits ........................ 622,759 204,557 197,933
Borrowings:
FHLB advances .................................... 440,000 105,000 125,000
Trust Preferred ................................. -- -- --
Other borrowings ................................. 30,000 -- --
---------- --------- ---------
Total borrowings ................................. 470,000 105,000 125,000
---------- --------- ---------
Total interest-bearing liabilities ............... 1,092,759 309,557 322,933
Total non-interest-bearing liabilities ............ -- -- --
Shareholders' equity .............................. -- -- --
---------- --------- ---------
Total liabilities and shareholders' equity ...... $1,092,759 $ 309,557 $ 322,933
========== ========= =========
Total interest-earning assets less interest-bearing
liabilities ("GAP") .............................. $ (57,318) $ 163,260 $ 17,778
========== ========= =========
Ratio of GAP to total assets ..................... (2.67)% 7.61% .83%
========== ========= =========
Cumulative excess (deficiency) of interest-earning
assets over interest-bearing liabilities ......... $ (57,318) $ 105,942 $ 123,720
========== ========= =========
Cumulative excess (deficiency) of interest-earning
assets over interest-bearing liabilities, as a
percentage of total assets ... (2.67)% 4.94% 5.77%
========== ========= =========
<PAGE>
<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 ........................ $ -- $ -- $ -- $ 186,955
Mortgage-backed securities ........................ 19,202 23,510 -- 120,271
Loans:
Adjustable-rate mortgages ........................ -- 1,018 10,447 1,332,795
Fixed-rate mortgages .............................. 96,221 76,818 411 424,379
Commercial and consumer loans ..................... 8 30 8 12,242
--------- -------- -------- ----------
Total loans .................................... 96,229 77,866 10,866 1,769,416
--------- -------- -------- ----------
Total interest-earning assets .................. 115,431 101,376 10,866 2,076,642
Total non-interest-earning assets ............... -- -- 68,764 68,764
--------- -------- -------- ----------
Total assets .................................... $ 115,431 $101,376 $ 79,630 $2,145,406
========= ======== ======== ==========
Interest-bearing liabilities:
Customer deposits:
Money market and NOW accounts ..................... 29,175 19,443 21,436 99,232
Passbook accounts ................................. 60,207 40,152 -- 160,557
Certificate accounts .............................. 230 -- -- 936,103
--------- -------- -------- ----------
Total customer deposits ........................ 89,612 59,595 21,436 1,195,892
Borrowings:
FHLB advances .................................... 1,484 -- -- 671,484
Trust Preferred ................................. -- 116,000 -- 116,000
Other borrowings ................................. -- -- -- 30,000
--------- -------- -------- ----------
Total borrowings ................................. 1,484 116,000 -- 817,484
--------- -------- -------- ----------
Total interest-bearing liabilities ............... 91,096 175,595 21,436 2,013,376
Total non-interest-bearing liabilities ............ -- -- 32,385 32,385
Shareholders' equity .............................. -- -- 99,645 99,645
--------- -------- -------- ----------
Total liabilities and shareholders' equity ...... $ 91,096 $175,595 $153,466 $2,145,406
========= ======== ======== ==========
Total interest-earning assets less interest-bearing
liabilities ("GAP") .............................. $ 24,335 $(74,219) $(73,836) $ --
========= ======== ======== ==========
Ratio of GAP to total assets ..................... 1.13% (3.46)% (3.44)% --
========= ======== ======== ==========
Cumulative excess (deficiency) of interest-earning
assets over interest-bearing liabilities ......... $ 148,055 $ 73,836
========= ========
Cumulative excess (deficiency) of interest-earning
assets over interest-bearing liabilities, as a
percentage of total assets ... 6.90% 3.44%
========= ========
</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 decay based upon duration estimates
utilized in the OTS Interest Rate Risk Model. 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.
4
<PAGE>
YIELDS EARNED AND RATES PAID. The following table sets forth certain
information relating to the categories of the Company's interest-earning assets
and interest-bearing liabilities for the periods indicated. All yield and rate
information is calculated on an annualized basis 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 calculated by dividing
net interest income by average interest-earning assets. Non-accrual loans are
included for the appropriate periods, whereas recognition of interest on such
loans is discontinued and any remaining accrued interest receivable is
reversed, in conformity with generally accepted accounting principles and
federal regulations. The yields and net interest margins appearing in the
following table have been calculated on a pre-tax basis.
<TABLE>
<CAPTION>
AS OF
9/30/97
YIELD/RATE
-----------
(DOLLARS IN THOUSANDS)
<S> <C>
Interest-earning assets:
Loans receivable, net ............... 7.44%
Mortgage-backed securities ......... 6.86
Short-term investments (1) ......... 6.30
Tax certificates ..................... 8.09
Long-term investments and FHLB
stock, net ........................ 7.05
-----
Total interest-earning assets ...... 7.36
-----
Interest-bearing liabilities:
NOW/Money Market ..................... 2.63
Savings .............................. 4.66
Certificate of deposits ............ 5.72
Trust preferred securites ............ 10.17
FHLB advances and other
borrowings ........................ 5.86
-----
Total interest-bearing
liabilities ..................... 5.79
-----
Excess of interest-earning assets over
interest-bearing liabilities .........
Net interest income ..................
Interest rate spread .................. 1.57%
=====
Net interest margin .................. 1.74%
=====
Ratio of interest-earning assets to
interest-bearing liabilities .........
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------------------------------------
1997 1996 1995
------------------------------------- ----------------------------------- --------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE
--------------- ---------- ---------- ------------- ---------- ---------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net ............... $ 1,217,181 $ 94,655 7.78% $ 540,313 $41,313 7.65% $ 419,501
Mortgage-backed securities ......... 103,389 7,035 6.80 62,711 4,250 6.78 59,204
Short-term investments (1) ......... 27,612 1,613 5.84 41,240 2,359 5.72 23,884
Tax certificates ..................... 41,162 3,171 7.70 34,831 3,018 8.66 37,377
Long-term investments and FHLB
stock, net ........................ 33,161 2,300 6.94 17,352 1,192 6.87 7,930
----------- -------- ----- --------- -------- ---- ---------
Total interest-earning assets ...... 1,422,505 108,774 7.65 696,447 52,132 7.49 547,856
----------- -------- ----- --------- -------- ---- ---------
Interest-bearing liabilities:
NOW/Money Market ..................... 91,515 2,236 2.44 33,148 775 2.34 41,196
Savings .............................. 137,912 6,342 4.60 59,965 2,627 4.38 55,950
Certificate of deposits ............ 735,008 41,558 5.65 313,521 17,389 5.55 276,564
Trust preferred securites ............ 63,008 6,473 10.27 -- -- -- --
FHLB advances and other
borrowings ........................ 335,112 19,351 5.77 235,264 13,831 5.88 144,052
----------- -------- ----- --------- -------- ---- ---------
Total interest-bearing
liabilities ..................... 1,362,555 75,960 5.58 641,898 34,622 5.39 517,762
----------- -------- ----- --------- -------- ---- ---------
Excess of interest-earning assets over
interest-bearing liabilities ......... $ 59,950 $ 54,549 $ 30,094
=========== ========= =========
Net interest income .................. $ 32,814 $17,510
======== ========
Interest rate spread .................. 2.07% 2.10%
===== ====
Net interest margin .................. 2.31% 2.51%
===== ====
Ratio of interest-earning assets to
interest-bearing liabilities ......... 104.40% 108.50% 105.81%
=========== ========= =========
<CAPTION>
YIELD/
INTEREST RATE
---------- ----------
<S> <C> <C>
Interest-earning assets:
Loans receivable, net ............... $30,171 7.19%
Mortgage-backed securities ......... 4,093 6.91
Short-term investments (1) ......... 1,491 6.25
Tax certificates ..................... 3,087 8.26
Long-term investments and FHLB
stock, net ........................ 577 7.29
-------- ----
Total interest-earning assets ...... 39,419 7.20
-------- ----
Interest-bearing liabilities:
NOW/Money Market ..................... 875 2.12
Savings .............................. 2,420 4.33
Certificate of deposits ............ 14,554 5.26
Trust preferred securites ............ -- --
FHLB advances and other
borrowings ........................ 8,456 5.87
-------- ----
Total interest-bearing
liabilities ..................... 26,305 5.08
-------- ----
Excess of interest-earning assets over
interest-bearing liabilities .........
Net interest income .................. $13,114
========
Interest rate spread .................. 2.12%
====
Net interest margin .................. 2.39%
====
Ratio of interest-earning assets to
interest-bearing liabilities .........
</TABLE>
- ---------------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and certificates
of deposit.
5
<PAGE>
RATE/VOLUME ANALYSIS. The following table presents, for the periods
indicated, the changes in interest income and the changes in interest expense
attributable to the changes in interest rates and the changes in the volume of
interest-earning assets and interest-bearing liabilities. For each category of
interest-earning assets and interest-bearing liabilities, information is
provided on changes attributable to: (i) changes in volume (change in volume
multiplied by prior year rate); (ii) changes in rate (change in rate multiplied
by prior year volume); (iii) changes in rate/volume (change in rate multiplied
by change in volume); and (iv) total changes.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------
1997 V. 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 ........................... $52,842 $ 53 $ 447 $53,342
Mortgage-backed securities and
collateralized mortgage
obligations ..................... 2,757 17 11 2,785
Short-term investments (1) ...... (780) 49 (15) (746)
Tax Certificates .................. 549 (335) (61) 153
Long-term investments and
FHLB stock ..................... 1,078 28 2 1,108
------- ------ -------- -------
Total interest-earning assets ... 56,446 (188) 384 56,642
------- ------ -------- -------
Interest expense attributable to:
NOW/Money Market .................. 1,365 35 61 1,461
Savings ........................... 3,415 131 169 3,715
Certificates of Deposit ............ 23,377 338 454 24,169
Trust preferred securities ......... -- -- 6,473 6,473
FHLB advances and other
borrowings ........................ 5,855 (233) (102) 5,520
------- ------ -------- -------
Total interest-bearing
liabilities ..................... 34,012 271 7,055 41,338
------- ------ -------- -------
Increase (decrease) in net interest
income ........................... $22,434 $ (459) $ (6,671) $15,304
======= ====== ======== =======
<PAGE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------------
1996 V. 1995
---------------------------------------------
INCREASE (DECREASE)
DUE TO
---------------------------------------------
CHANGES CHANGES CHANGES TOTAL
IN IN IN INCREASE
VOLUME RATE RATE/VOLUE (DECREASE)
---------- --------- ------------ -----------
<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
Trust preferred securities ......... -- -- --
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
======= ====== ====== =======
</TABLE>
- ---------------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and certificates
of deposit.
6
<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 ("ARMs") and, to a lesser extent, fixed-rate
mortgage loans secured by one-to-four family residential and commercial real
estate. As of September 30, 1997, the Company's loan portfolio totaled $1.8
billion, of which $1.6 billion or 88.3 % consisted of one-to-four family
residential first mortgages. At the present time, the Company's residential
real estate loans are primarily "conventional" loans 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 September 30, 1997, the remainder of the Company's loan portfolio consisted
of $130.2 million of commercial real estate loans (7.4 % of total loans);
five-or-more units residential real estate loans of $32.2 million (1.8 % of
total loans, net); $6.0 million of second mortgage loans (.3 % of total loans,
net); $1.7 million of consumer loans (.1% of total loans, net); $10.9 million
of commercial business loans (.6 % of total loans, net); and $15.5 million of
other loans (.9% of total loans, net).
At September 30, 1997, the Company's loan portfolio included $93.9 million
of residential mortgage loans to non-resident 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>
YEAR ENDED SEPTEMBER 30,
------------------------------------------
1997 1996 1995
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Total loans receivable, net, at beginning of period (1) ...... $ 646,385 $ 453,350 $ 413,287
Loans originated:
Residential real estate .................................... 159,533 65,954 54,438
Commercial business and consumer ........................... 18,804 16,705 7,556
---------- --------- ---------
Total loans originated .................................... 178,337 82,659 61,994
Loans acquired in Suncoast/Bank of Florida mergers (2) ...... 341,394 8,116 --
Loans purchased (3) .......................................... 913,653 242,099 76,081
Loans sold ................................................... (39,934) (4,356) (2,449)
Principal repayments and amortization of discounts
and premiums ................................................ (271,212) (133,836) (93,787)
Loans charged off ............................................. (604) (493) (594)
Transfers to real estate owned, net ........................... (2,296) (1,154) (1,182)
---------- --------- ---------
Total loans receivable, net, at end of period(1) ............ $1,765,723 $ 646,385 $ 453,350
========== ========= =========
</TABLE>
- ----------------
(1) Includes loans held for sale.
(2) Loans acquired in the Suncoast merger included $230.7 million of
one-to-four family residential real estate loans, $95.8 million of
commercial real estate loans and $14.9 million of other types of loans.
(3) All loans purchased are one-to-four family residential real estate loans
except for the purchase of $32.0 million of commercial real estate loans
in fiscal 1996.
7
<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 SEPTEMBER 30,
-----------------------------------------------
1997 1996
------------------------ ----------------------
AMOUNT PERCENT AMOUNT PERCENT
-------------- --------- ------------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
First mortgage loans:
One-to four-family
residential loans ...... $1,559,823 88.3% $568,203 87.9%
Five or more units
residential loans ...... 32,163 1.8 12,559 2.0
Commercial ............... 130,197 7.4 49,318 7.6
Construction ............ 7,477 .4 -- --
Land ..................... 7,997 .5 2,687 .4
Second mortgages loans . 5,992 .3 2,748 .4
---------- ----- -------- -----
Total first
and second
mortgage loans ......... 1,743,649 98.7 635,515 98.3
---------- ----- -------- -----
Consumer loans ............ 1,748 .1 2,687 .4
Commercial business
loans ..................... 10,890 .6 5,822 .9
---------- ----- -------- -----
Total loans
receivable ............ 1,756,287 99.4 643,985 99.6
---------- ----- -------- -----
Deferred loan fees,
premiums and
(discounts) ............... 13,129 .8 4,558 .7
Allowance for loan losses (3,693) ( .2) (2,158) ( .3)
---------- ----- -------- -----
Loans receivable,
net ..................... $1,765,723 100.0% $646,385 100.0%
========== ===== ======== =====
<CAPTION>
1995 1994 1993
---------------------- ---------------------- -----------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------------ --------- ------------ --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
First mortgage loans:
One-to four-family
residential loans ...... $432,472 95.4% $393,933 95.3% $298,342 96.1%
Five or more units
residential loans ...... 1,124 0.2 2,164 0.5 705 0.2
Commercial ............... 10,223 2.3 4,469 1.1 748 0.2
Construction ............ 200 0.1 -- -- 2,248 0.7
Land ..................... 450 0.1 1,095 0.3 1,099 0.4
Second mortgages loans . 2,412 0.5 2,616 0.6 623 0.2
-------- ----- -------- ----- -------- -----
Total first
and second
mortgage loans ......... 446,881 98.6 404,277 97.8 303,765 97.8
-------- ----- -------- ----- -------- -----
Consumer loans ............ 920 0.2 2,336 0.6 2,786 0.9
Commercial business
loans ..................... 3,632 0.8 4,732 1.1 3,665 1.2
-------- ----- -------- ----- -------- -----
Total loans
receivable ............ 451,433 99.6 411,345 99.5 310,216 99.9
-------- ----- -------- ----- -------- -----
Deferred loan fees,
premiums and
(discounts) ............... 3,386 0.7 2,783 0.7 1,409 0.5
Allowance for loan losses (1,469) ( 0.3) (841) ( 0.2) (1,184) ( 0.4)
-------- ----- -------- ----- -------- -----
Loans receivable,
net ..................... $453,350 100.0% $413,287 100.0% $310,441 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
The following table sets forth, as of September 30, 1997, the amount of
loans (including mortgage loans held for sale) by category and expected
principal repayments by year.
<TABLE>
<CAPTION>
OUTSTANDING AT
SEPTEMBER 30, 1997 1998 1999
-------------------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
First mortgage loans:
One-to-four family residential $1,559,823 $343,918 $257,389
Five-or-more units residential . 32,163 4,312 3,751
Commercial ........................ 130,197 68,154 19,612
Construction ..................... 7,477 5,301 1,394
Land .............................. 7,997 5,571 2,239
Second mortgage loans ............... 5,992 1,315 1,122
---------- -------- --------
Total first and second mortgage
loans ........................... 1,743,649 428,571 285,507
---------- -------- --------
Consumer loans ..................... 1,748 1,043 705
Commercial business loans ......... 10,890 7,723 3,167
---------- -------- --------
Total loans ..................... $1,756,287 $437,337 $289,379
========== ======== ========
<CAPTION>
2002- 2004- 2008 AND
2000 2001 2003 2007 THEREAFTER
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
First mortgage loans:
One-to-four family residential $198,224 $153,567 $213,382 $216,351 $176,992
Five-or-more units residential . 6,674 2,399 3,894 11,133 --
Commercial ........................ 11,239 11,239 9,978 9,975 --
Construction ..................... 764 18 -- -- --
Land .............................. 95 92 -- -- --
Second mortgage loans ............... 956 812 1,265 522 --
-------- -------- -------- -------- ---------
Total first and second mortgage
loans ........................... 217,952 168,127 228,519 237,981 176,992
-------- -------- -------- -------- ---------
Consumer loans ..................... -- -- -- -- --
Commercial business loans ......... -- -- -- -- --
-------- -------- -------- -------- ---------
Total loans ..................... $217,952 $168,127 $228,519 $237,981 $176,992
======== ======== ======== ======== =========
</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 September 30, 1997, 33.7% of the Company's gross
loans receivable (27.8% of total assets) were secured by properties located in
Florida and 13.8 % of gross loans receivable (11.4% of total assets) were
secured by properties located in California. Because of this concentration,
regional economic circumstances in those states could affect the level of the
Company's non-performing loans.
8
<PAGE>
The following table sets forth, as of September 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 SEPTEMBER 30, 1997
- ------------------------------------- -------------------
(IN THOUSANDS)
<S> <C>
Florida(l) ..................... $ 596,327
California ..................... 243,722
Illinois ........................ 95,141
Michigan ........................ 90,447
Colorado ........................ 66,069
Massachusetts .................. 61,652
Virginia ........................ 59,046
Maryland ........................ 49,529
New Jersey ..................... 48,182
Texas ........................... 39,678
Ohio ........................... 36,801
New York ........................ 34,569
Arizona ........................ 34,470
Georgia ........................ 34,273
Connecticut ..................... 33,096
Pennsylvania ..................... 28,928
Washington ..................... 27,613
North Carolina .................. 17,146
Missouri ........................ 15,677
Minnesota ........................ 12,472
Utah ........................... 11,239
Tennessee ........................ 10,822
Oregon ........................... 10,054
Nevada ........................... 9,465
South Carolina .................. 8,839
Kentucky ........................ 7,261
Indiana ........................ 7,204
Washington, DC .................. 6,873
Kansas ........................... 6,073
Wisconsin ........................ 4,913
Alabama ........................ 4,867
Oklahoma ........................ 4,273
New Mexico ..................... 3,502
Rhode Island ..................... 2,981
Louisiana ........................ 2,637
Idaho ........................... 2,612
Hawaii ........................... 2,036
Maine ........................... 1,664
Alaska ........................... 1,654
Arkansas ........................ 1,606
Mississippi ..................... 1,505
Iowa ........................... 1,216
New Hampshire .................. 1,211
Others(2) ........................ 3,912
Not secured by real estate ...... 13,030
----------
Total ........................... $1,756,287
==========
</TABLE>
- ----------------
(1) Does not include $49.3 million of tax certificates representing liens
secured by properties in Florida.
(2) Less than $1 million in any one state.
9
<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 Eleventh District Cost of Funds Index ("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 generally
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 certain 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. As of September 30,
1997 there were approximately $538.7 million of loans with teaser rates.
Applicable regulations permit the Company to lend up to 100% of the
appraised value of the real property securing a loan ("loan-to-value ratio").
The Company, however, generally does not make or acquire loans with
loan-to-value ratios that exceed 80% at origination. When terms are favorable,
the Company may 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 which 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.
10
<PAGE>
The Company has adopted written, non-discriminatory underwriting standards
for use in the underwriting and review of every loan considered for origination
or purchase. These underwriting standards are reviewed and approved annually by
the Company's Board of Directors. The Company's underwriting standards for
residential mortgage loans generally conform (except as to principal balance
and with regard to certain loans discussed below, as to the borrower's
citizenship and related factors) to 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.
At September 30, 1997, approximately $93.9 million, or 5.3%, 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 $159.5 million in fiscal 1997 and $66.0 million for the year
ended September 30, 1996.
Beginning in the Company's fiscal 1997 fourth quarter, management began a
program to sell approximately 50% to 75% of the Company's internally generated
residential loans. In the fourth quarter, a package of residential loans
totalling $30.1 million was sold for a gain of $523,000. In addition, as part
of starting this program, the Company reclassified $93.5 million of its
internally generated portfolio of residential loans as available for sale in
the fourth quarter. It is currently the Company's intention that future loans
classified as available for sale will be identified and so classified at time
of origination. Loans held for sale as of September 30, 1997 were $104.3
million.
11
<PAGE>
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 September 30, 1997, the Company had
$130.2 million of commercial real estate loans, representing a total of 7.4% 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
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
September 30, 1997, the Company had $7.5 million of construction loans
representing a total of .4% of the Company's loan portfolio before net items.
COMMERCIAL BUSINESS LENDING. Commercial business loans totaled $10.9
million as of September 30, 1997 representing .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) non-accrual loans;
(ii) loans that are more than 90 days contractually past due as to interest or
principal but that are well-secured and in the process of collection or renewal
in the normal course of business; and (iii) loans that have been renegotiated
to provide a deferral of interest or principal because of a deterioration in
the financial condition of the borrower. The Company issues 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, unless the loan is fully secured and in the process of collection. 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.
12
<PAGE>
As of September 30, 1997, the Company had $14.6 million in substandard
assets of which $14.3 million are included in non-performing assets.
Substandard assets consisted of the following:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
-------------------------
(IN THOUSANDS)
<S> <C>
One-to-four family residential loans ...... $10,087
Commercial real estate ..................... 2,517
Consumer and business loans ............... 150
REO ....................................... 611
Tax certificates ........................... 1,247
-------
Total Substandard Assets .................. $14,612
=======
</TABLE>
In addition, $336,000 of tax certificates, for which reserves have been
established, were classified as loss as of September 30, 1997.
The following table sets forth information regarding the Company's
allowance for loan losses for the periods indicated:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
-------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- --------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Allowance for loan losses, balance (at beginning of
period) ................................................... $2,158 $1,469 $ 841 $ 1,184 $ 265
Provisions (credit) for loan losses ........................ 1,295 (120) 1,221 1,187 1,052
Allowance from Suncoast/Bank of Florida ..................... 775 183 -- -- --
Allocation from discounts on loans purchased ............... -- -- -- -- 90
Loans charged off:
One-to-four family residential loans ........................ (604) (493) (535) (1,582) (223)
Commercial and other ....................................... -- -- (59) -- --
------ ------ ------ -------- ------
Total (604) (493) (594) (1,582) (223)
------ ------ ------ -------- ------
Recoveries:
One-to-four family residential loans ........................ 48 1,119 1 52 --
Commercial and other ....................................... 21 -- -- -- --
------ ------ ------ -------- ------
Total 69 1,119 1 52 --
------ ------ ------ -------- ------
Allowance for loan losses, balance (at end of period) ...... $3,693 $2,158 $1,469 $ 841 $1,184
====== ====== ====== ======== ======
</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.
13
<PAGE>
The following table sets forth the allocation of general allowance for
loan losses by loan category for the periods indicated.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
-----------------------------------------------------------------------------
1997 1996 1995
------------------------ ------------------------ -----------------------
% OF LOANS % OF LOANS % OF LOANS
IN EACH IN EACH IN EACH
CATEGORY TO CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
-------- ------------- -------- ------------- -------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at end of period
applicable to:
One-to-four family residential
mortgages ........................... $1,873 89.2% $1,381 88.6% $1,207 95.9%
Commercial and other loans ............ 1,787 10.8 739 11.4% 168 4.1%
Unallocated ........................... 33 N/A 38 N/A 94 N/A
------ ---- ------ ---- ------ ----
Total allowances for loan losses ...... $3,693 100.0% $2,158 100.0% $1,469 100.0%
====== ===== ====== ===== ====== =====
</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, 1997, 1996, and 1995--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.
14
<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 5 of
the Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
---------------------------------------------
1997 1996 1995
------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal funds sold ............... $ -- $ 400 $ 400
Federal agency securities ......... 23,283 4,985 4,675
FHLB overnight deposits ............ 79,413 28,253 31,813
Tax certificates .................. 49,283 40,088 39,544
Mortgage-backed securities ......... 120,271 70,165 52,998
Other .............................. 1,377 1,711 11
--------- --------- ---------
Total investment securities ...... $ 273,627 $ 145,602 $ 129,441
========= ========= =========
Weighted average yield ............ 6.91% 7.09% 7.43%
========= ========= =========
</TABLE>
The following table sets forth information regarding the maturities of the
Company's investments as of September 30, 1997. Amounts shown are book values.
<TABLE>
<CAPTION>
PERIODS TO MATURITY
FROM SEPTEMBER 30, 1997
---------------------------------------------------------
AS OF WITHIN 1 THROUGH 5 THROUGH OVER
SEPTEMBER 30, 1997 1 YEAR 5 YEARS 10 YEARS 10 YEARS
------------------- -------------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Federal agency securities ...... $ 23,283 $ -- $ 23,283 $ -- $ --
FHLB overnight deposits ......... 79,413 79,413 -- -- --
Mortgage-backed securities ...... 120,271 31,071 46,488 19,202 23,510
Tax certificates (1) ............ 49,283 49,283 -- -- --
Other ........................... 1,377 254 1,113 10 --
--------- ---------- -------- -------- --------
Total ........................... $ 273,627 $ 160,021 $ 70,884 $ 19,212 $ 23,510
========= ========== ======== ======== ========
Weighted average yield ......... 6.91% 6.97% 6.70% 7.06% 7.06%
========= ========== ======== ======== ========
</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 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
15
<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 acquired servicing portfolios of the Company as of the dates indicated:
<TABLE>
<CAPTION>
NOVEMBER 15, 1996
SEPTEMBER 30, 1997 (SUNCOAST ACQUISITION)
-------------------------------- ----------------------------------
# OF BOOK # OF BOOK
LOANS PRINCIPAL VALUE LOANS PRINCIPAL VALUE
------- ----------- -------- -------- ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
GNMA ........................ -- $ -- $ -- 5,791 $ 299,183 $ 4,952
FNMA ........................ 1,297 102,805 1,514 1,462 117,856 1,690
FHLMC ..................... 2,903 246,557 2,318 3,425 295,392 2,758
Private investors ......... 472 68,906 951 337 50,741 626
FDIC/RTC-subservicing ...... -- -- -- 7,087 150,317 --
Private subservicing ...... 320 14,275 -- 1,385 190,350 --
----- --------- ------ ----- ---------- -------
4,992 $432,543 $4,783 19,487 $1,103,839 $10,026
===== ========= ====== ====== ========== =======
</TABLE>
In the second quarter of 1997, the GNMA mortgage servicing portfolio was
sold at its fair market value recognized in purchase accounting. 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 instruments also increase the Company's vulnerability to periods of
high interest rates. There are no regulatory interest rate ceilings on the
Company's accounts.
16
<PAGE>
The following table sets forth information concerning the Company's
deposits by account type and the weighted average nominal rates at which
interest is paid thereon as of the dates indicated:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
-------------------------------------------------------------------------
1997 1996 1995
------------------------- ----------------------- -------------------
AMOUNT RATE AMOUNT RATE AMOUNT RATE
------------ ---------- ---------- ---------- ---------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Passbook accounts:
Regular .................................... $ 160,522 4.66% $ 73,741 4.44% $ 50,327 3.04%
Holiday club .............................. 35 2.00 39 2.00 46 2.00
---------- -------- --------
Total passbook accounts .................. 160,557 73,780 50,373
---------- -------- --------
Checking:
Insured money market ........................ 20,325 4.00 16,556 3.87 7,733 2.68
NOW and non-interest-bearing accounts ...... 78,907 2.28 24,566 1.49 18,157 2.17
---------- -------- --------
Total transaction accounts ............... 99,232 41,122 25,890
---------- -------- --------
Total passbook and checking accounts ...... 259,789 114,902 76,263
---------- -------- --------
Certificates:
30-89-day certificates of deposit ......... -- -- -- -- 91 2.73
3-5-month certificates of deposit ......... 18,674 4.94 7,114 4.67 1,465 4.78
6-8-month certificates of deposit ......... 439,091 5.67 159,850 5.40 93,684 5.65
9-11-month certificates of deposit ......... 15,721 5.66 20,279 5.45 5,654 5.55
12-17-month certificates of deposit ......... 307,305 5.73 124,637 5.49 79,637 5.90
18-23-month certificates of deposit ......... 20,410 5.80 12,375 5.79 12,382 5.37
24-29-month certificates of deposit ......... 58,279 5.84 42,875 5.94 18,593 5.57
30-35-month certificates of deposit ......... 12,517 5.85 1,774 5.57 2,868 4.99
36-60-month certificates of deposit ......... 64,106 6.07 22,300 5.93 19,437 5.81
---------- -------- --------
Total certificates ........................ 936,103 391,204 233,811
---------- -------- --------
Total .................................... $1,195,892 $506,106 $310,074
========== ======== ========
Weighted average rate .................. 5.32% 5.11% 4.99%
</TABLE>
The following table sets forth information by various rate categories
regarding the amounts of the Company's certificate accounts (under $100,000) as
of September 30, 1997 that mature during the periods indicated:
<TABLE>
<CAPTION>
PERIODS TO MATURITY
FROM SEPTEMBER 30, 1997
-----------------------------------------------
AS OF WITHIN 1 TO 2 TO MORE THAN
SEPTEMBER 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% ......... $ 173 $ 173 $ -- $ -- $ --
4.00% to 4.99% ......... 17,414 17,144 270 -- --
5.00% to 5.99% ......... 706,619 637,978 59,921 5,599 3,121
6.00% to 6.99% ......... 54,220 15,892 8,793 3,478 26,057
7.00% to 7.99% ......... 814 10 47 706 51
-------- -------- ------- ------- --------
Total certificate accounts
(under $100,000) ...... $779,240 $671,197 $69,031 $9,783 $29,229
======== ======== ======= ======= ========
</TABLE>
17
<PAGE>
The following table sets forth information by various rate categories
regarding the amounts of the Company's jumbo ($100,000 and over) certificate
accounts as of September 30, 1997 that mature during the periods indicated:
<TABLE>
<CAPTION>
PERIODS TO MATURITY
FROM SEPTEMBER 30, 1997
-----------------------------------------------
AS OF WITHIN 1 TO 2 TO MORE THAN
SEPTEMBER 30, 1997 1 YEAR 2 YEAR 3 YEARS 3 YEARS
------------------- ---------- --------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Jumbo certificate accounts:
4.00% to 4.99% ........................ $ 3,317 $ 3,317 $ -- $ -- $ --
5.00% to 5.99% ........................ 135,714 125,217 9,996 401 100
6.00% to 6.99% ........................ 17,174 9,563 2,785 560 4,266
7.00% to 7.99% ........................ 658 150 100 408 --
-------- -------- ------- ------- ------
Total Jumbo certificate amounts ...... $156,863 $138,247 $12,881 $1,369 $4,366
======== ======== ======= ======= ======
</TABLE>
Of the Company's total deposits at September 30, 1997, 1996, and 1995,
13.1%, 10.5%, and 8.6%, 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 the 1997 and 1996 fiscal years, the Company opened four new branch
offices and acquired six branch offices (one of which was closed) from
Suncoast. In fiscal 1998, the Company intends to open as many as eight new
branch offices including two that opened in the first fiscal quarter. These
additional branches are part of the Company's rapid growth as it takes
advantage of the bank consolidation in South Florida.
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
securities sold under agreements to repurchase in order to increase available
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.
18
<PAGE>
The following tables set forth information as to the Company's borrowings
as of the dates and for the periods indicated.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-----------------------------------------------------------------------------
1997 1996 1995
----------------------- ---------------------- --------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED
BALANCE RATE BALANCE RATE BALANCE AVERAGE RATE
---------- ---------- ---------- --------- ---------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
PERIOD END BALANCES:
FHLB advances(l) ............... $671,484 5.87% $237,000 5.73% $241,000 5.92%
Company Obligated Mandatorily
Redeemable Trust Preferred
Securities of Subsidiary Trusts
Holding Solely Junior
Subordinated Deferrable
Interest Debentures of
the Company .................. 116,000 10.17 -- -- -- --
Subordinated notes ............ -- -- 775 9.00 775 9.00
Securities sold under agreements
to repurchase(2) ............ 30,000 5.64 -- -- -- --
-------- ----- -------- ---- -------- ----
Total borrowings ............... $817,484 6.47% $237,775 5.74% $241,775 5.93%
======== ===== ======== ==== ======== ====
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30, 1997
--------------------------------------------------------------------------
1997 1996 1995
----------------------- ----------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
---------- ---------- ---------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
AVERAGE BALANCES:
FHLB advances(l) .................. $325,580 5.77% $234,489 5.77% $136,706 5.86%
Company Obligated Mandatorily
Redeemable Trust Preferred
Securities of Subsidiary Trusts
Holding Solely Junior Subordinated
Deferrable Interest Debentures of
the Company ..................... 63,008 10.27 -- -- -- --
Subordinated notes ............... 704 10.53 775 9.00 775 9.00
Securities sold under agreements to
repurchase(2) .................. 8,828 5.73 -- -- 6,571 5.59
-------- ----- -------- ---- -------- ----
Total borrowings .................. $398,120 6.49% $235,264 5.78% $144,052 5.86%
======== ===== ======== ==== ======== ====
</TABLE>
- ----------------
(1) The maximum amount of FHLB advances outstanding during the years ended
September 30, 1997, 1996 and 1995 was $671.5 million, $244.0 million and
$246.0 million, respectively.
(2) The maximum amount of securities sold under agreements to repurchase at any
month-end during the years ended September 30, 1997, 1996, and 1995 was
$30.0 million, $0.0 million and $33.6 million, respectively.
ACTIVITIES OF SUBSIDIARIES
T&D Properties of South Florida, Inc., a Florida corporation ("T&D"), is a
wholly owned operating subsidiary of the Bank that invests in tax certificates
and holds title to, maintains, manages and supervises the disposition of real
property acquired through tax deeds. T&D was established in 1991 for the
purpose of insulating the Bank from risk of liability concerning the
maintenance, management and disposition of real property.
19
<PAGE>
Bay Holdings, Inc., a Florida corporation ("Bay Holdings"), is a wholly
owned operating subsidiary of the Bank that holds title to, maintains, manages
and supervises the disposition of real property acquired through foreclosure.
Bay Holdings was established in 1994 for the purpose of insulating the Bank
from risk of liability concerning maintenance, management and disposition of
real property.
BU Ventures, Inc., a Florida corporation, is a wholly owned operating
subsidiary of the Company organized in 1994 to assume from T&D the
responsibility for the maintenance, management and disposition of real property
acquired through tax deeds.
BankUnited Mortgage Corporation, a Florida corporation ("BMC"), is a
wholly owned operating subsidiary of the Company that services loans secured by
real property. BMC was established for this purpose in 1996, and commenced
operations in October 1997.
BankUnited Capital, BankUnited Capital II and BankUnited Capital III (the
"Trusts") are Delaware statutory business trusts wholly owned by the Company.
BankUnited Capital was formed in 1996, and BankUnited Capital II and BankUnited
Capital III were formed in 1997, for the purpose of issuing Trust Preferred
Securities and investing the proceeds therefrom in Junior Subordinated
Debentures issued by the Company. BankUnited Capital and BankUnited Capital II
are operating, but BankUnited Capital III has not yet issued any capital stock.
BUFC Financial Services, Incorporated, a Florida corporation, is a wholly
owned operating subsidiary of the Company organized in 1997 for the purpose of
selling annuities, insurance and securities products.
BankUnited Financial Services, Inc., a Florida corporation, is a wholly
owned operating subsidiary of the Company, organized in 1997 for the purpose of
brokering loans.
EMPLOYEES
At September 30, 1997, the Company had 246 full-time equivalent employees.
The Company's employees are not represented by a collective bargaining group,
and the Company considers its relations with its employees to be excellent. The
Company provides employee benefits customary in the savings industry, which
include group medical and life insurance, a 401(k) savings plan and paid
vacations. The Company also provides a stock bonus plan, a profit sharing plan
and the two stock option plans for certain officers, directors and employees.
REGULATION
RECENT LEGISLATIVE DEVELOPMENTS
In recent years, measures have been taken to reform the thrift and banking
industries and to strengthen the insurance funds for depository institutions.
The most significant of these measures for savings institutions was the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (the
"FIRREA"), which has had a major impact on the operation and regulation of
savings associations generally. In 1991, the Federal Deposit Insurance
Corporation Improvement Act of 1991 (the "FDICIA"), became law. Although the
FDICIA's primary purpose was to recapitalize the Bank Insurance Fund (the
"BIF") of the FDIC, which insures the deposits of commercial banks, the FDICIA
also affected the supervision and regulation of all federally insured
depository institutions, including federal savings banks such as the Bank. More
recent legislation has attempted to resolve the problems of the SAIF in meeting
its minimum required reserve ratio and the related concern facing SAIF-insured
institutions, such as the Bank, of paying significantly higher deposit
insurance premiums than BIF-insured institutions. The following discussion is a
summary of the significant provisions of the recent legislation affecting the
banking industry.
20
<PAGE>
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
under the FIRREA to manage conservatorships and receiverships of insolvent
thrifts, and was succeeded by the FDIC.
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.
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.
21
<PAGE>
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 is 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, SAIF-insured
institutions will continue to be subject to a FICO assessment as a result of
this continuing obligation. Although the legislation also now requires
assessments to be made on BIF-assessable deposits for this purpose, 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
22
<PAGE>
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 shareholders 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 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
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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
shareholders' 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 designated
risk weights based on the credit risk associated with the particular asset. As
provided by OTS regulations, representative risk weights include: 0% for cash
and assets that are backed by the full faith and credit of the United States;
20% for cash items in the process of collection, FHLB stock, agency securities
not backed by the full faith and credit of the United States and certain
high-quality mortgage-related securities; 50% for certain revenue bonds,
qualifying mortgage loans, certain non-high-quality mortgage-related securities
and certain qualifying residential construction loans; and 100% for consumer,
commercial and other loans, repossessed assets, assets that are 90 or more days
past due, and all other assets.
As of September 30, 1997, the Bank's tangible, core and risk-based capital
ratios were 8.1%, 8.1% and 11.3% 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
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interest rate risk exposure is a projected decline of 2% in the net present
value of an institution's assets and liabilities resulting from a 2% swing in
interest rates. The IRR component will equal one-half of the difference between
the institution's measured interest rate exposure and the "normal" level of
exposure. Savings institutions are required to file data with the OTS that the
OTS will use to calculate, on a quarterly basis, the institutions' measured
interest rate risk and IRR components. The IRR component to be deducted from
capital is the lowest of the IRR components for the preceding three quarters.
The OTS may waive or defer an institution's IRR component on a case-by-case
basis. Implementation of the IRR requirements have been delayed. As of
September 30, 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 "adequately capitalized" if it has total risk-based capital of
8% or more, Tier 1 risk-based capital of 4% or more, and core capital of 4% or
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" 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.
25
<PAGE>
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 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
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activities that would not be permissible for national banks; (ii) prohibited
from establishing any new branch office in a location that would not be
permissible for a national bank in the institution's home state; (iii)
ineligible to obtain new advances from any FHLB; and (iv) subject to
limitations on the payment of dividends comparable to the statutory and
regulatory dividend restrictions applicable to national banks. Also, beginning
three years after the date on which the savings association ceases to be a QTL,
the savings association would be prohibited from retaining any investment or
engaging in any activity not permissible for a national bank and would be
required to repay any outstanding advances to any FHLB. A savings institution
may requalify as a QTL if it thereafter complies with the QTL test. At
September 30, 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 $33.6 million investment
in stock of the FHLB of Atlanta as of September 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
September 30, 1997, advances from the FHLB of Atlanta totaled $671.5 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 maintain for each
calendar month an average daily balance of short-term liquid assets (generally
those having maturities of one year or less) equal to at least 1% of its
average daily balance during the preceding calendar month of net withdrawable
accounts and short-term borrowings. The Director of the OTS may vary this
liquidity requirement from time to time within a range of 4% to 10%. Monetary
penalties may be imposed for failure to meet liquidity requirements. For the
month of September 1997, the Bank's liquidity ratio was 8.49%, and its
short-term liquidity ratio, which must be at least 1%, was 5.15%. Effective
November 24, 1997, OTS regulations were revised to eliminate the short-term
liquidity ratio and to reduce the liquidity ratio to 4%. The Bank is also
required to maintain cash reserve requirements at the Federal Home Loan Bank.
At September 30, 1997 this cash reserve requirement was $3.1 million.
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,
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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 1997, 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, were 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 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 September 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 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.
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GENERAL LENDING REGULATIONS
The Bank's lending activities are subject to federal and state regulation,
including the Equal Credit Opportunity Act, the Truth in Lending Act, the Real
Estate Settlement Procedures Act, the Community Reinvestment Act and the laws
of Florida, California and other jurisdictions governing discrimination, lender
disclosure to borrowers, foreclosure procedures and anti-deficiency judgments,
among other matters.
FEDERAL RESERVE SYSTEM
The Bank is subject to certain regulations promulgated by the Federal
Reserve Board. Pursuant to such regulations, savings institutions are required
to maintain reserves against their transaction accounts (primarily
interest-bearing checking accounts) and non-personal time deposits. The
balances maintained to meet the reserve requirements imposed by the Federal
Reserve Board may be used to satisfy liquidity requirements imposed by the OTS.
In addition, Federal Reserve Board regulations limit the periods within which
depository institutions must provide availability for and pay interest on
deposits to transaction accounts. Depository institutions are required to
disclose their check-hold policies and any changes to those policies in writing
to customers. The Bank is in compliance with all such Federal Reserve Board
regulations.
TAXATION
The Company reports its income and expenses under an accrual method of
accounting and prior to 1994 filed federal income tax returns on a calendar
year basis. Beginning in 1994 and continuing 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 carry forwards.
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
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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 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 carry forwards or carry backs).
In addition, net operating loss carry forwards 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
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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.
ITEM 2. PROPERTIES
The executive and administrative offices of the Company and the Bank and
the Coral Gables branch are located at 255 Alhambra Circle, Coral Gables,
Florida 33134. The Company owns electronic data processing equipment for its
exclusive use, which consists of personal computers and peripherals and
software having an aggregate net book value of approximately $1.3 million as of
September 30, 1997.
The following table sets forth the location of, and certain additional
information regarding, the Company's and Bank's offices and branches as of
September 30, 1997.
<TABLE>
<CAPTION>
NET BOOK VALUE OF PREMISES
OR LEASEHOLD IMPROVEMENTS LEASE EXPIRATION DATE
LOCATION AND EQUIPMENT AND RENEWAL TERMS SQUARE FOOTAGE
- ------------------------------------- --------------------------- ---------------------- ---------------
<S> <C> <C> <C>
Executive and administrative offices,
and savings branches
Aventura branch ..................... $ 11,319 1999 5,000
2984 Aventura Boulevard (2 options to renew
Aventura, Florida 33180 for 5 years each)
Boca Hamptons branch ............... 238,411 2002 2,700
9070 Kimberly Boulevard (3 options to renew
Suite 68 for 5 years each)
Boca Raton, Florida 33434
Boca Raton branch .................. 136,407 1999 2,442
21222 St. Andrews Boulevard #11 (3 options to renew
Raton, Florida 33434 for 3 years each)
Boynton Beach branch ............... 195,726 2001 2,933
117 North Congress Avenue (2 options to renew
Boynton Beach, Florida 33426 for 5 years)
Coconut Creek branch ............... 123,731 2002 2,400
4913 Coconut Creek Parkway (2 options to renew
Coconut Creek, Florida 33063 for 5 years each)
Coral Gables branch ............... 1,458,317 2001 14,097
255 Alhambra Circle (2 options to renew
Coral Gables, Florida 33134 for 5 years each)
Coral Springs branch ............... 68,272 2001 2,805
1307 University Drive (2 options to renew
Coral Springs, Florida 33071 for 5 years each)
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
NET BOOK VALUE OF PREMISES
OR LEASEHOLD IMPROVEMENTS LEASE EXPIRATION DATE
LOCATION AND EQUIPMENT AND RENEWAL TERMS SQUARE FOOTAGE
- ------------------------------------ --------------------------- ---------------------- ---------------
<S> <C> <C> <C>
Deerfield Beach branch ............ 297,753 1998 4,000
and Commercial Real Estate office (2 options to renew
2201 West Hillsboro Boulevard for 5 years each)
Deerfield Beach, Florida 33442
Delray Beach branch ............... 376,256 1995 4,000
7431-39 West Atlantic Avenue (3 options to renew
Delray Beach, Florida 33446 for 5 years each)
Hallandale branch .................. 635,114 (1)(2) 4,500
501 Golden Isles
Drive Hallandale, Florida 33009
Hollywood branch .................. 34,068 2004 4,111
4350 Sheridan Street, Unit 101
Hollywood, Florida 33021
Lauderdale by the Sea branch ...... 773,301 (1) 5,000
227 Commercial Boulevard
Lauderdale by the Sea, Florida
33008
Pembroke Pines branch ............ 49,451 2001 4,059
100 South Flamingo Road (1 option to renew
Pembroke Pines, Florida 33027 for 5 years)
Pompano Beach branch ............... $708,102 (1) 5,000
1313 North Ocean Boulevard
Pompano Beach, Florida 33062
South Miami branch ............... 127,783 2002 6,701
6075 Sunset Drive (1 option to renew
South Miami, Florida 33143 for 5 years)
Tamarac branch ..................... 110,937 2002 3,531
5779 North University Drive (1 option to renew
Tamarac, Florida 33321 for 5 years)
West Airport branch ............... 283,723 2000 7,200
2410 N.W. 72nd Avenue (4 options to renew
Miami, Florida 33122 for 3 years)
West Palm Beach branch ............ 167,794 2001 3,740
2911C North Military Trail (2 options to renew
West Palm Beach, Florida 33409 for 5 years)
Mortgage Servicing office ......... 811,765 2000 32,850
Presidential Circle (2 options to renew
4000 Hollywood Boulevard for 5 years each)
Hollywood, Florida 33021
Miami Lakes Operation Center ...... -- 2002 14,880
7815 N.W. 148 Street (2 options to renew
Miami Lakes, Florida 33016 for 5 years each)
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
NET BOOK VALUE OF PREMISES
OR LEASEHOLD IMPROVEMENTS LEASE EXPIRATION DATE
LOCATION AND EQUIPMENT AND RENEWAL TERMS SQUARE FOOTAGE
- ----------------------------------------- --------------------------- ---------------------- ---------------
<S> <C> <C> <C>
Hollywood Training Office ............... -- 1999 4,042
4350 Sheridan Street,
Units 200 & 201
Hollywood, Florida 33021
Mortgage Origination Office ............ 177,384 2004 2,000
255 Alhambra Circle 3rd Floor
Coral Gables, Florida 33134
Other Offices
1177 George Bush Boulevard, #200 ...... -- 1998 5,371
Delray Beach, Florida 33483 (1 option to renew
for 3 years)
4340 Sheridan Street .................. 585,855 (1)(3) 4,764
Hollywood, Florida 33021
6101 Sunset Drive ..................... -- 1998 4,000
South Miami, Florida 33143
7700 North Kendall Drive, #506 ......... -- 1998 1,129
Miami, Florida 33143
</TABLE>
- ----------------
(1) The Bank owns the facility.
(2) The Bank leases 1,400 square feet to unrelated parties
(3) The entire space is currently sub-leased to an unrelated party
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries, from time to time, are involved as
plaintiff or defendant in various legal actions arising in the normal course of
their businesses. While the ultimate outcome of any such proceedings cannot be
predicted with certainty, it is the opinion of management that no 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended September 30, 1997.
33
<PAGE>
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information concerning the executive
officers and directors of the Company and the Bank.
<TABLE>
<CAPTION>
POSITIONS WITH COMPANY
NAME AGE AND BUSINESS EXPERIENCE
- -------------------- ----- ------------------------------------------------------------------------
<S> <C> <C>
Alfred R. Camner 53 Director, Chairman of the Board, Chief Executive Officer and
President of the Company (1993 to present); Director, Chairman of
the Board and Chief Executive Officer (1984 to present) and
President (1984 to 1993, 1994 to present) of the Bank; Senior
Managing Director (1996 to present) and Managing Director (1973 to
1996) 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 (1993 to
present) and the Bank (1984 to present); Managing Director (1992 to
present) and partner (1974 to present) of Rachlin, Cohen & Holtz,
certified public accountants.
James A. Dougherty 47 Director (December 1995 to present) and Chief Operating Officer
and Executive Vice President (1994 to present) of the Company;
Director, Executive Vice President and Chief Operating Officer of the
Bank (1994 to present); Executive Vice President of Retail Banking
of Intercontinental Bank (1989 to 1994).
Earline G. Ford 54 Director, Executive Vice President and Treasurer of the Company
(1993 to present); Director (1984 to present), Executive Vice
President (1990 to present), Senior Vice President--Administration
(1988 to 1990), Treasurer (1984 to present) and Vice President--
Administration (1984 to 1988) of the Bank; Legal Administrator of
Stuzin and Camner, Professional Association, attorneys-at-law (1973
to 1996); Vice Chairman of CSW Associates, Inc., an asset
management firm (1990 to 1995).
Marc D. Jacobson 55 Director (1993 to present) and Secretary (1993 to 1997) of the
Company; Director (1984 to present) and Secretary (1985 to 1996) of
the Bank; Vice President of Head-Beckham Insurance Agency, Inc.
(1990 to present).
Allen M. Bernkrant 67 Director of the Company (1993 to present) and the Bank (1985 to
present); Private investor in Miami, Florida (1990 to present);
Chairman, President and principal owner of Southern General
Diversified, Inc., manufacturer and distributor of recreational
equipment (1960 to 1990).
Bruce D. Friesner 55 Director of the Company and the Bank (1996 to present); Director of
Loan America Financial Corporation, a national mortgage banking
company (1990 to 1994); Partner of F&G Associates, a commercial
real estate development company (1972 to present).
Patricia L. Frost 58 Director of the Company (1993 to present) and the Bank (1990 to
1997); Private investor in Miami, Florida (1993 to present); Principal,
West Laboratory School, Coral Gables, Florida (1970 to 1993).
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
POSITIONS WITH COMPANY
NAME AGE AND BUSINESS EXPERIENCE
- ------------------------- ----- ---------------------------------------------------------------------
<S> <C> <C>
Elia J. Gusti 63 Director of the Company and the Bank (1996 to present); Director of
Suncoast (1990 to 1996); President and principal owner of Lee Guisti
Realty, Inc., a real estate and mortgage brokerage firm (1982 to
present).
Marc Lipsitz 55 Director (1996 to present) and Secretary (1997 to present) of the
Company; Managing Director (1996 to present) of Stuzin and
Camner, Professional Association, attorneys-at-law; General Counsel
of Jefferson National Bank (1993 to 1996); Partner, Stroock Stroock
& Lavan, attorneys-at-law (1991 to 1993).
Norman E. Mains 54 Director of the Company and the Bank (November 1996 to present);
Director of Suncoast (1985 to 1986); Chief Economist and Director of
Research for the Chicago Mercantile Exchange (1994 to present);
President and Chief Operating Officer of Rodman & Renshaw
Capital Group, Inc., a securities broker/dealer firm (1991 to 1994).
Neil H. Messinger, M.D. 59 Director of the Company and the Bank (1996 to present);
Radiologist; President (1986 to present), Radiological Associates,
P.A.; Chairman (1986 to present) of Imaging Services of Baptist
Hospital.
Christina Cuervo 32 Director of the Company and the Bank (1995 to present); Executive
Vice President, the Beacon Council (1996 to present); Assistant City
Manager and Chief of Staff of the City of Miami (1992 to present);
Assistant Vice President of United National Bank (1992); Assistant
Vice President, First Union National Bank (formerly Southeast Bank,
N.A.) (1986 to 1992).
Anne W. Solloway 82 Director of the Company (1993 to present) and the Bank (1985 to
present); Private investor in Miami, Florida.
EXECUTIVE OFFICERS OF THE COMPANY AND/OR THE BANK
WHO ARE NOT DIRECTORS:
Clifford A. Hope 49 Executive Vice President of the Company and the Bank (1997 to
present); Banking industry consultant in private practice (1996 to
1997); Senior Vice President and Chief Accounting Officer, Citizens
Federal Bank (1987 to 1996).
Samuel A. Milne 47 Executive Vice President and Chief Financial Officer (1996 to
present) and Senior Vice President and Chief Financial 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) and the
Bank (1996 to present); Senior Vice President and 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.
35
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDERS
MATTERS
STOCK INFORMATION
The Company's Class A Common Stock, $.01 par value ("Class A Common
Stock"), is traded in the over-the-counter market and quoted in the Nasdaq
Stock Market ("Nasdaq"). The Company's Class B Common Stock, $.01 par value
("Class B Common Stock"), is not currently traded on any established public
market.
At December 11, 1997, there were 400 and 19 holders of record of the
Company's Class A Common Stock and Class B Common Stock, respectively. The
number of holders of record of the Class A Common Stock includes nominees of
various depository trust companies for an undeterminable number of individual
stockholders. Class B Common Stock is convertible into Class A Common Stock at
a ratio (subject to adjustment on the occurrence of certain events) of one
share of Class A Common Stock for each Class B share surrendered for
conversion.
There were no common stock dividends declared or paid in fiscal 1997 or
1996. See Note 12 to the Company's Consolidated Financial Statements for a
discussion of restrictions on the Bank's payment of dividends to the Company.
The following tables set forth, for the periods indicated, the range of
high and low bid prices for the Class A Common Stock quoted on Nasdaq. Stock
price data in the Nasdaq reflects inter-dealer prices, without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK
--------------------
PRICE
--------------------
HIGH LOW
--------- --------
<S> <C> <C>
Fiscal Year Ended September 30, 1997:
1st Quarter ..................... $10.00 $ 7.875
2nd Quarter ..................... $11.25 $ 9.25
3rd Quarter ..................... $10.875 $ 8.50
4th Quarter ..................... $13.375 $ 9.625
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
</TABLE>
36
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
AS OF OR FOR THE FISCAL
YEARS ENDED SEPTEMBER 30,
-----------------------------
1997 1996
------------ ----------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
OPERATIONS DATA
Interest income ................................................ $ 108,774 $ 52,132
Interest expense ............................................. 75,960 34,622
---------- ------------
Net interest income .......................................... 32,814 17,510
Provision for loan losses .................................... 1,295 (120)
---------- ------------
Net interest income after provision for loan losses ............ 31,519 17,630
---------- ------------
Non-interest income:
Service fees ................................................... 2,993 597
Gain on sales of loans and mortgage-backed
securities, net ............................................. 819 5
Gain (loss) on sales of other assets, net(1) .................. 1 (6)
Other ......................................................... 247 53
---------- ------------
Total non-interest income .................................... 4,060 649
---------- ------------
Non-interest expense:
Employee compensation and benefits ........................... 8,880 4,275
Occupancy and equipment ....................................... 3,568 1,801
Insurance(2) ................................................ 948 3,610
Professional fees ............................................. 1,605 929
Other ......................................................... 7,964 3,421
---------- ------------
Total non-interest expense ................................. 22,947 14,036
---------- ------------
Income before income taxes .................................... 12,632 4,243
Provision for income taxes(3) ................................. 5,033 1,657
---------- ------------
Net income before Preferred Stock dividends .................. 7,599 2,586
Preferred stock dividends:
Bank ......................................................... - -
Company ...................................................... 2,890 2,145
---------- ------------
Net income after Preferred Stock dividends ..................... $ 4,709 $ 441
========== ============
FINANCIAL CONDITION DATA:
Total assets ................................................... $2,145,406 $ 824,360
Loans receivable, net, and mortgage-backed securities(4) ...... 1,281,652 716,550
Investments, overnight deposits, tax certificates, reverse
purchase agreements, certificates of deposits and other
earning assets ................................................ 186,955 87,662
Total liabilities ............................................. 2,045,76 1755,249
Deposits ...................................................... 1,195,892 506,106
Borrowings ................................................... 817,484 237,775
Total stockholders' equity .................................... 99,645 69,111
Common stockholders' equity .................................... 61,371 42,350
PER COMMON SHARE DATA:
Primary earnings per common share and common
equivalent share ............................................. $ .54 $ .10
========== ============
Earnings per common share assuming full dilution ............... $ .54 $ .10
========== ============
Weighted average number of common shares and common
equivalent shares assumed outstanding during the period:
Primary ...................................................... 8,679,845 4,558,521
Fully diluted ................................................ 9,030,843 4,558,521
Equity per common share ....................................... $7.94 $ 7.85
Fully diluted equity per common share ........................ $ 6.51 $ 6.83
Cash dividends per common share
Class A ...................................................... $ - $ -
Class B ...................................................... $ - $ -
<PAGE>
<CAPTION>
AS OF OR FOR THE FISCAL YEARS ENDED
SEPTEMBER 30,
----------------------------------------
1995 1994 1993
------------- ------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C>
OPERATIONS DATA
Interest income ................................................ $ 39,419 $ 30,421 $ 25,722
Interest expense ............................................. 26,305 16,295 12,210
----------- ----------- -----------
Net interest income .......................................... 13,114 14,126 13,512
Provision for loan losses .................................... 1,221 1,187 1,052
----------- ----------- -----------
Net interest income after provision for loan losses ............ 11,893 12,939 12,460
----------- ----------- -----------
Non-interest income:
Service fees ................................................... 423 358 221
Gain on sales of loans and mortgage-backed
securities, net ............................................. 239 150 1,496
Gain (loss) on sales of other assets, net(1) .................. 9,569 -- --
Other ......................................................... 6 46 2
----------- ----------- -----------
Total non-interest income .................................... 10,237 554 1,719
----------- ----------- -----------
Non-interest expense:
Employee compensation and benefits ........................... 3,997 3,372 2,721
Occupancy and equipment ....................................... 1,727 1,258 978
Insurance(2) ................................................ 1,027 844 835
Professional fees ............................................. 1,269 833 543
Other ......................................................... 4,129 3,579 2,746
----------- ----------- -----------
Total non-interest expense ................................. 12,149 9,886 7,823
----------- ----------- -----------
Income before income taxes .................................... 9,981 3,607 6,356
Provision for income taxes(3) ................................. 3,741 1,328 2,318
----------- ----------- -----------
Net income before Preferred Stock dividends .................. 6,240 2,279 4,038
Preferred stock dividends:
Bank ......................................................... - 198 787
Company ...................................................... 2,210 1,871 726
----------- ----------- -----------
Net income after Preferred Stock dividends ..................... $ 4,030 $ 210 $ 2,525
=========== =========== ===========
FINANCIAL CONDITION DATA:
Total assets ................................................... $ 608,415 $ 551,075 $ 435,378
Loans receivable, net, and mortgage-backed securities(4) ...... 506,132 470,154 313,899
Investments, overnight deposits, tax certificates, reverse
purchase agreements, certificates of deposits and other
earning assets ................................................ 88,768 64,783 100,118
Total liabilities ............................................. 562,670 509,807 397,859
Deposits ...................................................... 310,074 347,795 295,108
Borrowings ................................................... 241,775 158,175 97,775
Total stockholders' equity .................................... 45,745 41,268 30,273
Common stockholders' equity .................................... 21,096 16,667 17,162
PER COMMON SHARE DATA:
Primary earnings per common share and common
equivalent share ............................................. $ 1.77 $ .10 $ 1.42
=========== =========== ===========
Earnings per common share assuming full dilution ............... $ 1.26 $ .10 $ 1.00
=========== =========== ===========
Weighted average number of common shares and common
equivalent shares assumed outstanding during the period:
Primary ...................................................... 2,296,021 2,175,210 1,773,264
Fully diluted ................................................ 4,158,564 2,175,210 3,248,618
Equity per common share ....................................... $ 10.20 $ 8.33 $ 8.86
Fully diluted equity per common share ........................ $ 7.81 $ 6.87 $ 7.07
Cash dividends per common share
Class A ...................................................... $ - $ .075 $ .094
Class B ...................................................... $ - $ .03 $ 0.38
</TABLE>
(Continued on next page)
37
<PAGE>
<TABLE>
<CAPTION>
AS OF OR FOR THE YEARS ENDED SEPTEMBER 30,
---------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ---------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS
PERFORMANCE RATIOS:
Return on average assets(5) ................................. .51% .36% 1.10% .46% 1.12%
Return on average common equity .............................. 9.38 1.30 22.60 1.21 18.55
Return on average total equity .............................. 8.08 4.30 14.70 5.84 14.07
Interest rate spread ....................................... 2.07 2.10 2.12 2.78 3.59
Net interest margin .......................................... 2.31 2.51 2.39 3.01 3.87
Dividend payout ratio(6) .................................... 38.03 82.95 35.42 96.79 40.66
Ratio of earnings to combined fixed charges and preferred
stock dividends(7):
Excluding interest on deposits .............................. 1.26 1.05 1.52 1.07 1.87
Including interest on deposits .............................. 1.10 1.02 1.21 1.03 1.27
Total loans, net, and mortgage-backed securities to
total deposits ............................................. 148.98 141.58 163.13 134.40 109.65
Non-interest expenses to average assets ..................... 1.55 1.97 2.14 2.04 2.18
Efficiency ratio(8) .......................................... 57.56 76.45 14.58 66.06 45.17
ASSET QUALITY RATIOS:
Ratio of non-performing loans to total loans ............... .72% .99% 1.02% 1.07% 1.54%
Ratio of non-performing assets to total loans, real estate
owned and tax certificates ................................. .79 1.14 1.35 1.41 1.78
Ratio of non-performing assets to total assets ............... .67 .95 1.10 1.17 1.46
Ratio of charge-offs to total loans ........................ .03 .08 .13 .39 .07
Ratio of loan loss allowance to total loans .................. .21 .34 .32 .20 .38
Ratio of loan loss allowance to non-performing loans ......... 28.96 33.74 31.54 18.89 24.70
CAPITAL RATIOS:
Ratio of average common equity to average total assets ...... 3.40% 4.78% 3.14% 3.58% 3.79%
Ratio of average total equity to average total assets ...... 6.36 8.44 7.47 8.05 7.99
Tangible capital-to-assets ratio(9) ........................ 8.07 7.01 7.09 6.65 7.56
Core capital-to-assets ratio(9) .............................. 8.07 7.01 7.09 6.65 7.56
Risk-based capital-to-assets ratio(9) ........................ 11.27 14.19 15.79 14.13 15.85
</TABLE>
- ----------------
(1) 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.
(2) In 1996 the Company recorded a one-time SAIF special assessment of $2.6
million ($1.6 million after tax).
(3) Amount reflects expense from change in accounting principle of $194,843 for
fiscal 1994. See Note 15 to Consolidated Financial Statements.
(4) Does not include mortgage loans held for sale.
(5) Return on average assets is calculated before payment of Preferred Stock
dividends.
(6) 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.
(7) 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.
(8) Efficiency ratio is calculated by dividing non-interest expenses less
non-interest income by net interest income.
(9) Regulatory capital ratio of the Bank.
38
<PAGE>
ITEM 7. 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 BankUnited Financial Corporation (also referred to as the "Company" or
"BankUnited") for the fiscal years ended September 30, 1997, 1996 and 1995.
This discussion and analysis are presented to assist the reader in
understanding and evaluating the financial condition, results of operations and
future prospects of BankUnited, and are intended to supplement, and should be
read in conjunction with, the Consolidated Financial Statements and Notes
thereto.
BankUnited'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, BankUnited'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 BankUnited's loans and investments.
In addition to the foregoing, results of BankUnited's operations, like
those of other financial institution holding companies, are affected by
BankUnited's asset and liability management policies, as well as factors beyond
BankUnited'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 financings 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.
ACQUISITIONS
The Company has had an active acquisition program during the last two
years and expects to continue this program in the foreseeable future.
In September 1997, the Company entered into a definitive agreement to
acquire Consumers Bancorp, Inc. for approximately $11 million in a combination
of cash and stock. Consumers Bancorp, Inc. is a thrift holding company for
Consumers Savings Bank which had assets of $108.0 million and deposits of $87.8
million at September 30, 1997.
On November 15, 1996, BankUnited 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 shareholders' equity of $24.7 million as of
September 30, 1996. The cost of the acquisition to BankUnited was $27.8
million, representing the fair value of consideration given to Suncoast
shareholders as well as option and warrant holders. See Note 2 of the Notes to
Consolidated Financial Statements for additional information regarding this
acquisition.
In March 1996, BankUnited 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 FOR THE YEARS ENDED SEPTEMBER 30,
1997, 1996, AND 1995
Total assets increased $1.3 billion, or 160% to $2.1 billion at September
30, 1997 from $824 million at September 30, 1996, as compared to $608 million
at September 30, 1995.
LOANS. The Company's net loans receivable increased by $1.1 billion, or
173% to $1.7 billion at September 30, 1997 from $646 million at September 30,
1996. The increase was primarily the result of the $913.7 million of
residential loans purchased in fiscal 1997, $341.4 million of loans acquired
with
39
<PAGE>
Suncoast, and $178.3 million of loan originations, partially offset by
principal repayments of $376 million (net of accretion of discount and
amortization of premium).
In fiscal 1996, the Company's net loans receivable increased by $193.3
million, or 42.6%, 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.
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.
Of the new loans originated or purchased during fiscal 1997 totaling $1.4
billion, $728.2 million or 51% represented adjustable-rate residential loans
("ARMs"). Of BankUnited's total net loans receivable of $1.7 billion at
September 30, 1997, $1.2 billion or 71% were ARMs. Of this amount BankUnited
had $122.8 million in ARMs 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.")
Loans available for sale as of September 30, 1997, were $104.3 million as
compared to no such loans available for sale as of September 30, 1996 and
$216,000 as of September 30, 1995. Beginning in the Company's fiscal 1997
fourth quarter, management began a program to sell approximately 50% to 75% of
the Company's internally generated residential loans. In the fourth quarter, a
package of residential loans totaling $30.1 million was sold for a gain of
$523,000. In addition, as part of starting this program, the Company
reclassified $93.5 million of its internally generated portfolio of residential
loans as available for sale in the fourth quarter. It is currently the
Company's intention that future loans classified as available for sale will be
identified and so classified at time of origination.
The Company also reclassified all commercial loans acquired with Suncoast
that were secured by properties outside the state of Florida totaling $10.8
million as available for sale.
CREDIT QUALITY. At September 30, 1997, non-performing assets totaled $14.3
million as compared to $7.8 million and $6.7 million at September 30, 1996 and
1995, respectively. Expressed as a percentage of total assets, non-performing
assets declined to .67% as of September 30, 1997 as compared to .95% as of
September 30, 1996 and 1.10% as of September 30, 1995. The increase in
non-performing assets in both 1997 and 1996 is due primarily to the increase in
loans.
Prior to 1993, BankUnited did not experience significant loan losses.
However, beginning in late 1993, BankUnited 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, BankUnited 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 1997,
BankUnited recorded a total of $3.0 million in charge offs for residential
loans secured by property in Southern California. Of these Southern California
charge offs, $1.0 million were for loans purchased from a single seller.
BankUnited instituted legal action against the seller for breach of warranty to
recover BankUnited's losses. In October 1995, this legal action was settled,
which resulted in a recovery of $1.0 million. Taking this recovery into
account, BankUnited recorded net charge offs of $2.3 million for the period
from late 1993 through September 30, 1997, of which $2.0 million or 82.4% were
for residential loans secured by real properties in Southern California.
Beginning in fiscal 1993, BankUnited 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, 1997 BankUnited had $243.7 million of residential loans in
California which constituted 11.4% of its assets. This compares to $125.8
million, or 15.3% of its assets
40
<PAGE>
as of September 30, 1996, and $147.2 million or 24.2% as of September 30, 1995.
Effective in fiscal 1997, after taking into account the improved economic
conditions in Southern California, management discontinued this policy.
The allowance for loan losses was $3.7 million, $2.2 million, and $1.5
million at September 30, 1997, 1996, and 1995, respectively. The allowance for
loan losses as a percentage of total loans decreased to .21% at fiscal year end
1997, as compared to .34% at fiscal year end 1996, and .32% at fiscal year end
1995. The decrease in the allowance as a percentage of total loans reflects the
Company's recent charge-off history which shows net charge-offs (recoveries) as
a percentage of average loans of .04%, (.12%) and .14% for 1997, 1996 and 1995,
respectively. The increase in non-performing assets to $14.3 million as of
September 30, 1997 from $7.8 million as of September 30, 1996 was due to
increases in non-performing loans of $6.4 million which, as stated above,
relates to the increase in total loans. Real estate owned declined from $1.5
million as of September 30, 1995 to $632,000 as of September 30, 1996, to
$611,000 as of September 30, 1997. At September 30, 1997, $3.0 million, or
23.5%, of BankUnited's non-performing loans were secured by Southern California
properties as compared to $2.8 million, or 43.4%, as of September 30, 1996, and
$1.1 million, or 28.2% as of September 30, 1995.
Effective October 1, 1995, BankUnited 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 BankUnited's loan portfolio (primarily residential or
collateral dependent loans) and BankUnited'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
BankUnited 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
BankUnited 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. BankUnited's impaired loans within the scope of SFAS No. 114
include all non-performing loans.
BankUnited'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 loan 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 BankUnited'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.
41
<PAGE>
The following table sets forth information concerning the Company's
non-performing assets for the periods indicated:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Non-accrual loans(1) ........................... $ 10,866 $ 4,939 $ 3,496 $ 3,918 $ 4,225
Restructured loans(2) ........................... 1,888 1,457 1,070 533 569
Loans past due 90 days and still accruing ...... -- -- 92 -- --
-------- ------- -------- -------- --------
Total non-performing loans .................. 12,754 6,396 4,658 4,451 4,794
Non-accrual tax certificates .................. 958 800 574 -- --
Real estate owned .............................. 611 632 1,453 1,983 1,581
-------- ------- -------- -------- --------
Total non-performing assets ..................... $ 14,323 $ 7,828 $ 6,685 $ 6,434 $ 6,375
======== ======= ======== ======== ========
Allowance for losses on tax certificates ...... $ 697 $ 614 $ 569 $ 85 $ --
Allowance for loan losses ..................... 3,693 2,158 1,469 841 1,184
-------- ------- -------- -------- --------
Total allowance .............................. $ 4,390 $ 2,772 $ 2,038 $ 926 $ 1,184
======== ======= ======== ======== ========
Non-performing assets as a percentage of
total assets ................................. .67% .95% 1.10% 1.17% 1.46%
Non-performing loans as a percentage of
total loans(4) .............................. .72% .99% 1.02% 1.07% 1.54%
Allowance for loan losses as a percentage
of total loans(4) ........................... .21% .34% .32% .20% .38%
Allowance for loan losses as a percentage
of non-performing loans ..................... 28.96% 33.74% 31.54% 18.89% 24.70%
Net chargeoffs as a percentage of average
total loans ................................. .04% ( .12%) .14% .42% .08%
</TABLE>
- ----------------
(1) Gross interest income that would have been recorded on non-accrual loans
had they been current in accordance with original terms was $556,000,
$217,000, $128,000, $52,000, and $295,000, for the years ended September
30, 1997, 1996, 1995, 1994, and 1993, respectively. The amount of interest
income on such non-accrual loans included in net income for years ended
September 30, 1997, 1996, and 1995 was $369,000, $145,000, and $113,000,
respectively.
(2) All restructured loans were accruing.
(3) In addition to the above, management has concerns as to the borrower's
ability to comply with present repayment terms on $1,878,000 and $109,000
of accruing loans as of September 30, 1997 and 1996, respectively.
Management estimates the loss, if any, on these loans will not be
significant.
(4) Based on balances prior to deductions for allowance for loan losses.
FEDERAL HOME LOAN BANK (FHLB) OVERNIGHT DEPOSITS. FHLB overnight deposits
increased to $79.4 million at September 30, 1997 from $28.3 million at
September 30, 1996 and $31.8 million at September 30, 1995. This increase is
due to increased liquidity requirements caused by the growth in the balance
sheet.
TAX CERTIFICATES. BankUnited's investment in tax certificates increased
$9.2 million, or 18.6%, to $49.3 million at September 30, 1997 from $40.1
million at September 30, 1996 and $39.5 million at September 30, 1995. The
increase was primarily the result of $42.3 million in certificate purchases
during fiscal 1997 which exceeded $33.0 million in certificate redemptions and
repayments.
INVESTMENTS. Investments held to maturity increased $14.5 million to $14.5
million as of September 30, 1997 as compared with $11,000 as of September 30,
1996 and $4.7 million as of September 30, 1995. Investments available for sale
increased $3.5 million to $10.2 million as of September 30, 1997 as compared to
$6.7 million as of September 30, 1996 and none as of September 30, 1995. The
increase in both of these categories is primarily due to the investment in
agency securities for liquidity purposes.
42
<PAGE>
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities, held to maturity
were $11.4 million, $14.7 million and $50.9 million at September 30, 1997, 1996
and 1995 respectively. In fiscal 1996 the Company's portfolio decreased $36.2
million, or 71.1%, primarily as a result of BankUnited'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.
BankUnited's available for sale mortgage-backed securities portfolio
increased $53.4 million to $108.9 million as of September 30, 1997 from $55.5
million as of September 30, 1996, and $2.1 million as of September 30, 1995. In
fiscal 1997, the increase was due to $18.7 million of securities acquired with
Suncoast and purchases of $56.4 million, partially offset by maturities and pay
downs of $21.7 million. In fiscal 1996, $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.
OTHER INTEREST EARNING ASSETS. Other interest earning assets increased to
$33.6 million at September 30, 1997 from $12.2 million as of September 30, 1996
and $12.3 million as of September 30, 1995. This category primarily represents
stock in the FHLB which the Company is required to purchase as FHLB advances
increase.
OTHER ASSETS. From September 30, 1996 to September 30, 1997, Office
properties and equipment, net, mortgage servicing rights, goodwill and prepaid
and other assets increased by $4.8 million, $4.8 million, $11.8 million and
$16.7 million, respectively. These increases all relate primarily to the
acquisition of Suncoast.
Since acquiring Suncoast, the Company sold its $292 million Ginnie Mae
("GNMA") mortgage servicing portfolio for $4.7 million and transferred its
FDIC/RTC subservicing portfolio. No gain or loss was recorded on either of
these transactions.
DEPOSITS. Deposits increased by $689.8 million, or 136.3%, to $1.2 billion
at September 30, 1997 from $506.1 million at September 30, 1996. Of this
growth, $323.7 million was acquired with Suncoast; $96.6 million of the
increase represents growth in former Suncoast branches since acquisition;
$128.1 million represents growth in the four branches opened in the two years;
and $22.0 million represents deposits from the State of Florida. Management
believes this strong deposit growth was primarily attributable to BankUnited
offering competitive interest rates and personalized service. BankUnited
intends to open as many as eight branches in the 1998 fiscal year.
FHLB ADVANCES. FHLB advances were $671.5 million at September 30, 1997, up
$434.5 million from the $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 BankUnited in connection
with the acquisition of Suncoast.
TRUST PREFERRED SECURITIES. In December 1996, BankUnited'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, BankUnited's subsidiary, BankUnited Capital II,
issued $46 million of Trust Preferred Securities. The net proceeds from the
sales of the Trust Preferred Securities were $111 million. These funds may be
used for general corporate purposes, including, but not limited to,
acquisitions by either the Bank or the Company, 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 year ended September 30, 1997, BankUnited contributed $85
million of additional capital to the Bank.
SUBORDINATED NOTES. On August 31, 1997, BankUnited called all outstanding
subordinated notes totaling $774,500.
43
<PAGE>
STOCKHOLDERS' EQUITY. BankUnited's total stockholders' equity was $99.6
million at September 30, 1997, an increase of $30.5 million, or 44.1% from
$69.1 million at September 30, 1996. This 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, in connection with the Suncoast
acquisition. The estimated value of the stock issued to acquire Suncoast was
$27.8 million.
In February 1997, the holder of BankUnited'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. BankUnited had previously
exercised its right to call both classes of preferred stock. In July 1997,
BankUnited 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 BankUnited purchased 448,583 shares pursuant thereto. The number
of shares remaining outstanding after the tender offer is 701,417 shares.
In September 1997, the Company exercised its right to call all the
outstanding shares of its 8% Non-cumulative Convertible Preferred Stock Series
1996, effective October 10, 1997. As a result 927,204 shares (387,709 shares as
of September 30, 1997) converted to 1,548,410 Class A Common Stock at a ratio
of 12/3 shares of common stock for each share of preferred. The remaining 5,696
shares of preferred shares were redeemed at $15 per share.
In October 1997, the Company issued 3,680,000 shares of Class A Common
Stock pursuant to a public stock offering. Net proceeds from the offering were
approximately $43.9 million.
LIQUIDITY AND CAPITAL RESOURCES. BankUnited'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 predictable sources of funds, deposit flows and prepayments on loans
and mortgage-backed securities are greatly influenced by general interest
rates, economic conditions and competition. BankUnited manages the pricing of
its deposits to maintain a desired balance. In addition, BankUnited 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, 1997, the Bank
had liquid assets and short-term liquid assets of 8.49% and 5.15%,
respectively, which was in compliance with these requirements, and as of
September 30, 1996, the Bank had liquid assets and short-term liquid assets of
6.75% and 3.80%, respectively. These applicable federal regulations were
revised effective November 24, 1997, eliminating the 1.0% short-term liquid
asset requirement and reducing the 5.0% liquid asset requirement to 4%.
BankUnited's primary use of funds is to purchase or originate loans and to
purchase mortgage-backed and investment securities. In fiscal 1997, 1996, and
1995, loans increased $1.1 billion, $193.0 million, and $40.1 million,
respectively, and BankUnited purchased $77.8 million, $22.7 million, and $16.6
million, respectively, of mortgage-backed and investment securities. In
addition, in 1995, BankUnited sold branches having $130.3 million of deposits.
Funding for the above came primarily from increases in deposits of $689.8
million, $196.1 million and $92.6 million (exclusive of the branch sale) in
1997, 1996 and 1995, respectively, and increases in FHLB advances and other
borrowings of $464.5 million in 1997, $52.7 million in 1996 and $83.6 million
in 1995.
Federal savings banks such as the Bank are also required to maintain
capital at levels specified by applicable minimum capital ratios. At September
30, 1997, the Bank was in compliance with all capital requirements and met the
definition of a "well capitalized" institution under applicable federal
regulations.
44
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1997
AND 1996
NET INCOME AFTER PREFERRED STOCK DIVIDENDS. BankUnited had net income
after preferred stock dividends of $4.7 million for the year ended September
30, 1997, compared to net income after preferred stock dividends of $441,000
for the year ended September 30, 1996. All major categories of income and
expense increased significantly in the year ended September 30, 1997 as
compared to the year ended September 30, 1996 and reflect the significant
growth BankUnited has experienced in the last year. A significant factor in
such growth was the acquisition of Suncoast, which was completed on November
15, 1996. BankUnited's Consolidated Statement of Operations for the year ended
September 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 $13.9 million, or
78.8%, to $31.5 million for the year ended September 30, 1997 from $17.6
million for the year ended September 30, 1996. This increase was attributable
to an increase in average interest-earning assets of $726.0 million, or 104.3%,
to $1.4 billion for the year ended September 30, 1997 from $696.4 million for
the year ended September 30, 1996. Approximately $350 million of the increase
in average interest-earning assets for the year ended September 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 16 basis points to 7.65% for the year
ended September 30, 1997, from 7.49% for the year ended September 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 $56.6 million, or 108.8%, to $108.8
million for the year ended September 30, 1997 from $52.1 million for the year
ended September 30, 1996, primarily reflects increases in interest and fees on
loans of $53.3 million. The average yield on loans receivable increased to
7.78% for the year ended September 30, 1997 from 7.65% for the year ended
September 30, 1996 and the average balance of loans receivable increased $676.9
million, or 125.3%, to $1.2 billion for the year ended September 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 $41.3 million, or 119.4%, to $76.0
million for the year ended September 30, 1997 from $34.6 million for the year
ended September 30, 1996 primarily reflects an increase in interest expense on
interest-bearing deposits of $29.3 million, or 141.1%, from $20.8 million for
the year ended September 30, 1996, to $50.1 million for the year ended
September 30, 1997, an increase in interest expense on FHLB advances of $5
million from $13.8 million for the year ended September 30, 1996 to $18.8
million for the year ended September 30, 1997, and interest expense of $6.5
million on Trust Preferred Securities which were issued in fiscal 1997. This
increase was due to an increase in average interest-bearing deposits of $557.8
million, or 137.2%, from $406.6 million for the year ended September 30, 1996
to $964.4 million for the year ended September 30, 1997. Approximately $250
million of this increase represents deposits acquired with Suncoast. The
average rate paid on interest-bearing deposits increased 9 basis points from
5.11% for the year ended September 30, 1996 to 5.20% for the year ended
September 30, 1997.
PROVISION FOR LOAN LOSSES. The provision for loan losses for the year
ended September 30, 1997 was $1.3 million as compared with a credit for loan
losses of $120,000 for the year ended September 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 BankUnited's asset quality and allowance for loan losses, see
"--Description of Financial Condition Changes for the Years Ended September 30,
1997, 1996 and 1995--Credit Quality."
45
<PAGE>
NON-INTEREST INCOME. Non-interest income for the year ended September 30,
1997 was $4.1 million compared with $649,000 for the year ended September 30,
1996, an increase of $3.4 million. Of this increase, $1.6 million represents
loan servicing fees (net of amortization of capitalized servicing rights) from
operations acquired with Suncoast, and $819,000 represent gains on the sale of
loans and mortgage backed securities. 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 $8.9 million, or
63.5%, to $22.9 million for the year ended September 30, 1997 compared to $14.0
million for the year ended September 30, 1996. The increase in expenses was
attributable to the growth BankUnited has experienced including the expenses of
Suncoast's operations. The year ended September 30, 1996 included a one time
assessment to replenish the Savings Association Insurance Fund ("SAIF") of the
Federal Deposit Insurance Corporation (FDIC) of $2.6 million.
INCOME TAXES. The income tax provision was $5.0 million for the year ended
September 30, 1997 compared to $1.7 million for the year ended September 30,
1996. The increase in income taxes was the result of BankUnited's higher
pre-tax earnings during the year ended September 30, 1997, compared to the year
ended September 30, 1996.
PREFERRED STOCK DIVIDENDS. Preferred stock dividends for the year ended
September 30, 1997 were $2.9 million, an increase of $745,000, as compared to
$2.1 million for the year ended September 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 and retired in
October, 1997, 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 FISCAL 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
BankUnited'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 share stock dividends declared in 1996 or 1995. In
the fourth quarter of fiscal 1994 BankUnited 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 attributed to 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
46
<PAGE>
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 BankUnited acquired
$110.7 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
34 basis points to 5.12% 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 BankUnited's
branches on the west coast of Florida.
PROVISIONS FOR LOAN LOSSES. In fiscal 1996, BankUnited 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 BankUnited had
previously purchased approximately $38.7 million of loans. BankUnited
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 BankUnited's asset quality and allowance for loan
losses, see "--Description of Financial Condition Changes for the Years Ended
September 30, 1997, 1996 and 1995--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 BankUnited'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.
The reduction of operating expenses as a result of the sale of
BankUnited's three branches on the west coast of Florida in July 1995 were
substantially offset by the opening of three new branches in Palm Beach County
on the east coast of Florida in fiscal 1996. Employee compensation and benefits
increased $278,000 or 7.0% to $4.3 million in fiscal 1996 from $4.0 million in
fiscal 1995. The increase primarily represents increased personnel resulting
from BankUnited's growth.
Insurance expense increased 251.5% due to the one time SAIF special
assessment of $2.6 million.
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,
BankUnited recorded an additional provision on tax certificates previously
purchased, which have not been redeemed and on which BankUnited elected not to
seek tax deeds.
47
<PAGE>
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
from 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 BankUnited 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.
48
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA
Set forth below is selected quarterly data for the fiscal years ended
September 30, 1997 and 1996.
<TABLE>
<CAPTION>
1997
--------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net interest income .................................... $7,076 $8,001 $8,842 $8,895
Provision for loan losses .............................. 250 165 280 600
Non-interest income .................................... 600 1,001 916 1,543
Non-interest expense .................................... 4,805 5,751 6,158 6,233
------- ------- ------- ------
Income before taxes and preferred stock dividends ...... 2,621 3,086 3,320 3,605
Income taxes .......................................... 1,022 1,243 1,329 1,439
------- ------- ------- ------
Net income before preferred stock dividends ............ 1,599 1,843 1,991 2,166
Preferred stock dividends .............................. 672 777 718 723
------- ------- ------- ------
Net income applicable to common stock .................. $ 927 $1,066 $1,273 $1,443
======= ======= ======= ======
Primary earnings per share .............................. $ 0.13 $ 0.12 $ 0.14 $ 0.15
======= ======= ======= ======
Fully diluted earnings per share ........................ $ 0.13 $ 0.12 $ 0.14 $ 0.15
======= ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
1996
------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net interest income .......................................... $3,538 $3,758 $4,723 $ (5,491)
Provision (credit) for loan losses ........................... (300) -- 75 105
Non-interest income .......................................... 158 129 198 164
Non-interest expense .......................................... 2,528 2,764 3,006 5,738
------ ------- ------- --------
Income (loss) before taxes and preferred stock dividends ...... 1,468 1,123 1,840 (188)
Income taxes ................................................... 557 430 706 (36)
------ ------- ------- --------
Net income (loss) before preferred stock dividends ............ 911 693 1,134 (152)
Preferred stock dividends .................................... 536 536 537 536
------ ------- ------- --------
Net income (loss) applicable to common stock .................. $ 375 $ 157 $ 597 $ (688)
====== ======= ======= ========
Primary earnings (loss) per share .............................. $ 0.16 $ 0.04 $ 0.10 $ (0.12)
====== ======= ======= ========
Fully diluted earnings (loss) per share ........................ $ 0.15 $ 0.04 $ 0.10 $ (0.12)
====== ======= ======= ========
</TABLE>
In the fourth quarter of 1996, the Company recorded an expense of $2.6
million for a one-time special assessment by the SAIF. The SAIF special
assessment required by the FDIC became effective on September 30, 1996, in
connection with the federal government's plan to recapitalize the SAIF.
49
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The business of the Company and the composition of its balance sheet
consists of investments in interest-earning assets (primarily loans,
mortgage-backed securities, and investment securities) which are primarily
funded by interest-bearing liabilities (deposits and borrowings). Such
financial instruments have varying levels of sensitivity to changes in market
interest rates resulting in market risk. Other than loans which are originated
and held for sale, all of the financial instruments of the Company are for
other than trading purposes.
Interest rate risk results when the maturity or repricing intervals and
interest rate indices of the interest-earning assets, interest-bearing
liabilities, and off-balance sheet financial instruments are different,
creating a risk that changes in the level of market interest rates will result
in disproportionate changes in the value of, and the net earnings generated
from, the Company's interest-earning assets, interest-bearing liabilities, and
off-balance sheet financial instruments. The Company's exposure to interest
rate risk is managed primarily through the Company's strategy of selecting the
types and terms of interest-earning assets and interest-bearing liabilities
which generate favorable earnings, while limiting the potential negative
effects of changes in market interest rates. Since the Company's primary source
of interest-bearing liabilities is customer deposits, the Company's ability to
manage the types and terms of such deposits may be somewhat limited by customer
preferences in the market areas in which the Company operates. Borrowings,
which include FHLB Advances, short-term borrowings, and long-term borrowings,
are generally structured with specific terms which in management's judgement,
when aggregated with the terms for outstanding deposits and matched with
interest-earning assets, mitigate the Company's exposure to interest rate risk.
The rates, terms and interest rate indices of the Company's interest-earning
assets result primarily from the Company's strategy of investing in loans and
securities (a substantial portion of which have adjustable-rate terms) which
permit the Company to limit its exposure to interest rate risk, together with
credit risk, while at the same time achieving a positive interest rate spread
from the difference between the income earned on interest-earning assets and
the cost of interest-bearing liabilities (see "Business--Factors Affecting
Earnings--Asset and Liability Management" for a further discussion of rate
sensitive assets, rate sensitive liabilities and net interest spread).
SIGNIFICANT ASSUMPTIONS UTILIZED IN MANAGING INTEREST RATE RISK
Managing the Company's exposure to interest rate risk involves significant
assumptions about the exercise of imbedded options and the relationship of
various interest rate indices of certain financial instruments.
IMBEDDED OPTIONS. A substantial portion of the Company's loans and
mortgage-backed securities are residential mortgage loans containing
significant imbedded options which permit the borrower to prepay the principal
balance of the loan prior to maturity ("prepayments") without penalty. A loan's
propensity for prepayment is dependent upon a number of factors, including, the
current interest rate and interest rate index (if any) on the loan, the
financial ability of the borrower to refinance, the economic benefit to be
obtained from refinancing, availability of refinancing at attractive terms, as
well as economic and other factors in specific geographic areas which affect
the sales and price levels of residential property. In a changing interest rate
environment, prepayments may increase or decrease on fixed- and adjustable-rate
loans depending on the current relative levels and expectations of future
short- and long-term interest rates. Since a significant portion of the
Company's loans are ARM loans, prepayments on such loans generally increase
when long-term interest rates fall or are at historically low levels relative
to short-term interest rates making fixed-rate loans more desirable.
Investment securities, other than those with early call provisions,
generally do not have significant imbedded options and repay pursuant to
specific terms until maturity. While savings and checking deposits generally
may be withdrawn upon the customer's request without prior notice, a continuing
relationship with customers resulting in future deposits and withdrawals is
generally predictable resulting in a dependable and uninterruptible source of
funds. Time deposits generally have early
50
<PAGE>
withdrawal penalties, while term FHLB Advances have prepayment penalties, which
discourage customer withdrawal of time deposits and prepayment of FHLB Advances
prior to maturity.
INTEREST RATE INDICES. The Company's ARM loans and mortgage-backed
securities are primarily indexed to the One Year Constant Maturity Treasury
Index or COFI (see "Business--Lending Activities"). When such loans and
mortgage-backed securities are funded by interest-bearing liabilities which are
determined by other indices, primarily deposits and FHLB Advances, a changing
interest rate environment may result in different levels of change in the
different indices leading to disproportionate changes in the value of, and the
net earnings generated from, the Company's financial instruments. Each index is
unique and is influenced by different external factors, therefore, the
historical relationships in various indices may not necessarily be indicative
of the actual change which may result in a changing interest rate environment.
INTEREST RATE RISK MEASUREMENT
In addition to periodic gap reports (see "Business--Factors Affecting
Earnings--Asset and Liability Management") comparing the sensitivity of
interest-earning assets and interest-bearing liabilities to changes in interest
rates, management also utilizes a quarterly report ("model") prepared for the
Bank by the OTS based on information provided by the Bank which measures the
Bank's exposure to interest rate risk. The model calculates the present value
of assets, liabilities, off-balance sheet financial instruments, and equity at
current interest rates, and at hypothetical higher and lower interest rates at
one percent intervals. The present value of each major category of financial
instrument is calculated by the model using estimated cash flows based on
weighted average contractual rates and terms at discount rates representing the
estimated current market interest rate for similar financial instruments. The
resulting present value of longer term fixed-rate financial instruments are
more sensitive to change in a higher or lower market interest rate scenario,
while adjustable-rate financial instruments largely reflect only a change in
present value representing the difference between the contractual and
discounted rates until the next interest rate repricing date.
51
<PAGE>
The following table reflects the estimated present value of
interest-earning assets, interest-bearing liabilities, and off-balance sheet
financial instruments as calculated by the OTS for the Bank as of September 30,
1997, consolidated with the estimated present values of other financial
instruments of the Company, at current interest rates and at hypothetical
higher and lower interest rates of one and two percent.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
------------------------------------------------------------------------
PRESENT VALUE
------------------------------------------------------------------------
-2% -1% CURRENT +1% +2%
------------ ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Investments, tax certificates, Federal
funds sold, FHLB overnight deposits
and other interest earning assets,
at cost ................................. $ 191,067 $ 189,499 $ 187,074 $ 186,141 $ 184,475
Mortgage-backed securities ............... 127,699 124,954 120,211 114,403 108,636
Loans:
Adjustable-rate mortgages ............... 1,402,745 1,392,526 1,378,638 1,359,515 1,334,774
Fixed-rate mortgages ..................... 450,068 442,009 426,906 407,384 387,172
Commercial and consumer loans ............ 12,771 12,689 12,608 12,533 12,455
---------- ---------- ---------- ---------- ----------
Total loans .............................. 1,865,584 1,847,224 1,818,152 1,779,432 1,734,401
---------- ---------- ---------- ---------- ----------
Total interest-earning assets ............ $2,184,350 $2,161,677 $2,125,437 $2,079,976 $2,027,512
========== ========== ========== ========== ==========
Interest-bearing liabilities:
Customer deposits:
Money market and NOW accounts ............ $ 99,357 $ 99,357 $ 99,357 $ 99,357 $ 99,357
Passbook accounts ........................ 160,431 160,431 160,431 160,431 160,431
Certificate accounts ..................... 950,266 944,105 938,083 932,140 926,336
---------- ---------- ---------- ---------- ----------
Total customer deposits .................. 1,210,054 1,203,893 1,197,871 1,191,928 1,186,124
Borrowings:
FHLB advances ........................... 678,664 676,676 674,705 672,752 670,815
Trust preferred ........................... 142,791 129,923 119,010 109,035 100,538
Other borrowings ........................ 30,000 30,000 30,000 30,000 30,000
---------- ---------- ---------- ---------- ----------
Total borrowings ........................ 851,455 836,599 823,715 811,787 801,353
---------- ---------- ---------- ---------- ----------
Total interest-bearing liabilities ...... $2,061,509 $2,040,492 $2,021,586 $2,003,715 $1,987,477
========== ========== ========== ========== ==========
Loan commitments ........................... $ 30,219 $ 20,174 $ 7,371 $ (8,716) $ (28,481)
========== ========== ========== ========== ==========
</TABLE>
The calculations of present value have certain shortcomings. The discount
rates utilized for loans and mortgage-backed securities are based on estimated
market interest rate levels for similar loans and securities nationwide, with
prepayment levels generally assumed based on global statistics. The unique
characteristics of the Company's loans and mortgage-backed securities may not
necessarily parallel those assumed in the model, and therefore, would likely
result in different discount rates, prepayment experiences, and present values.
The discount rates utilized for deposits and borrowings are based upon
available alternative types and sources of funds which are not necessarily
indicative of the present value of deposits and FHLB Advances since such
deposits and Advances are unique to, and have certain price and customer
relationship advantages for, depository institutions. The present values are
determined based on the discounted cash flows over the remaining estimated
lives of the financial instruments and assumes that the resulting cash flows
are reinvested in financial instruments with virtually identical terms. The
total measurement of the Company's exposure to interest rate risk as presented
in the above table may not be representative of the actual values which might
result from a higher or lower interest rate environment. A higher or lower
interest rate environment will most likely
52
<PAGE>
result in different investment and borrowing strategies by the Company designed
to further mitigate the effect on the value of, and the net earnings generated
from, the Company's net assets from any change in interest rates.
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 calculated as the net 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 net 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 present value
of an institution's total assets prior to the hypothetical 200 basis point
change will require the institution to deduct from its regulatory capital 50%
of that excess decline. Implementation of the rule has been postponed
indefinitely.
The following table presents the Bank's ratio of NPV to the present value
of total assets as of September 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>
+200 $114,075 $2,061,248 5.53% (4.46)%
+100 169,500 2,104,648 8.05 (1.94)
Static 214,066 2,141,024 10.00 --
-100 244,597 2,166,744 11.29 1.29
-200 265,113 2,185,364 12.13 2.13
</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 loan. Further, in the event of a
change in interest rates, prepayment and early withdrawal levels could 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 a
significant 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 are 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.
53
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BANKUNITED FINANCIAL CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PAGE
-
Report of Independent Certified Public Accountants .................. 55
Consolidated Statements of Financial Condition as of September 30, 1997
and September 30, 1996 ............................................. 56
Consolidated Statements of Operations for the Years Ended
September 30, 1997, 1996 and 1995 .................................... 57
Consolidated Statements of Stockholders' Equity for the Years Ended
September 30, 1997, 1996 and 1995 .................................... 58
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1997, 1996 and 1995 .................................... 60
Notes to Consolidated Financial Statements ........................... 62
</TABLE>
54
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
BankUnited Financial Corporation:
In our opinion, the accompanying consolidated statements of financial
condition and the related consolidated statements of operations, of
stockholders' equity and of cash flows present fairly, in all material
respects, the financial position of BankUnited Financial Corporation and its
subsidiaries at September 30, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Miami, Florida
November 12, 1997
55
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
-------------------------
1997 1996
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash .................................................................................... $ 10,571 $ 5,483
Federal Home Loan Bank overnight deposits ................................................ 79,413 28,253
Federal funds sold ..................................................................... -- 400
Tax certificates, (net of reserves of $697 and $614 at September 30, 1997 and 1996,
respectively) ........................................................................... 49,283 40,088
Investments held to maturity (market value of approximately $14,613 and $11 at
September 30, 1997 and 1996, respectively) ............................................. 14,494 11
Investments available for sale, at market ................................................ 10,166 6,685
Mortgage-backed securities, held to maturity (market value of approximately $11,292 and
$14,274 at September 30, 1997 and 1996, respectively).................................... 11,352 14,698
Mortgage-backed securities available for sale, at market ................................. 108,919 55,467
Loans receivable, net .................................................................. 1,661,381 646,385
Mortgage loans held for sale (market value of approximately $105,980 at September 30, 104,342 --
1997) .
Other interest earning assets ............................................................ 33,599 12,225
Office properties and equipment, net ................................................... 7,371 2,608
Real estate owned, net .................................................................. 611 632
Accrued interest receivable ............................................................ 16,261 7,023
Mortgage servicing rights ............................................................... 4,783 --
Goodwill ................................................................................. 14,278 2,457
Prepaid expenses and other assets ...................................................... 18,582 1,945
---------- --------
Total assets ........................................................................... $2,145,406 $824,360
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits .............................................................................. $1,195,892 $506,106
Securities sold under agreements to repurchase .......................................... 30,000 --
Advances from Federal Home Loan Bank ................................................... 671,484 237,000
Company obligated mandatorily redeemable trust preferred securities of subsidiary trust
holding solely junior subordinated deferrable interest debentures of the Company ...... 116,000 --
Subordinated notes ..................................................................... -- 775
Interest payable (primarily on deposits and advances from Federal Home Loan Bank) ...... 3,844 1,244
Advance payments by borrowers for taxes and insurance ................................. 10,688 4,292
Accrued expenses and other liabilities ................................................ 17,853 5,832
---------- --------
Total liabilities ..................................................................... 2,045,761 755,249
---------- --------
Commitments and contingencies (Notes 7 and 16)
Stockholders' equity:
Preferred stock, Series B, 1993 and 1996, $0.01 par value. Authorized shares--10,000,000;
issued and outstanding shares--2,175,296 and 2,664,547 at September 30, 1997 and 1996,
respectively ........................................................................ 22 27
Class A Common Stock, $.01 par value. Authorized shares--30,000,000; issued and
outstanding shares--9,257,098 and 5,454,201 at September 30, 1997 and 1996, 92 54
respectively .
Class B Common Stock, $.01 par value. Authorized shares--3,000,000; issued and
outstanding shares--275,685 and 251,515 at September 30, 1997 and 1996, respectively 3 3
Additional paid-in capital ............................................................... 86,679 62,055
Retained earnings ........................................................................ 11,988 7,279
Net unrealized gains (losses) on securities available for sale, net of tax ............... 861 (307)
---------- --------
Total stockholders' equity ............................................................ 99,645 69,111
---------- --------
Total liabilities and stockholders' equity ............................................. $2,145,406 $824,360
========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
56
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30:
--------------------------------------
1997 1996 1995
---------- -------------- --------
(DOLLARS IN THOUSANDS,
EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C>
Interest income:
Interest and fees on loans ....................................... $ 94,655 $ 41,313 $30,171
Interest on mortgage-backed securities ........................... 7,035 4,250 4,093
Interest on short-term investments ................................. 1,613 2,359 1,491
Interest and dividends on long-term investments and other
interest-earning assets .......................................... 5,471 4,210 3,664
- ---------------------------------------------------------------------- -------- -------- -------
Total interest income ............................................. 108,774 52,132 39,419
-------- -------- -------
Interest expense:
Interest on deposits ............................................. 50,136 20,791 17,849
Interest on borrowings ............................................. 19,351 13,831 8,456
Preferred dividends of Trust Subsidiary ........................... 6,473 -- --
-------- -------- -------
Total interest expense .......................................... 75,960 34,622 26,305
-------- -------- -------
Net interest income before provision (credit) for loan
losses ......................................................... 32,814 17,510 13,114
Provision (credit) for loan losses ................................. 1,295 (120) 1,221
-------- -------- -------
Net interest income after provision (credit) for loan losses ...... 31,519 17,630 11,893
-------- -------- -------
Non-interest income:
Service fees ...................................................... 2,993 597 423
Gain on sale of loans and mortgage-backed securities ............... 819 5 239
Gain (loss) on sale of other assets .............................. 1 (6) 9,569
Other ............................................................ 247 53 6
-------- --------- -------
Total non-interest income ....................................... 4,060 649 10,237
-------- --------- -------
Non-interest expenses:
Employee compensation and benefits ................................. 8,880 4,275 3,997
Occupancy and equipment .......................................... 3,568 1,801 1,727
Insurance ......................................................... 948 3,610 1,027
Professional fees--legal and accounting ........................... 1,605 929 1,269
Data processing ................................................... 992 340 356
Loan servicing expense ............................................. 1,796 979 765
Real estate owned operations ....................................... 301 73 559
Other operating expenses .......................................... 4,875 2,029 2,449
-------- --------- -------
Total non-interest expenses ....................................... 22,947 14,036 12,149
-------- --------- -------
Income before income taxes and preferred stock
dividends ...................................................... 12,632 4,243 9,981
Income taxes ...................................................... 5,033 1,657 3,741
-------- --------- -------
Net Income before preferred stock dividends ..................... 7,599 2,586 6,240
Preferred stock dividends of the Company ........................... 2,890 2,145 2,210
-------- --------- -------
Net income after preferred stock dividends ........................ $ 4,709 $ 4,441 $ 4,030
======== ========= =======
Primary earnings per share .......................................... $ 0.54 $ 0.10 $ 1.77
======== ========= =======
Fully diluted earnings per share .................................... $ 0.54 $ 0.10 $ 1.26
======== ========= =======
</TABLE>
See accompanying notes to consolidated financial statements.
57
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
CLASS A CLASS B
PREFERRED STOCK COMMON STOCK COMMON STOCK
------------------------ -------------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- ---------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1994 ......... 2,679,107 $ 27 1,787,018 $18 214,834 $ 2
Issuance of Class A and Class B
Common Stock ........................ -- -- 22,418 -- 18,232 --
Conversion of Class B Common
Stock to Class A Common
Stock .............................. -- -- 742 -- (742) --
Payment of dividends on
Company's preferred stock ......... -- -- 24,992 -- -- --
Net unrealized gain on
investments available for sale . -- -- -- -- -- --
Net income for the year ended
September 30, 1995 .................. -- -- -- -- -- --
--------- ----- --------- --- ------- ---
Balance at September 30, 1995 ......... 2,679,107 27 1,835,170 18 232,324 2
Conversion of Preferred Stock
to Common Stock Class A ............ (14,560) -- 21,340 -- -- --
Issuance of Class A and Class B
Common Stock ........................ -- -- 25,210 -- 19,191 1
Underwritten public offering of
the Company's Common
Class A, net ........................ -- -- 3,565,000 36 -- --
Payment of dividends on the
Company's Preferred Stock ......... -- -- 7,481 -- -- --
Net change in unrealized loss on
investments available for sale . -- -- -- -- -- --
Net income for the year ended
September 30, 1996 .................. -- -- -- -- -- --
--------- ----- --------- --- ------- ---
Balance at September 30, 1996 ......... 2,664,547 27 5,454,201 54 251,515 3
Issuance of Class A and Class B
Common Stock ........................ -- -- 40,357 -- 24,423 --
Conversion of Preferred Stock
to Common Class A .................. (973,568) (10) 1,470,359 13 -- --
Conversion of Common Class B
to Common Class A .................. -- -- 253 -- (253) --
Preferred Stock, Series 9%
tender offer ........................ (448,583) (4) -- -- -- --
Issuance of Stock in connection
with the Suncoast acquisition . 920,000 9 2,199,730 22 -- --
Stock options and warrants
exercised ........................... 12,900 -- 89,004 -- -- --
Payments of dividends on the
Company's Preferred Stock ......... -- -- 3,194 3 -- --
Net change in unrealized loss on
investments available for sale . -- -- -- -- -- --
Net income for the year ended
September 30, 1997 .................. -- -- -- -- -- --
--------- ------- --------- --- ------- ---
Balance at September 30, 1997 ......... 2,175,296 $ 22 9,257,098 $92 275,685 $ 3
========= ======= ========= === ======= ===
<PAGE>
<CAPTION>
UNREALIZED
GAIN ON
SECURITIES
AVAILABLE TOTAL
PAID-IN RETAINED FOR SALE, STOCKHOLDERS'
CAPITAL EARNINGS NET OF TAX EQUITY
------------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
Balance at September 30, 1994 ......... $38,413 $ 2,808 $ -- $ 41,268
Issuance of Class A and Class B
Common Stock ........................ 222 -- -- 222
Conversion of Class B Common
Stock to Class A Common
Stock .............................. -- -- -- --
Payment of dividends on
Company's preferred stock ......... 200 (2,210) -- (2,010)
Net unrealized gain on
investments available for sale . -- -- 25 25
Net income for the year ended
September 30, 1995 .................. -- 6,240 -- 6,240
-------- ------- ------- --------
Balance at September 30, 1995 ......... 38,835 6,838 25 45,745
Conversion of Preferred Stock
to Common Stock Class A ............ -- -- -- --
Issuance of Class A and Class B
Common Stock ........................ 330 -- -- 331
Underwritten public offering of
the Company's Common
Class A, net ........................ 22,831 -- -- 22,867
Payment of dividends on the
Company's Preferred Stock ......... 59 (2,145) -- (2,086)
Net change in unrealized loss on
investments available for sale . -- -- (332) (332)
Net income for the year ended
September 30, 1996 .................. -- 2,586 -- 2,586
-------- ------- ------- --------
Balance at September 30, 1996 ......... 62,055 7,279 (307) 69,111
Issuance of Class A and Class B
Common Stock ........................ 501 -- -- 501
Conversion of Preferred Stock
to Common Class A .................. (3) -- -- --
Conversion of Common Class B
to Common Class A .................. -- -- -- --
Preferred Stock, Series 9%
tender offer ........................ (4,481) -- -- (4,485)
Issuance of Stock in connection
with the Suncoast acquisition . 27,781 -- -- 27,812
Stock options and warrants
exercised ........................... 794 -- -- 794
Payments of dividends on the
Company's Preferred Stock ......... 32 (2,890) -- (2,855)
Net change in unrealized loss on
investments available for sale . -- -- 1,168 1,168
Net income for the year ended
September 30, 1997 .................. -- 7,599 -- 7,599
--------- ------- ------- --------
Balance at September 30, 1997 ......... $86,679 $11,988 $ 861 $ 99,645
========= ======= ======= ========
</TABLE>
(CONTINUED ON NEXT PAGE)
58
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY--(CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
The beginning balance at September 30, 1994 of each series of the
Company's preferred stock were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
----------- -------
<S> <C> <C>
Series A ......... 55,000 $ 1
Series B ......... 142,378 2
Series C ......... 363,636 4
Series C-II ...... 222,223 2
Series 1993 ...... 745,870 7
Series 9% ......... 1,150,000 11
--------- ---
Total ......... 2,679,107 $27
========= ===
</TABLE>
The ending balance at September 30, 1997 of Preferred Stock were as
follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
----------- -------
<S> <C> <C>
Series B ......... 183,818 $ 2
Series 1993 ...... 744,870 7
Series 9% ......... 701,417 8
Series 1996 ...... 545,191 5
------- ---
Total ......... 2,175,296 $22
========= ===
</TABLE>
Effective September 30, 1995, the Series A Preferred Stock was exchanged
for Series B Preferred Stock.
See accompanying notes to consolidated financial statements.
59
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
----------------------------------------------
1997 1996 1995
------------ --------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ......................................................... $ 7,599 $ 2,586 $ 6,240
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Provision (credit) for loan losses ................................. 1,295 (120) 1,221
Provision for losses on tax certificates ........................... 84 76 484
Depreciation and amortization ....................................... 1,320 674 526
Amortization of discounts and premiums on investments ............... 38 20 3
Amortization of discounts and premiums on
mortgage-backed securities ....................................... 101 144 84
Amortization of goodwill .......................................... 683 -- --
Amortization of discounts and premiums on loans ..................... (570) (2,332) (784)
Amortization of loan servicing assets .............................. 931 -- --
Loans originated for sale .......................................... (28,467) (4,141) (2,376)
Increase in accrued interest receivable ........................... (6,285) (1,239) (320)
Increase in interest payable on deposits and FHLB advances ......... 1,142 31 685
Increase (decrease) in accrued expenses ........................... 3,312 213 (68)
Increase (decrease) in accrued taxes .............................. 792 (2,960) 3,065
Increase (decrease) in deferred taxes .............................. (1,854) (469) 33
Increase (decrease) in other liabilities ........................... (22,130) 2,841 1,763
(Increase) decrease in prepaid expenses and other assets ............ (1,635) (224) 566
Gain on sales of mortgage-backed securities ........................ (185) -- (231)
Proceeds from sale of loans ....................................... 39,890 4,362 2,456
Proceeds from sale of loan servicing assets ........................ 4,215 -- 265
Recovery on loans ................................................... 69 1,119 1
(Gain) loss on sales of loans ....................................... 44 (5) (8)
(Gain) loss on real estate owned operations ........................ 236 (185) 94
(Gain) on sales of tax certificates ................................. -- -- (3)
(Gain) loss on sale of other assets ................................. -- 7 --
Gain on sale of loan servicing rights .............................. -- -- (265)
Gain on sale of branches .......................................... -- -- (9,304)
--------- ----------- ----------
Net cash provided by (used in) operating activities ............... 625 398 4,127
--------- ----------- ----------
Cash flows from investing activities:
Net increase in loans ............................................. (792,501) (185,457) (44,744)
Proceeds from sale of real estate owned ........................... 2,257 2,661 4,607
Purchase of investment securities ................................. (22,144) (3,510) (4,675)
Purchase of mortgage-backed securities .............................. (56,499) (19,228) (11,931)
Purchases of other earning assets ................................. (32,300) (650) (9,580)
Proceeds from repayments of investment securities .................. 4,051 5,675 2,000
Proceeds from repayments of mortgage-backed securities ............ 19,345 10,523 6,326
Proceeds from repayments of other earning assets .................. 14,176 750 5,125
Proceeds from sales of investment securities ........................ 126 2,097 --
Proceeds from sale of mortgage-backed securities .................. 7,653 -- 9,947
Purchases of office properties and equipment ........................ (1,980) (1,170) (742)
Sales of premises and equipment .................................... 1,364 -- --
Net decrease (increase) in tax certificates ........................ (9,278) (620) 2,587
Purchase of Bank of Florida, net of acquired cash equivalents ...... -- 1,521 --
Cash and cash equivalents of Suncoast at date of acquisition ...... 32,803 -- --
--------- ----------- ----------
Net cash used in investing activities .............................. (832,927) (187,408) (41,080)
--------- ----------- ----------
</TABLE>
(CONTINUED ON NEXT PAGE)
60
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
-------------------------------------------
1997 1996 1995
------------ ------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase in deposits .......................................... $366,049 $168,744 $ 92,555
Net (decrease) in deposits from sale of branches .................. -- -- (130,276)
Net (decrease) increase in Federal Home Loan Bank advances ...... 382,984 (4,000) 105,000
Net (decrease) increase in other borrowings ..................... 30,000 -- (21,400)
Decrease in subordinated notes .................................... (775) -- --
Premium on sale of branches ....................................... -- -- 9,304
Net proceeds from issuance of trust preferred securities ......... 111,456 -- --
Net proceeds from issuance of common stock ........................ 1,329 23,198 222
Preferred Stock, Series 9% tender offer ........................... (4,486) -- --
Dividends paid on the Company's preferred stock .................. (2,890) (2,086) (2,010)
Increase in advances from borrowers for taxes and insurance ...... 4,483 560 1,526
-------- -------- ----------
Net cash provided by financing activities ........................ 888,150 186,416 54,921
-------- -------- ----------
Increase (decrease) in cash and cash equivalents .................. 55,848 (594) 17,968
Cash and cash equivalents at beginning of year .................. 34,136 34,730 16,762
-------- -------- ----------
Cash and cash equivalents at end of year ........................ $ 89,984 $ 34,136 $ 34,730
======== ======== ==========
Supplemental Disclosures:
Interest paid on deposits and borrowings ........................ $ 73,385 $ 34,547 $ 25,617
======== ======== ==========
Income taxes paid ................................................ $ 3,390 $ 4,626 $ 676
======== ======== ==========
Transfers from loans to real estate owned ........................ $ 2,296 $ 1,154 $ 1,182
======== ======== ==========
Transfer of mortgage-backed securities from held to maturity to
available for sale ............................................. $ -- $ 31,780 $ --
======== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
61
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of BankUnited Financial Corporation
(the "Company") and subsidiaries conform to generally accepted accounting
principles and to general practices within the savings and loan industry.
Presented below is a description of the Company and its principal accounting
policies.
(A) BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, including BankUnited, FSB (the "Bank"). The Bank provides
a full range of banking services to individual and corporate customers through
its branches in South Florida. The Bank is subject to the regulations of
certain federal agencies and undergoes periodic examinations by those
regulatory authorities. All significant intercompany transactions and balances
have been eliminated.
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the consolidated
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of
the consolidated statements of financial condition and operations for the
period.
Material estimates that are particularly susceptible to significant change
in the near term relate to the determination of the allowance for loan losses
and the allowance for losses on tax certificates, the valuation of mortgage
servicing rights, and the valuation of real estate acquired in connection with
foreclosures or in satisfaction of loans. In connection with the determination
of the allowances for loan losses and real estate owned, management obtains
independent appraisals for properties.
(B) MORTGAGE-BACKED SECURITIES AND INVESTMENTS
Mortgage-backed securities and other investments available for sale are
carried at fair value (market value), inclusive of unrealized gains and losses,
and net of discount accretion and premium amortization computed using the level
yield method. Net unrealized gains and losses are reflected as a separate
component of stockholders' equity, net of applicable deferred taxes.
Mortgage-backed securities and investments held to maturity are carried at
amortized cost. Mortgage-backed securities and investment securities that the
Company has the positive intent and ability to hold to maturity are designated
as held-to-maturity securities.
Gain or losses on sales of mortgage securities and investments are
recognized on the specific identification basis.
Tax certificates are considered investments held to maturity and,
accordingly, are carried at cost less a valuation allowance. Interest is
accrued on tax certificates until payoff or until it appears uncollectible.
When deemed uncollectible, accrued but uncollected interest is reversed.
Applicable law permits application for tax deeds to be applied for two years
after the effective date of the acquisition of the tax certificate. Tax deeds
applied for are carried at the cost of the tax certificates, adjusted for
accrued interest. Tax deeds applied for carry an annual interest rate of 18%.
(C) ALLOWANCE FOR LOAN LOSSES
A provision for losses on loans is charged to operations when, in
management's opinion, the collectibility of the balances is doubtful and the
carrying value is greater than the estimated net
62
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
realizable value of the collateral. The provision is based upon a review of the
nature, volume, delinquency status and inherent risk of the loan portfolio in
relation to the allowance for loan losses.
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the allowance for loan losses.
Such agencies may require additions to the allowance based on their judgments
about information available to them at the time of their examination.
The Company's non-accrual policy provides that all loans are placed on
non-accrual status when they are 90 days past due as to either principal or
interest, unless the loan is fully secured and in the process of collection.
Loans are returned to accrual status when they become less than 90 days
delinquent.
Payments received on impaired loans are generally applied to principal and
interest based on contractual terms. See Note 6 for information regarding the
Company's adoption of Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan."
(D) LOANS RECEIVABLE
Loans receivable are considered long-term investments and, accordingly,
are carried at historical cost. Loans held for sale are recorded at the lower
of cost or market, determined in the aggregate. In determining cost, deferred
loan origination fees and costs are adjusted to the principal balances of the
related loans.
(E) LOAN-ORIGINATION FEES, COMMITMENT FEES AND RELATED COSTS
Loan origination fees and certain direct loan origination costs are
deferred, and the net fee or cost is recognized as an adjustment to interest
income using the interest method over the contractual life of the loans,
adjusted for estimated prepayments based on the Company's historical prepayment
experience. Commitment fees and costs relating to commitments, of which the
likelihood of exercise is remote, are recognized over the commitment period on
a straight-line basis. If the commitment is subsequently exercised during the
commitment period, the remaining unamortized commitment fee at the time of
exercise is recognized over the life of the loan as an adjustment of yield.
(F) OTHER INTEREST EARNING ASSETS
Other interest earning assets includes Federal Home Loan Bank of Atlanta
stock and an equity investment in the Community Reinvestment Group. The fair
value is estimated to be the carrying value which is par.
(G) OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are carried at cost less accumulated
depreciation and amortization. Depreciation is provided using the estimated
service lives of the assets for furniture,
63
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
fixtures and equipment (7 to 10 years), and computer equipment and software (3
to 5 years), or with leases, the term of the lease or the useful life (10
years), whichever is shorter. Repair and maintenance costs are charged to
operations as incurred, and improvements are capitalized.
(H) ACCRUED INTEREST RECEIVABLE
Recognition of interest on the accrual method is generally discontinued
when interest or principal payments are greater than 90 days in arrears, unless
the loan is well secured and in the process of collection. At the time a loan
is placed on nonaccrual status, previously accrued and uncollected interest is
reversed against interest income in the current period.
(I) REAL ESTATE OWNED
Property acquired through foreclosure, deeds in lieu of foreclosures, or
loans judged to be in-substance foreclosures are recorded at the lower of the
related principal balance at foreclosure or estimated fair value less estimated
costs to sell the property. Any excess of the loan balance over the net
realizable value is charged to the allowance for loan losses when the property
is classified as real estate owned. The net realizable value is reviewed
periodically and, when necessary, any decline in the value of the real estate
is charged to expense. Significant property improvements which enhance the
salability of the property are capitalized to the extent that the carrying
values do not exceed their estimated realizable values. Maintenance and
carrying costs on the property are charged to operations as incurred.
(J) GOODWILL
Goodwill is amortized on a straight-line basis over its estimated
beneficial life of 10 to 25 years.
(K) INCOME TAXES
The Company and its subsidiaries file consolidated income tax returns.
Deferred income taxes have been provided for elements of income and expense
which are recognized for financial reporting purposes in periods different than
such items are recognized for income tax purposes. The Company accounts for
income taxes utilizing the liability method, which applies the enacted
statutory rates in effect at the statement of financial condition date to
differences between the book and tax bases of assets and liabilities. The
resulting deferred tax liabilities and assets are adjusted to reflect changes
in tax laws.
(L) EARNINGS PER SHARE
Primary earnings per common and common equivalent share is computed on a
weighted average number of common shares and common share equivalents
outstanding during the year. Common share equivalents include the dilutive
effect of stock options using the treasury stock method. The weighted average
number of common share equivalents assumed outstanding for the years ended
September 30, 1997, 1996 and 1995 were 8,680,000, 4,559,000, and 2,296,000,
respectively. Earnings per common share, assuming full dilution, assume the
maximum dilutive effect of the average number of shares from stock options and
the conversion equivalents of preferred stocks. The weighted average number of
fully
64
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
diluted common shares outstanding during the years ended September 30, 1997,
1996 and 1995 were 9,031,000, 4,559,000 and 4,159,000, respectively. Stock
dividends have been included in the calculation of earnings per share for all
years presented.
(M) STOCK OPTIONS
At the time stock options are granted to employees and directors, no
accounting entries are made, as the options are granted at the fair market
value of the Company's common stock. The proceeds from the exercise of options
are credited to common stock for the par value of the shares issued, and the
excess, net of any tax benefit, is credited to paid-in capital. (See Note 14.)
(N) IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1996, the 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 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.
(O) FINANCIAL STATEMENT RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the
September 30, 1997 consolidated financial statements.
(2) ACQUISITIONS
On March 31, 1996, the Company 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. The acquisition was accounted for as a purchase and $2.5 million
of goodwill was recorded.
65
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(2) ACQUISITIONS--(CONTINUED)
On November 15, 1996, the Company acquired Suncoast Savings & Loan
Association, FSA ("Suncoast"). The Company issued one share of its Class A
Common Stock for each share of Suncoast common stock of which 2,199,930 were
outstanding and one share of newly created 8% Noncumulative Convertible
Preferred Stock, Series 1996 for each share of Suncoast preferred stock of
which 920,000 shares were outstanding. The 8% Noncumulative Convertible
Preferred Stock, Series 1996 has substantially the same terms and conditions as
the Suncoast preferred stock. The cost of the acquisition, which was accounted
for as a purchase was $27.8 million, representing the fair value of the
consideration given to the Suncoast common and preferred stockholders as well
as the option and warrant holders. In addition, the Company incurred
approximately $1.3 million of costs directly related to the merger. The balance
sheet and results of operations of Suncoast have been included with those of
BankUnited as of and for periods subsequent to November 15, 1996.
At the date of acquisition, the fair value of the assets and liabilities
acquired from Suncoast are as follows (in thousands):
<TABLE>
<S> <C>
Cash and cash equivalents ...... $ 32,804
Loans receivable, net ............ 341,394
Mortgage-backed securities ...... 18,672
Goodwill ........................ 11,643
Other assets ..................... 34,930
Deposits ........................ (323,737)
FHLB advances .................. (51,500)
Other liabilities ............... (36,394)
----------
Net purchase price ............ $ 27,812
==========
</TABLE>
The unaudited proforma combined condensed statements of operations for the
years ended September 30, 1997 and 1996, after giving effect to certain
proforma adjustments are as follows (in thousands except per share data):
<TABLE>
<CAPTION>
1997 1996
---------- --------
<S> <C> <C>
Interest income .................................... $112,642 $81,752
Interest expense ................................. 78,268 52,423
Provision for loan losses ........................ 1,401 45
Non-interest income .............................. 4,714 9,193
Non-interest expense .............................. 24,770 31,885
Income tax expense ................................. 5,166 2,654
-------- -------
Net income before preferred stock dividends ...... 7,751 3,938
Preferred stock dividends ........................ 3,028 3,249
-------- -------
Net income after preferred stock dividends ...... $ 4,723 $ 689
======== =======
Earnings per share
Primary .......................................... $ .53 $ .10
Fully-diluted .................................... $ .52 $ .10
</TABLE>
The proforma combined condensed statement of operations assumes the
acquisition occurred as of October 1, 1995.
66
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(2) ACQUISITIONS--(CONTINUED)
As part of the purchase of Suncoast, the Company issued warrants to
Suncoast's warrant holders to purchase 80,000 shares of the newly created 8%
Noncumulative Convertible Preferred Stock, Series 1996, and assumed Suncoast's
outstanding stock options. The warrants are exercisable at a price of $18.00
for each share of the 8% Noncumulative Convertible Preferred Stock, Series 1996
or each warrant could be exercised to purchase 1.68595 shares, subject to
adjustment, of Class A Common Stock at a per share price of $10.68, also
subject to adjustment under certain conditions. The warrants expire on July 8,
1998 and, as of September 30, 1997, 63,541 warrants were outstanding.
In September 1997, the Company entered into a definitive agreement to
acquire Consumers Bancorp, Inc. for approximately $11 million in a combination
of cash and stock. Consumers Bancorp, Inc. is a thrift holding company for
Consumers Savings Bank which had assets of $108.0 million and deposits of $87.8
million at September 30, 1997. The acquisition will be accounted for as a
purchase and is expected to result in goodwill of approximately $3.5 million.
(3) TAX CERTIFICATES
Tax certificates are certificates representing delinquent real estate
taxes owed to the respective counties. A substantial percentage of tax
certificates are for properties located in southeast Florida. The Company's
policy is to purchase tax certificates only for properties located in Florida.
The net carrying value of tax certificates was $49.3 million and $40.0
million at September 30, 1997 and 1996, respectively. Included in these amounts
at September 30, 1997 and 1996 were $1.3 million and $1.9 million,
respectively, of tax certificates for which the Company had made application
for the tax deeds. The Company maintains loss reserves for tax certificates
which were $697,000 and $614,000 at September 30, 1997 and 1996, respectively.
The estimated market values of the Company's tax certificates are the same
as the carrying values, since historically the tax certificates have had
relatively short lives and their yields approximate market rates.
(4) SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
Interest income from securities purchased under agreements to resell
aggregated approximately $1.2 million for the year ended September 30, 1995.
67
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(4) SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL--(CONTINUED)
The following sets forth information concerning the Company's agreements
to resell for the periods indicated:
<TABLE>
<CAPTION>
AS OF AND FOR
THE YEAR ENDED SEPTEMBER 30,
------------------------------
1997 1996 1995
------ ------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Maximum amount of outstanding agreements at any month end
during the period .................................... $-- $-- $ 700
Average amount outstanding during the period ............ $-- $-- $ 20,262
Weighted average interest rate for the period ......... -- -- 6.10%
Maturity ................................................ -- -- --
</TABLE>
(5) INVESTMENTS AND MORTGAGE-BACKED SECURITIES
Securities designated as available for sale are carried at market value
with the resultant after-tax appreciation or depreciation from amortized cost
reflected as an addition to, or deduction from, stockholders' equity.
INVESTMENTS
Presented below is an analysis of the carrying values and approximate
market values of investments held to maturity.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
---------- ------------ ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. government agency securities ...... $14,483 $119 $-- $14,602
State of Israel Bonds .................. 11 -- -- 11
-------- ---- -------- -------
Total ................................. $14,494 $119 $-- $14,613
======== ==== ======== =======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
---------- ------------ ------------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
State of Israel Bonds ...... $11 $-- $-- $11
--- -------- -------- ---
Total ..................... $11 $-- $-- $11
=== ======== ======== ===
</TABLE>
68
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(5) INVESTMENTS AND MORTGAGE-BACKED SECURITIES--(CONTINUED)
All investments held to maturity at September 30, 1997 and 1996 had
maturities between one and five years. Presented below is analysis of the
investments designated as available for sale.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
---------- ------------ ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. government agency securities ...... $ 8,799 $ 2 $-- $ 8,801
Other ................................. 1,353 12 -- 1,365
-------- --- -------- -------
Total ................................. $10,152 $14 $-- $10,166
======== === ======== =======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
---------- ------------ ------------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury Notes ..................... $2,005 $-- $ 1 $2,004
U.S. government agency securities ...... 2,999 -- 18 2,981
Other ................................. 1,702 -- 2 1,700
------ -------- --- ------
Total ................................. $6,706 $-- $21 $6,685
====== ======== === ======
</TABLE>
MORTGAGE-BACKED SECURITIES
The carrying value and historical cost of mortgage-backed securities
available for sale are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------------------------------------------
GROSS GROSS
HISTORICAL UNREALIZED UNREALIZED CARRYING
COST GAINS LOSSES VALUE
------------ ------------ ------------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
GNMA mortgage-backed securities ...... $ 48,881 $ 994 $ (41) $ 49,834
FNMA mortgage-backed securities ...... 4,198 108 (6) 4,300
FHLMC mortgage-backed securities ...... 31,839 119 (19) 31,939
Other ................................. 22,625 282 (61) 22,846
-------- ------ ------- --------
Total ................................. $107,543 $1,503 $(127) $108,919
======== ====== ======= ========
</TABLE>
69
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(5) INVESTMENTS AND MORTGAGE-BACKED SECURITIES--(CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------------------------------------------
GROSS GROSS
HISTORICAL UNREALIZED UNREALIZED CARRYING
COST GAINS LOSSES VALUE
------------ ------------ ------------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
GNMA mortgage-backed securities ...... $24,943 $207 $(338) $24,812
FNMA mortgage-backed securities ...... 6,055 61 (2) 6,114
FHLMC mortgage-backed securities ...... 22,172 33 (432) 21,773
Other ................................. 2,772 6 (10) 2,768
------- ---- ------- -------
Total ................................. $55,942 $307 $(782) $55,467
======= ==== ======= =======
</TABLE>
The market value and historical cost of mortgage-backed securities held to
maturity are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
---------- ------------ ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
GNMA mortgage-backed securities ......... $ 74 $ 6 $ -- $ 80
FHLMC mortgage-backed securities ......... 3,434 -- (44) 3,390
Mortgage pass-through certificates ...... 7,844 -- (22) 7,822
-------- --- ----- -------
Total ................................. $11,352 $ 6 $ (66) $11,292
======== === ===== =======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
---------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
---------- ------------ ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
GNMA mortgage-backed securities ......... $ 83 $ 5 $ -- $ 88
FHLMC mortgage-backed securities ......... 4,144 -- (118) 4,026
Collateralized mortgage obligations ...... 8,802 -- (289) 8,513
Mortgage pass-through certificates ...... 1,669 -- (22) 1,647
-------- --- ------ -------
Total .................................... $14,698 $ 5 $ (429) $14,274
======== === ====== =======
</TABLE>
The mortgage-backed securities have contractual maturities which range
from the years 1997 to 2027, however, expected maturities will differ from
contractual maturities as borrowers have the right to prepay obligations with
or without prepayment penalties.
Gross proceeds on sales of mortgage-backed securities and collateralized
mortgage obligations were $7.7 million for the year ended September 30, 1997
and $10.0 million for the year ended September 30, 1995. There were no sales of
mortgage-backed securities and collateralized mortgage obligations in 1996.
Gross realized gains were $250,000 and $231,000 on sales of mortgage-backed
securities and collateralized mortgage obligations during the years ended
September 30, 1997 and 1995, respectively. There were no realized losses during
the years ended September 30, 1997 and 1995.
70
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(5) INVESTMENTS AND MORTGAGE-BACKED SECURITIES--(CONTINUED)
At September 30, 1997 , GNMA mortgage-backed securities with carrying
values of approximately $10.9 million were pledged as collateral for public
funds on deposit.
At September 30, 1997, FHLMC and GNMA mortgage-backed securities with a
carrying value of approximately $34.0 million and a market value of
approximately $34.5 million were pledged as collateral for a $30.0 million
reverse repurchase agreement. The securities underlying the agreement were held
in safekeeping by a trustee.
(6) LOANS RECEIVABLE
Loans receivable consist of the following:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
----------------------------
1997 1996
------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Mortgage loans-conventional ........................ $ 387,096 $263,757
Mortgage loans-conventional serviced by others ...... 1,110,686 317,103
Mortgage loans-other ................................. 140,393 53,817
Commercial loans:
Secured ............................................. 9,475 5,618
Unsecured .......................................... 1,168 787
Line of credit loans ................................. 1,456 1,254
Share loans .......................................... 835 648
Installment loans .................................... 836 1,001
---------- --------
Total ............................................. 1,651,945 643,985
Less allowance for loan losses ..................... (3,693) (2,158)
Deferred loan fees, discounts and premiums ......... 13,129 4,558
---------- --------
Loans receivable, net .............................. $1,661,381 $646,385
========== ========
</TABLE>
Of the total gross loans receivable of $1.7 billion at September 30, 1997,
approximately $506.1 million, or 30.6%, represents residential loans secured by
properties in Florida, $243.7 million, or 15.0% represents loans in California
and $950.2 million, or 54.4% represents loans secured by properties in other
states.
71
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(6) LOANS RECEIVABLE--(CONTINUED)
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------
1997 1996 1995
---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of the period ...... $2,158 $1,469 $ 841
Provision (credit) ..................... 1,295 (120) 1,221
Allowance from Bank of Florida ......... -- 183 --
Allowance from Suncoast .................. 775 -- --
Loans charged-off ........................ (604) (493) (594)
Recoveries .............................. 69 1,119 1
------ ------ ------
Balance at end of the period ............ $3,693 $2,158 $1,469
====== ====== ======
</TABLE>
Effective October 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment
of a Loan" as amended by SFAS No. 118, "Accounting by Creditors for Impairment
of a Loan--Income Recognition and Disclosures" ("Statement No. 114"). There was
no significant 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.
As of September 30, 1997 and 1996, the Company had impaired or non-accrual
loans of $10.9 million and $4.9 million, respectively and had recorded specific
reserves on these loans of $704,000 and $801,000, respectively. For the years
ended September 30, 1997, 1996 and 1995 the average amounts of impaired loans
were $8.0 million, $4.8 million and $2.3 million, respectively. No income is
recognized on loans during the period for which the loan is deemed impaired.
(7) OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are summarized as follows:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
-------------------------
1997 1996
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Office buildings ........................... $ 2,600 $ --
Leasehold improvements ..................... 2,700 1,640
Furniture, fixtures and equipment ......... 3,504 1,881
Computer equipment and software ............ 3,548 1,124
-------- --------
Total .................................... 12,352 4,645
Less: accumulated depreciation ............ (4,981) (2,037)
-------- --------
Office properties and equipment, net ...... $ 7,371 $ 2,608
======== ========
</TABLE>
Depreciation expense was $1.2 million, $674,000 and $526,000, for the
years ended September 30, 1997, 1996, and 1995, respectively.
72
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(7) OFFICE PROPERTIES AND EQUIPMENT--(CONTINUED)
The Company has entered into non-cancelable leases with approximate
minimum future rentals as follows:
<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30, AMOUNT
- ---------------------------- -----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
1998 .................. $ 2,961
1999 .................. 2,889
2000 .................. 2,051
2001 .................. 1,464
2002 .................. 956
Thereafter ............ 997
-------
Total .................. $11,318
=======
</TABLE>
Rent expense for the years ended September 30, 1997, 1996, and 1995 was
$1.6 million, $905,000, and $959,000, respectively.
(8) DEPOSITS
The weighted average nominal interest rate payable on all deposit accounts
at September 30, 1997 and 1996 was 5.20% and 5.11%, respectively.
Types of deposits and related range of interest rates were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------------------------------------------------------
1997 1996
------------------------------------ -----------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest-bearing deposits ......... --% - --% $ 21,436 --% - --% $ 7,301
Passbook and statement savings deposits 2.00% - 5.16% 160,557 2.00% - 4.97% 73,780
Super NOW deposits .................. 0.00% - 3.93% 57,471 0.00% - 3.00% 17,265
Money market deposits ............... 0.00% - 3.10% 20,325 0.00% - 4.65% 16,556
Certificates of deposit ............... 3.92% - 6.06% 936,103 3.92% - 6.16% 391,204
---------- --------
Total .............................. $1,195,892 $506,106
========== ========
</TABLE>
Deposit accounts with balances of $100,000 or more totaled approximately
$174.0 millioin and $69.4 million at September 30, 1997 and 1996, respectively.
Interest expense on deposits for the years ended September 30, 1997, 1996
and 1995 was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Super NOW and money market deposits ......... $ 2,236 $ 775 $ 875
Passbook and statement savings deposits ...... 6,342 2,627 2,420
Certificates of deposit ..................... 41,558 17,389 14,554
------- ------- -------
Total ....................................... $50,136 $20,791 $17,849
======= ======= =======
</TABLE>
Early withdrawal penalties on deposits are recognized as a reduction of
interest on deposits. For the years ended September 30, 1997, 1996 and 1995,
early withdrawal penalties totaled $101,000, $42,000, and $110,000,
respectively.
73
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(8) DEPOSITS--(CONTINUED)
The amounts and scheduled maturities of certificate accounts at September
30, 1997 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30, AMOUNT
- ---------------------------- -----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
1998 .................. $809,444
1999 .................. 81,912
2000 .................. 11,152
2001 .................. 4,951
2002 .................. 28,414
Thereafter ............ 230
--------
Total .................. $936,103
========
</TABLE>
(9) ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank of Atlanta (FHLB) incur interest
and are repayable as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
REPAYABLE DURING YEAR ENDING SEPTEMBER 30, INTEREST RATE 1997 1996
- -------------------------------------------- --------------------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1997 .................................... 4.56% - 6.07% $ -- 192,000
1998 .................................... 5.63% - 6.55% 480,000 5,000
1999(1) ................................. 5.60% 25,000 --
2001(2) ................................. 5.33% - 5.61% 15,000 40,000
2002(3) ................................. 5.43% - 6.24% 150,000 --
2005 .................................... 6.65% 1,484 --
-------- -------
$671,484 $237,000
======== ========
</TABLE>
- ----------------
(1) Advances for $25 million are callable by the FHLB in 1998.
(2) Advances for $15 million are callable by the FHLB in 1997.
(3) Advances for $25 million are callable by the FHLB in 1998 and $125 million
in 1999.
The terms of a security agreement with the FHLB of Atlanta include a
blanket floating lien that requires the maintenance of qualifying first
mortgage loans as pledged collateral with unpaid principal amounts at least
equal to 100% of the FHLB advances, when discounted at 75% of the unpaid
pricipal balance. The FHLB of Atlanta stock, which is recorded at cost, is also
pledged as collateral for these advances.
(10) SECURITIES SOLD UNDER AN AGREEMENT TO REPURCHASE
Interest expense on securities sold under an agreement to repurchase
aggregated $506,000 and $367,000 for the years ended September 30, 1997 and
1995, respectively.
74
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(10) SECURITIES SOLD UNDER AN AGREEMENT TO REPURCHASE--(CONTINUED)
The following sets forth information concerning repurchase agreements for
the periods indicated:
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED
SEPTEMBER 30,
----------------------------------------
1997 1996 1995
---------------- ------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Maximum amount of outstanding agreements at any month
end during the period .............................. $30,000 $-- $ 33,600
Average amount outstanding during the period ...... $8,828 $-- $ 6,572
Weighted average interest rate for the period ...... 5.73% -- 5.59%
Maturity .......................................... Nov. 28, 1997 -- --
</TABLE>
At September 30, 1997, the Company had $34.0 million of mortgage-backed
securities pledged under repurchase agreements. At September 30, 1996 and 1995,
the Company had no pledged securities under repurchase agreements.
(11) COMPANY OBLIGATED MANDATORILY REEDEMABLE TRUST PREFERRED SECURITIES OF
SUBSIDIARY TRUST HOLDING SOLELY JUNIOR SUBORDINATED DEFERRABLE INTEREST
DEBENTURES OF THE COMPANY.
On December 30, 1996, a newly formed trust subsidiary created under the
laws of Delaware, BankUnited Capital, issued $50 million of 10-1/4% Trust
Preferred Securities, Series A and $2 million of common securities. The common
securities are wholly owned by the Company. In connection with this
transaction, BankUnited Capital simultaneously purchased $52 million of 10-1/4%
Junior Subordinated Deferrable Interest Debentures, Series A issued by
BankUnited Financial Corporation with terms similar to the 10-1/4% Trust
Preferred Securities, Series A which are the sole assets of BankUnited Capital.
On March 24, 1997, BankUnited Capital issued an additional $20 million of
10-1/4% Trust Preferred Securities, Series A and $800,000 of common securites,
which common securities are also wholly owned by the Company. BankUnited
Capital simultaneously purchased an additional $20.8 million of 10-1/4% Junior
Subordinated Deferrable Interest Debentures, Series A issued by BankUnited
Financial Corporation. These securities mature December 31, 2026 and pay a
preferential cumulative cash distribution at an annual rate of 10-1/4%. The
Company and BankUnited Capital have the right to defer payment of interest for
up to 5 years. BankUnited Financial Corporation has guaranteed all of the
obligations of the 10-1/4% Trust Preferred Securities, Series A subject to
certain limitations.
On June 5, 1997, BankUnited Capital II, a newly formed trust subsidiary
created under the laws of Delaware, issued $46 million of 9.60% Cumulative
Trust Preferred Securities and $1.84 million of common securities. The common
securities are wholly owned by the Company. In connection with this
transaction, BankUnited Capital II simultaneously purchased $47.8 million of
9.60% Junior Subordinated Deferrable Interest Debentures issued by BankUnited
Financial Corporation with terms similar to the 9.60% Cumulative Trust
Preferred Securities which are the sole assets of BankUnited Capital II.
These securities mature June 30, 2027 and pay a preferential cumulative
cash distribution at an annual ratae of 9.60%. The Company and BankUnited
Capital II have the right to defer payment of
75
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(11) COMPANY OBLIGATED MANDATORILY REEDEMABLE TRUST PREFERRED SECURITIES OF
SUBSIDIARY TRUST HOLDING SOLELY JUNIOR SUBORDINATED DEFERRABLE INTEREST
DEBENTURES OF THE COMPANY.--(CONTINUED)
interest for up to five years. BankUnited Financial Corporation has guaranteed
all the obligations of the 9.60% Cumulative Trust Preferred Securities, subject
to certain limitations. The 9.60% Junior Subordinated Deferrable Interest
Debentures rank pari pasu with the 10-1/4% Junior Subordinated Deferrable
Interest Debentures.
Considered together the back-up undertakings constitute a full and
unconditional guarantee by the Company of the obligations of the Trust
Preferred Securities.
(12) REGULATORY CAPITAL
The Bank is required by federal regulations to maintain minimum levels of
capital as follows:
<TABLE>
<CAPTION>
REGULATORY CAPITAL
REQUIREMENT ACTUAL CAPITAL EXCESS CAPITAL
--------------------------- ---------------------------- ----------------------------
1997 1996 1997 1996 1997 1996
------------ ------------ ------------- ------------ ------------- ------------
(DOLLAR IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Tangible capital ......... $ 31,542 $ 12,196 $ 169,708 $ 56,967 $ 138,166 $ 44,771
1.5% 1.5% 8.1% 7.0% 6.6% 5.5%
Core Capital ............ $ 63,084 $ 24,392 $ 169,708 $ 56,967 $ 106,624 $ 32,575
3.0% 3.0% 8.1% 7.0% 5.1% 4.0%
Risk-based capital ...... $123,365 $ 33,927 $ 173,725 $ 60,164 $ 50,360 $ 26,237
8.0% 8.0% 11.3% 14.2% 3.3% 6.2%
</TABLE>
Under the Office of Thrift Supervision (OTS) regulations adopted to
implement the "prompt corrective action" provisions of the Federal Deposit
Insurance Corporation Improvement Act of 1991 (the "FDICIA"), a "well
capitalized" institution must have a risk-based capital ratio of 10%, a core
capital ratio of 5% and a Tier 1 risk-based capital ratio of 6%. (The "Tier 1
risk-based capital" ratio is the ratio of core capital to risk-weighted
assets.) The Bank is a well capitalized institution under the definitions as
adopted. Regulatory capital and net income amounts as of and for the years
ended September 30, 1997, 1996 and 1995 did not differ from regulatory capital
and net income amounts reported to the OTS.
On August 31, 1993, the OTS adopted an amendment to its regulatory capital
regulations to take into account a savings institution's exposure to the risk
of loss from changing interest rates. Under the regulation as amended, a
savings institution with an above normal level of interest rate risk exposure
will be required to deduct an interest rate risk ("IRR") component from its
total capital when determining its compliance with the risk-based capital
requirements. An "above normal" level of interest rate risk exposure is a
projected decline of 2% in the net present value of an institution's assets and
liabilities resulting from a 2% swing in interest rates. The IRR component will
equal one-half of the difference between the institution's measured interest
rate exposure and the "normal" level of exposure. Savings institutions will be
required to file data with the OTS that the OTS will use to calculate, on a
quarterly basis (but with a two-quarter lag), institutions' measured interest
rate risk and IRR components. Implementation of the IRR requirements have been
delayed pending the testing of the
76
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(12) REGULATORY CAPITAL--(CONTINUED)
OTS appeals process. If the IRR component had been required as of September 30,
1997, the Bank would have been required to deduct an IRR component from its
total capital when determining its compliance with its risk-based capital
requirements, however the Bank would continue to be well capitalized.
Payment of dividends by the Bank is limited by federal regulations, which
provide for certain levels of permissible dividend payments depending on the
Bank's regulatory capital and other relevant factors.
(13) STOCKHOLDERS' EQUITY
The Company has the following capital structure:
PREFERRED STOCK--issuable in series with rights and preferences to be
designated by the Board of Directors. As of September 30, 1997, 5,666,310
shares were authorized but not designated to a particular series.
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES A:
Effective September 30, 1995, pursuant to an Offer to Exchange Preferred
Stock, the holders of the Noncumulative Convertible Preferred Stock, Series A,
agreed to exchange each of the 55,000 shares of the Series A Preferred stock
for one share of the Company's Noncumulative Convertible Preferred Stock,
Series B. Because the dividend rate, redemption price, and the liquidation
preference for the Series B Preferred Stock are lower than those for the Series
A Preferred Stock, the Company agreed not to redeem the shares of Series B
Preferred Stock issued pursuant to the exchange offer for a period of three
years and for three years thereafter, such Series B Preferred Stock will only
be redeemed at a 50% premium or $11.0625 per share.
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES B:
Authorized shares--200,000 shares.
Issued and outstanding shares--183,818 shares
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $0.6750 per share beginning October 1, 1997 and $0.7375 per
share prior to that date.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $7.375 per share.
Redemption Prior to October 1, 1997--except for the shares converted from
Series A discussed above, at the option of the Company at $7.67 per share at
September 30, 1995, declining thereafter at $.07375 per share during each year
through January 31, 1998, and thereafter the redemption price remains at $7.375
per share.
Effective October 1, 1997, the Company, in exchange for a reduction in the
dividend rate described above, has agreed not to redeem the Series B, Preferred
Stock until October 1, 2007 or later unless earlier redemption is approved by
the holders of at least 50 percent of the Series B Preferred shares.
77
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(13) STOCKHOLDERS' EQUITY--(CONTINUED)
Voting rights--two-and-one-half votes per share. If the Company fails to
pay dividends for six quarters, whether or not consecutive, the holders shall
have the right to elect two additional directors until dividends have been paid
for four consecutive quarters.
Convertibility--convertible into 1.4959 shares (adjusted for all stock
dividends) of Class B Common Stock for each share of Noncumulative Convertible
Preferred Stock, Series B, surrendered for conversion, subject to adjustment on
the occurrence of certain events.
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES C:
Authorized, issued and outstanding shares--none as of September 30, 1997
and 363,636 shares as of September 30, 1996.
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $0.550 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $5.50 per share.
Redemption--at the option of the Company, at $5.50 per share.
Voting rights--nonvoting.
Convertibility--convertible into 1.45475 shares (adjusted for all stock
dividends) of Class A Common Stock for each share of Noncumulative Preferred
Stock, Series C, surrendered for conversion, subject to adjustment on the
occurrence of certain events.
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES C-II:
Authorized, issued and outstanding shares--none as of September 30, 1997
and 222,223 shares as of September 30, 1996.
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $0.80 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $9.00 per share.
Redemption--at the option of the Company, at $9.00 per share.
Voting rights--nonvoting.
Convertibility--convertible into 1.3225 shares (adjusted for all stock
dividends) of Class A Common Stock for each share of Noncumulative Preferred
Stock, Series C-II, surrendered for conversion, subject to adjustment on the
occurrence of certain events.
78
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(13) STOCKHOLDERS' EQUITY--(CONTINUED)
8% NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES 1993:
Authorized shares--1,610,000 shares.
Issued and outstanding--744,870 shares as of September 30, 1997 and
September 30, 1996.
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $.80 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $10.00 per share.
Redemption--not redeemable prior to July 1, 1998, unless certain criteria
are met, in which case the redemption price would be $10.00 per share;
beginning July 1, 1998, redemption is at the option of the Company at a
redemption price of $10.40 per share, declining thereafter at $0.08 per share
during each year through July 1, 2003, and thereafter the redemption price
remains $10.00 per share.
Voting rights--nonvoting. However, if the Company fails to pay dividends
for six quarters, whether or not consecutive, the holders shall have the right
to elect two additional directors until dividends have been paid for four
consecutive quarters.
Convertibility--convertible into one share of Class A Common Stock for
each share of non-cumulative Convertible Preferred Stock, Series 1993,
surrendered for conversion, subject to adjustment on the occurrence of certain
events.
9% NONCUMULATIVE PERPETUAL PREFERRED STOCK:
Authorized shares--1,851,417 shares as of September 30, 1997 and 2,300,000
shares as of September 30, 1996.
Issued and outstanding--701,417 as of September 30, 1997 and 1,150,000 as
of September 30, 1996.
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $0.90 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $10.00 per share.
Redemption--not redeemable prior to October 1, 1998; subsequent to
September 30, 1998, redemption is at the option of the Company at a redemption
price of $10.00 per share.
Voting rights--nonvoting. However, if the Company fails to pay dividends
for six quarters, whether or not consecutive, the holders shall have the right
to elect two additional directors until dividends have been paid for four
consecutive quarters.
Convertibility--none.
79
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(13) STOCKHOLDERS' EQUITY--(CONTINUED)
8% NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES 1996:
Authorized shares--608,732 shares as of September 30, 1997 and none as of
September 30, 1996.
Issued and outstanding shares--545,191 shares as of September 30, 1997 and
none as of September 30, 1996.
Dividends--non-cumulative cash dividends payable quarterly at the fixed
annual rate of $1.20 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $15.00 per share.
Redemption--called for redemption effective October 10, 1997 for $15.00
per share. As a result 927,204 shares were converted to Class A Common Stock
and 5,696 shares were or will be redeemed.
Voting rights--nonvoting except under certain circumstances.
Convertibility--convertible into 1.67 shares of Class A Common Stock for
each share of 8% Noncumulative Convertible Preferred Stock, Series 1996,
surrendered for conversion.
CLASS A COMMON STOCK:
Issuable in series with rights and preferences to be designated by the
Board of Directors:
As of September 30, 1997, 10,000,000 shares of Class A Common Stock were
authorized but not designated to a series. As of September 30, 1996, 5,000,000
shares were authorized but not designated.
SERIES I CLASS A COMMON STOCK:
Authorized shares--20,000,000 at September 30, 1997 and 10,000,000 at
September 30, 1996.
Issued and outstanding--9,257,098 shares as of September 30, 1997 and
5,454,201 shares as of September 30, 1996.
Dividends--as declared by the Board in the case of a dividend on the Class
A Common Stock alone or not less than 110% of the amount per share of any
dividend declared on the Class B Common Stock.
Voting rights--one tenth of one vote per share.
In October 1997, the Company issued 3,680,000 shares of Series I Class A
Common Stock pursuant to a public stock offering. Net proceeds from the
offering were approximately $43.9 million.
80
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(13) STOCKHOLDERS' EQUITY--(CONTINUED)
CLASS B COMMON STOCK:
Authorized shares--3,000,000.
Issued and outstanding--275,685 shares as of September 30, 1997 and
251,515 shares as of September 30, 1996.
Dividends--as declared by the Board of Directors.
Voting rights--one vote per share.
Convertibility--convertible into one share of Class A Common Stock for
each share of Class B Common Stock surrendered for conversion, subject to
adjustment on the occurrence of certain events.
(14) STOCK BONUS PLAN, OPTION AGREEMENTS AND OTHER BENEFIT PLANS
The Company maintains the 1992 Stock Bonus Plan whereby it is authorized
to issue up to 125,000 shares and to allow directors of the Company who are not
employees to participate in the plan and receive stock in partial payment of
their director's fees. As of September 30, 1997, 64,857 shares of Class A
Common Stock and 54,779 shares of Class B Common Stock have been issued under
the 1992 Stock Bonus Plan. As of September 30, 1997, there were 5,364 shares
available for grant under the 1992 Stock Bonus Plan.
The Company also maintains a non-statutory stock option plan under which
options for up to 825,000 shares of Class A and Class B Common Stock may be
granted. The options are for a period of 10 years and are exercisable at the
fair market value of the stock at the grant date. As of September 30, 1997,
825,000 options have been granted under this plan and 75,207 options have been
exercised.
The Company also maintains an incentive stock option plan under which
options for up to 250,000 shares of Class A and Class B Common Stock may be
granted. As of September 30, 1997, 250,000 options have been granted under this
plan.
BankUnited's Board of Directors approved several non-qualified stock
option agreements (the "Agreements") under which options to purchase shares of
Class B Common Stock were granted at the fair market price of the Class B
Common Stock on the date of the grant. The Agreements, which originally expired
on October 23, 1994, have been extended pursuant to Stockholders' approval to
October 23, 1999. As of September 30, 1997, the Agreements are exercisable for
a total of 155,367 shares at the exercise price of $4.64 per share; none have
been exercised.
Pursuant to stockholder approval in February 1997, the Company maintains
the 1996 Incentive and Stock Award Plan. Under this plan, the Compensation
Committee of the Board of Directors may grant options to purchase, or may issue
in connection with Stock Awards, Stock Bonuses and Restricted Stock, up to
550,000 shares of Class A or Class B Common Stock. Additionally, the number of
shares of Noncumulative Convertible Preferred Stock, Series B for which Options
may be granted or which may be issued in connection with Stock Bonuses, Stock
Awards and Restricted Stock in lieu of cash or other
81
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(14) STOCK BONUS PLAN, OPTION AGREEMENTS AND OTHER BENEFIT PLANS--(CONTINUED)
stock awards is 100,000. As of September 30, 1997, options to purchase 149,365
shares of Class A Common Stock and 237,000 shares of Class B Common Stock had
been granted and 9,452 shares of Class A Common Stock had been issued.
The following table presents additional data concerning the Company's
outstanding stock options:
<TABLE>
<CAPTION>
NUMBER OPTION PRICE AGGREGATE
OF SHARES PER SHARE OPTION PRICE
----------- ---------------- -------------
<S> <C> <C> <C>
Options outstanding, September 30, 1994 ............ 616,587 $3.11 - $10.98 3,361,572
Options granted .................................... 208,671 4.95 - 7.95 1,139,902
Options exercised ................................. (6,695) 3.21 - 5.73 (23,958)
------- ---------------- ----------
Options outstanding, September 30, 1995 ............ 818,563 3.11 - 10.98 4,477,516
Options granted .................................... 122,585 7.24 - 8.26 933,064
------- ---------------- ----------
Options outstanding, September 30, 1996 ............ 941,148 3.11 - 10.98 5,410,580
Options granted (including Suncoast options) ...... 729,381 3.00 - 10.74 5,839,961
Options exercised ................................. (83,004) 3.00 - 8.80 (490,932)
------- ---------------- ----------
Options outstanding, September 30, 1997 ............ 1,587,525 $3.00 - $10.98 $10,759,609
========= ================ ===========
</TABLE>
The Company has adopted SFAS No. 123, "Accounting for Stock-Based
Compensation" and as permitted by SFAS No. 123, the Company continues to follow
the measurement provisions of Accounting Principles Board Option No. 25,
"Accounting for Stock Issued to Employees, " and does not recognize
compensation expense for its stock-based incentive plans. Had compensation cost
for the Company's stock based incentive compensation plans been determined
based on the fair value at the grant dates for awards under those plans
consistent with the methodology prescribed by SFAS No. 123, the Company's net
income and earnings per share for fiscal 1997 and 1996 would have been reduced
to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
As Reported ........................... $7,599 $2,586
Pro forma .............................. 6,218 2,349
Primary earnings per common share:
As reported ........................... $ .54 $ .10
Pro forma .............................. $ .39 $ .04
Fully diluted earnings pper common share:
As reported ........................... $ .54 $ .10
Pro forma .............................. $ .38 $ .04
</TABLE>
The fair value of each option is estimated on the date of the grant using
the Black Scholes option pricing model, with the following historical weighted
average assumptions applied to grants in fiscal 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Dividend yields ............... -- --
Expected volatility ............ 30.1 % 30.1 %
Risk-free interest rates ...... 6.30% 6.52%
Expected life (in years) ...... 9.52 7.88
</TABLE>
82
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(14) STOCK BONUS PLAN, OPTION AGREEMENTS AND OTHER BENEFIT PLANS--(CONTINUED)
Based upon the above assumptions, the weighted average fair value of
options granted during 1997 and 1996 was $2,484,000 and $334,000, respectively.
The Company has a 401(k) savings plan pursaunt to which eligible employees
are permitted to contribute up to 15% of their annual salary to the savings
plan. The Company will provide matching contributions at a rate of 33% of such
contributions, up to a maximum of 2% of an employee's salary. The amount of
such matching by the Company for the years ended September 30, 1997, 1996, and
1995 totaled approximately $34,600, $7,000, and $30,000 respectively. Employees
are eligible to participate in the plan after one year of service and begin
vesting in the company's contribution after two years of participation in the
plan at the rate of 25% per year up to 100%.
In September 1995, the Company's Board of Directors adopted a Profit
Sharing Plan. Under the terms of the plan, the Company, at the discretion of
the Board of Directors, may contribute Class A Common Stock to the plan. The
contributions are allocated to the account of the eligible employees based upon
their salaries. Employees become eligible for the plan after one year of
service and become vested at the rate of 20% per year up to 100%. The Board of
Directors authorized a contribution of $170,000, $100,000 and $75,000 in 1997,
1996 and 1995, respectively.
In connection with the Suncoast acquisition the Company assumed 119,000 of
Suncoast's options with option prices ranging from $3.00 to $7.38 per share of
Class A Common Stock with an aggregate exercise price of $610,000. As of
September 30, 1997, 73,000 of these options had been exercised.
(15) INCOME TAXES
The Company's effective tax rate differs from the statutory federal income
tax rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------------------------------
1997 1996 1995
--------------------- --------------------- ----------------------
AMOUNT % AMOUNT % AMOUNT %
-------- ---------- -------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Tax at federal income tax rate ...... $4,295 34.0% $1,443 34.0% $3,394 34.0%
Increase (decrease) resulting from:
State tax ........................... 314 2.5% 154 3.6 362 3.6
Other, net ........................ 424 3.3% 60 1.5 (15) (0.1)
------ ---- ------ ---- ------ ----
Total .............................. $5,033 39.8% $1,657 39.1% $3,741 37.5%
====== ==== ====== ==== ====== ====
</TABLE>
83
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(15) INCOME TAXES--(CONTINUED)
The components of the provision for income taxes for the year ended
September 30, 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
--------------------------------
1997 1996 1995
-------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current-federal ...... $1,150 $1,324 $3,590
Current-state ......... 125 227 620
Deferred-federal ...... 3,391 90 (400)
Deferred-state ......... 367 16 (69)
------ ------ ------
Total ............... $5,033 $1,657 $3,741
====== ====== ======
</TABLE>
The tax effects of significant temporary differences included in the
deferred tax asset as of September 30, 1997 and 1996 were:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------
1997 1996
-------- -----
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Deferred tax asset:
Non-accrual interest ............... $ 200 $185
Loan loss and other reserves ...... 875 431
Fixed assets ........................ 77 5
Deferrals and amortization ......... 250 19
Purchase accounting ............... 1,605 --
Other .............................. 236 --
------ ----
Gross deferred tax asset ......... 3,243 640
------ ----
Deferred tax liability:
FHLB Atlanta stock dividends ...... 159 167
Deferrals and amortizations ......... 912 --
Other .............................. 91 13
------ ----
Gross deferred tax liability ...... 1,162 180
------ ----
Net deferred tax asset ............ $2,081 $460
====== ====
</TABLE>
At September 30, 1997, the Company had $409,000 in Tax Bad Debt Reserves
originating before December 31, 1987 for which deferred taxes have not been
provided. The amount becomes taxable under the Internal Revenue Code upon the
occurrence of certain events, including certain non-dividend distributions. The
Company does not anticipate any actions which would ultimately result in the
recapture of this amount for income tax purposes.
84
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(15) INCOME TAXES--(CONTINUED)
The components of deferred income tax provision (benefit) relate to the
following:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------
1997 1996 1995
-------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Differences in book/tax depreciation ...... $ -- $(10) $ (21)
Delinquent interest ........................ (18) (7) (80)
FHLB Stock dividends ..................... -- -- (144)
Loan fees ................................. 15 -- --
Loan loss and other reserves ............... (294) 156 (164)
Deferrals and amortization ............... (145) (33) (60)
SAIF special assessment .................. 758 -- --
Purchase accounting ........................ 2,635 -- --
Other .................................... 807 -- --
------ ------ ------
Total deferred taxes ..................... $3,758 $106 $ (469)
====== ====== ======
</TABLE>
In connection with the acquisition of Suncoast, the Company recorded
deferred tax assets and liabilities for the differences between values assigned
in purchase accounting and the tax bases of acquired assets and liabilities.
The resultant net deferred tax asset is not included in the summary of
significant temporary differences at September 30, 1996 above. Approximately
$2,635,000 of this deferred tax asset has been recognized as deferred tax
expense during the year ended September 30, 1997 and $1,605,000 represents the
tax effect at September 30, 1997 of amounts deductible for tax purposes in
future periods.
The Company also acquired net deferred tax assets of approximately
$1,140,000 in conjunction with its acquisition of Suncoast. These net deferred
tax assets are not included in the summary of significant temporary differences
at September 30, 1996 above.
(16) COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company enters into instruments that
are not recorded in the consolidated financial statements, but are required to
meet the financing needs of its customers and to reduce its own exposure to
fluctuations in interest rates. These financial instruments include commitments
to extend credit and standby letters of credit. Those instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the consolidated statements of financial condition. The
contract or notional amounts of those instruments reflect the extent of
involvement the Company has in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by
the other party on the financial instrument for commitments to extend credit
and standby letters of credit by the other party is represented by the
contractual amount of those instruments. The Company uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or
85
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(16) COMMITMENTS AND CONTINGENCIES--(CONTINUED)
other termination clauses and may require payment of a fee. Total commitments
to extend credit at September 30, 1997 were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------------------
FIXED VARIABLE
RATE RATE TOTAL
--------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Commitments to fund loans ......... $ 9,980 $ 15,826 $ 25,806
Loans in process .................. 4,297 8,664 12,961
Letters of credit .................. 127 -- 127
Commitments to purchase loans ...... -- 873,553 873,553
------- -------- --------
Total .............................. $14,404 $898,043 $912,447
======= ======== ========
</TABLE>
The Company evaluates each customer's credit worthiness on a case-by-case
basis. The amount of collateral obtained, if deemed necessary by the Company,
upon extension of credit is based on management's credit evaluation of the
customer. Collateral varies but may include accounts receivable, property,
plant and equipment, residential real estate, and income-producing commercial
properties.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. The Company requires collateral to support those commitments.
The Company is a party to certain other claims and litigation arising in
the ordinary course of business. In the opinion of management, the resolution
of such claims and litigation will not materially affect the Company's
consolidated financial position or results of operations.
(17) RELATED PARTY TRANSACTIONS
The Company employs the services of a law firm, of which the Company's
Chairman of the Board and President is senior managing director and of which
another director of the Company is managing director; and the services of an
insurance agency, of which a member of the Board of Directors is a vice
president. For the years ended September 30, 1997, 1996 and 1995, total fees (a
portion of which were capitalized) paid to this law firm totaled approximately
$2.2 million, $986,000, and $1.1 million, respectively, and amounts paid to
this insurance agency totaled approximately $373,000, $147,000, and $129,000,
respectively.
In fiscal 1997, the Company leased property for a new branch, which is 25%
owned by the Company's Chairman of the Board. The lease is for a term of 3
years with four three year options to renew. The annual rent for the property
is approximately $126,000, and in fiscal 1997, the Company paid a total of
$82,000 in rent.
86
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(18) BANKUNITED FINANCIAL CORPORATION
The following summarizes the major categories of the Company's (parent
company only) financial statements:
CONDENSED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
------------------------
1997 1996
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Assets:
Cash ......................................................... $ 623 $ 88
FHLB overnight deposits ....................................... 2,822 7,889
Tax certificates ............................................. 40 312
Investments, net (market value of approximately $10 and $10 at
September 30, 1997 and 1996, respectively) .................. 10 10
Investments available for sale .............................. -- 155
Mortgage-backed securities, available for sale ............... 18,644 1,309
Accrued interest receivable ................................. 173 132
Investment in the Bank ....................................... 183,807 59,443
Investment in subsidiaries .................................... 4,640 --
Other assets ................................................ 9,622 248
-------- -------
Total ...................................................... $220,381 $69,586
======== =======
Liabilities ................................................... $ 3,396 $ 475
Junior subordinated deferrable interest debentures ............ 120,640 --
Stockholders' equity:
Preferred stock ............................................. 22 27
Common stock ................................................ 95 57
Paid-in capital ............................................. 86,679 62,055
Retained earnings ............................................. 11,988 7,279
Net unrealized gains (losses) on securities available for sale,
net of taxes ................................................ 861 (307)
-------- -------
Total stockholders' equity ................................. 99,645 69,111
-------- -------
Total liabilities and stockholders' equity .................. $220,381 $69,586
======== =======
</TABLE>
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
----------------------------------
1997 1996 1995
----------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest income .................. $ 2,626 $ 803 $ 307
Interest expense .................. 6,726 17 36
Equity income of the Bank ......... 10,927 2,406 6,587
Operating expenses ............... 1,166 491 818
-------- ------ ------
Income before income taxes ......... 5,661 2,701 6,040
Income tax expense (benefit) ...... (1,938) 115 (200)
-------- ------ ------
Net income ........................ $ 7,599 $2,586 $6,240
======== ====== ======
</TABLE>
87
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(18) BANKUNITED FINANCIAL CORPORATION--(CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
1997 1996 1995
------------ ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flow from operating activities:
Net income ................................................... $ 7,599 $ 2,586 $ 6,240
Less: Undistributed income of the Bank ..................... (11,551) (406) (6,587)
Other ...................................................... (2,757) 242 156
--------- --------- --------
Net cash provided by (used in) operating activities ......... (6,709) 2,422 (191)
--------- --------- --------
Cash from investing activities:
Equity contributions to the Bank ........................... (85,000) (16,000) --
Equity contributions to subsidiaries ........................ (4,640) -- --
Purchase of investment securities ........................... -- (155) --
Proceeds from sale of investments ........................... 155 -- --
Purchase of mortgage-backed securities ..................... (27,411) -- --
Proceeds from repayments of mortgage- backed securities . 5,054 368 181
Proceeds from sales of mortgage-backed securities ............ 5,021 -- --
Net decrease in tax certificates ........................... 269 145 732
--------- --------- --------
Net cash provided by (used in) investing activities ......... (106,552) (15,642) 913
--------- --------- --------
Cash flow from financing activities:
Net proceeds from issuance of Junior subordinated
deferrable interest debentures ........................... 114,776 -- --
Net proceeds from issuance of common stock .................. 1,329 23,198 222
Dividends paid on preferred stock ........................... (2,890) (2,086) (2,010)
Preferred Stock, Series 9% tender offer ..................... (4,486) -- --
--------- --------- --------
Net cash provided by (used in) financing activities ......... 108,729 21,112 (1,788)
(Decrease) increase in cash and cash equivalents ............ (4,532) 7,892 (1,066)
Cash and cash equivalents at beginning of year ............... 7,977 85 1,151
--------- --------- --------
Cash and cash equivalents at end of year ..................... $ 3,445 $ 7,977 $ 85
========= ========= ========
</TABLE>
(19) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The information set forth below provides disclosure of the estimated fair
value of the Company's financial instruments. Management has made estimates of
fair value discount rates that it believes to be reasonable. However, because
there is no market for many of these financial instruments, management has no
basis to determine whether the fair value presented would be indicative of the
value negotiated in an actual sale. The fair value estimates do not consider
the tax effect that would be associated with the disposition of the assets or
liabilities at their fair value estimates.
Fair values are estimated for loan portfolios with similar financial
characteristics. Loans are segregated by category, such as commercial,
commercial real estate, residential mortgage, second mortgages, and other
installment. Each loan category is further segmented into fixed and adjustable
rate
88
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(19) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS--(CONTINUED)
interest terms and by performing and non-performing status. The fair value of
loans, except residential mortgage and adjustable rate loans, is calculated by
discounting scheduled cash flows through the estimated maturity using estimated
market discount rates that reflect the credit and interest rate risk inherent
in the loan. The estimate of average maturity is based on historical experience
with prepayments for each loan classification, modified, as required, by an
estimate of the effect of current economic and lending conditions.
For residential mortgage loans, fair value is estimated by discounting
contractual cash flows adjusted for national historical prepayment estimates
using discount rates based on secondary market sources adjusted to reflect
differences in servicing and credit costs.
For adjustable-rate loans, the fair value is estimated at book value after
adjusting for credit risk inherent in the loan. The Company's interest rate
risk is considered insignificant since the majority of the Company's adjustable
rate loans are based on the average cost of funds for the Eleventh District of
the Federal Home Loan Bank System ("COFI") or one-year Constant Maturity
Treasuries ("CMT") rates and adjust monthly or at intervals generally over a
period not exceeding one year.
The fair value of the tax certificates is estimated at book value as these
investments historically have had relatively short lives and their yields
approximate market rates. The fair value of mortgage-backed securities and
investment securities is estimated based on bid prices available from
securities dealers.
The fair value of deposits with no stated maturity, such as
non-interest-bearing demand deposits, savings and NOW accounts, and money
market accounts, is equal to the amount payable on demand. The fair value of
certificates of deposit is based on the discounted value of contractual cash
flows. The discount rate is estimated using the Company's current rates for
deposits of similar maturities adjusted for insurance costs.
The fair value of the Trust Preferred Securities is estimated based on bid
prices available from securities dealers.
The fair value of subordinated notes is estimated by discounting
contractual cash flows using estimated market rates. The contract amounts and
related fees of the Company's commitments to extend credit approximate the fair
value of these commitments.
89
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
(19) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS--(CONTINUED)
The following table presents information for the Company's financial
instruments at September 30, 1997 and 1996:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
------------------------------
CARRYING VALUE FAIR VALUE
---------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Financial assets:
Cash and overnight investments ............... $ 89,984 $ 89,984
Tax certificates and other investments ...... 73,943 74,062
Mortgage-backed securities .................. 120,271 120,211
Loans receivable ........................... 1,765,723 1,814,459
Mortgage servicing assets .................. 4,783 4,890
Other interest-earning assets ............... 33,599 33,599
Financial liabilities:
Deposits .................................... $1,195,892 $1,197,871
Borrowings ................................. 701,484 704,705
Trust Preferred Securities .................. 116,000 119,010
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
------------------------------
CARRYING VALUE FAIR VALUE
---------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Financial assets:
Cash and overnight investments ............... $ 34,136 $ 34,136
Tax certificates and other investments ...... 46,784 46,784
Mortgage-backed securities .................. 70,163 69,741
Loans receivable ........................... 646,385 646,547
Other interest-earning assets ............... 12,225 12,225
Financial liabilities:
Deposits .................................... $506,106 $506,025
Advances from the FHLB ..................... 237,000 237,218
Subordinated notes ........................... 775 859
</TABLE>
90
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
The information contained under the caption "Election of Directors" to
appear in the Company's definitive proxy statement relating to the Company's
1998 Annual Meeting of Stockholders, which definitive proxy statement will be
filed with the Securities and Exchange Commission not later than 120 days after
the end of the Company's fiscal year covered by this report on Form 10-K
(hereinafter referred to as the "Annual Meeting Proxy Statement"), is
incorporated herein by reference. Information concerning the executive officers
of the Company is included in Part I of this Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained under the caption "Executive Compensation" to
appear in the Annual Meeting Proxy Statement is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained under the caption "Security Ownership of Certain
Beneficial Owners and Management" to appear in the Annual Meeting Proxy
Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the captions "Compensation Committee
Interlocks and Insider Participation" and "Certain Relationships and Related
Transactions" to appear in the Annual Meeting Proxy Statement is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
(1) Financial Statements.
The following consolidated financial statements of the Company and the
report of the independent certified public accountants thereon filed with this
report:
Report of Independent Certified Public Accountants (Price
Waterhouse LLP).
Consolidated Statements of Financial Condition as of September 30,
1997 and 1996.
Consolidated Statements of Operations for the years September 30,
1997, 1996 and 1995.
Consolidated Statements of Stockholders' Equity for the years ended
September 30, 1997, 1996 and 1995.
91
<PAGE>
Consolidated Statements of Cash Flows for the years ended September
30, 1997, 1996 and 1995.
Notes to Consolidated Financial Statements.
(2) Financial Statement Schedules.
Schedules are omitted because the conditions requiring their filing
are not applicable or because the required information is provided in
the Consolidated Financial Statements, including the Notes thereto.
(3) Exhibits.*
2.1 Agreement and Plan of Merger, dated July 15, 1996, between
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).
2.2 Agreement and Plan of Merger between BankUnited and Consumers
Bancorp, Inc. dated September 19, 1997 (Exhibit 2.2 to BankUnited's
Form S-4 Registration Statement, File No. 333-39921, as filed with the
Securities and Exchange Commission on November 10, 1997).
3.1 Articles of Incorporation of BankUnited.
3.2 Statement of Designation of Series I Class A Common Stock and
Class B Common Stock of BankUnited (included as an appendix to Exhibit
3.1).
3.3 Statement of Designation of Noncumulative Convertible Preferred
Stock, Series A, of BankUnited (included as an appendix to Exhibit
3.1).
3.4 Statement of Designation of Noncumulative Convertible Preferred
Stock, Series B of BankUnited (included as appendix to Exhibit 3.1).
3.5 Statement of Designation of 8% Noncumulative Convertible
Preferred Stock, Series 1993 of BankUnited (included as an appendix to
Exhibit 3.1).
3.6 Statement of Designation of 9% Noncumulative Perpetual Preferred
Stock of BankUnited (included as an appendix to Exhibit 3.1).
3.7 Statement of Designation of 8% Noncumulative Convertible
Preferred Stock, Series 1996 of BankUnited (included as appendix to
Exhibit 3.1).
3.8 Form of Letter Agreement between BankUnited and the holders of
shares of BankUnited's Noncumulative Convertible Preferred Stock,
Series B.
3.9 Bylaws of BankUnited (Exhibit 4.5 to BankUnited's Form S-8
Registration Statement, File No. 333-43211, as filed with the
Securities and Exchange Commission on November 14, 1996).
4.1 Agreement for Advances and Security Agreement with Blanket
Floating Lien dated as of September 25, 1992, between BankUnited, FSB
(the "Bank") and the Federal Home Loan Bank of Atlanta (Exhibit 4.1 to
the Bank's Form 10-K for the year ended September 30, 1992, filed with
the Securities and Exchange Commission as an exhibit to BankUnited's
Form 8-K dated March 25, 1993).
92
<PAGE>
4.2 Forms of Series 15A-F, Series 18E and Series 20A-F of
Subordinated Notes of the Bank (Exhibit 4.3 to BankUnited's Form S-4
Registration Statement, File No. 33-55232, as filed with the Securities
and Exchange Commission on December 2, 1992).
10.1 Non-Statutory Stock Option Plan, as amended, (Exhibit 4.9 to
BankUnited's Form S-8 Registration Statement, File No. 33-76882, as
filed with the Securities and Exchange Commission on March 24, 1994).
**
10.2 1992 Stock Bonus Plan, as amended (Exhibit 10.2 to BankUnited's
Form 10-K Report for the year ended September 30, 1994 [the "1994
10-K"]).**
10.3 1994 Incentive Stock Option Plan. (Exhibit 10.3 to the 1994
10-K).**
10.4 The Bank's Profit Sharing Plan. (Exhibit 10.4 to BankUnited's
Form S-2 Registration Statement, File No. 33-80791, as filed with the
Securities and Exchange Commission on December 22, 1995).**
10.5 1996 Incentive Compensation and Stock Award Plan (Exhibit 10.5
to BankUnited's Form 10-K Report for the year ended September 30,
1996).**
10.6 Purchase and Assumption Agreement dated March 20, 1995 by and
among BankUnited, the Bank, SouthTrust Corporation, SouthTrust of
Florida, Inc. and SouthTrust Bank of the Suncoast (Exhibit 10.1 to
BankUnited's Form 10-Q Report for the quarter ended March 31, 1995 [the
"March 31, 1995 10-Q"]).
10.7 Purchase and Assumption Agreement dated March 20, 1995 by and
among BankUnited, the Bank, SouthTrust Corporation, SouthTrust of
Florida, Inc., and SouthTrust Bank of Southwest Florida, N.A. (Exhibit
10.2 to the March 31, 1995 10-Q).
10.8 First Amendment to Purchase and Assumption Agreement dated July
27, 1995 by and among BankUnited, the Bank, SouthTrust Corporation,
SouthTrust of Florida, Inc., and SouthTrust Bank of the Suncoast
(Exhibit 10.1 to BankUnited's Form 10-Q Report for the quarter ended
June 30, 1995 [the "June 30, 1995 10-Q"]).
10.9 First Amendment to Purchase and Assumption Agreement dated July
27, 1995 by and among BankUnited, the Bank, SouthTrust Corporation,
SouthTrust of Florida, Inc., and SouthTrust of Southwest Florida, N.A.
(Exhibit 10.2 to the June 30, 1995 10-Q).
10.10 Form of Employment Agreement between BankUnited and Alfred R.
Camner (Exhibit 10.10 to BankUnited's 10-K Report for the year ended
September 30, 1996).
10.11 Form of Employment Agreement between BankUnited and Earline G.
Ford (Exhibit 10.11 to BankUnited's 10-K Report for the year ended
September 30, 1996).
10.12 Form of Employment Agreement between BankUnited and certain of
its senior officers (Exhibit 10.12 to BankUnited's 10-K Report for the
year ended September 30, 1996).
10.13 Junior Subordinated Indenture with respect to BankUnited's
101/4% Junior Subordinated Debentures. (Exhibit 4.1A to the Company's
Registration Statement on Form S-4, File No. 333-24025, as filed with
the Securities and Exchange Commission on March 27, 1997).
10.14 Supplemental Indenture (Exhibit 4.1B to the Company's
Registration Statement on Form S-4, File No. 333-24025, as filed with
the Securities and Exchange Commission on March 27, 1997).
93
<PAGE>
10.15 Form of Amended and Restated Trust Agreement of BankUnited
Capital. (Exhibit 4.3 to the Company's Registration Statement on Form
S-4, No. 333-24025, as filed with the Securities and Exchange
Commission on March 27, 1997).
10.16 Form of Amended and Restated Guarantee Agreement for
BankUnited Capital. (Exhibit 4.5 to the Company's Registration
Statement on Form S-4, No. 333-24025, as filed with the Securities and
Exchange Commission on March 27, 1997).
10.17 Form of Agreement as to Expenses and Liabilities (included as
an exhibit to Exhibit 99.6 to the Company's Registration Statement on
Form S-4, No. 333-24025, as filed with the Securities and Exchange
Commission on March 27, 1997).
10.18 Registration Rights Agreement (Exhibit 4.6 to the Company's
Registration Statement on Form S-4, No. 333-24025, as filed with the
Securities and Exchange Commission on March 27, 1997).
10.19 Registration Rights Agreement (Exhibit 4.7 to the Company's
Registration Statement on Form S-4, No. 333-24025, as filed with the
Securities and Exchange Commission on March 27, 1997).
10.20 Purchase Agreement (Exhibit 99.4 to the Company's Registration
Statement on Form S-4, No. 333-24025, as filed with the Securities and
Exchange Commission on March 27, 1997).
10.21 Purchase Agreement (Exhibit 99.5 to the Company's Registration
Statement on Form S-4, No. 333-24025, as filed with the Securities and
Exchange Commission on March 27, 1997).
10.22 Form of Indenture with respect to BankUnited's 9.60% Junior
Subordinated Debentures. (Exhibit 4.3 to the Company's Registration
Statement on Form S-2, File No. 333-27597, as filed with the Securities
and Exchange Commission on May 22, 1997).
10.23 Trust Agreement of BankUnited Capital II. (Exhibit 4.6 to the
Company's Registration Statement on Form S-2, File No. 333-27597, as
filed with the Securities and Exchange Commission on May 22, 1997).
10.24 Form of Amended and Restated Trust Agreement of BankUnited
Trust II. (Exhibit 4.7 to the Company's Registration Statement on Form
S-2, No. 333-27597, as filed with the Securities and Exchange
Commission on May 22, 1997).
10.25 Form of Guarantee Agreement for BankUnited Capital II.
(Exhibit 4.9 to the Company's Registration Statement on Form S-2, No.
333-27597, as filed with the Securities and Exchange Commission on May
22, 1997).
10.26 Form of Agreement as to Expenses and Liabilities (included as
an exhibit to Exhibit 4.7) (Exhibit 4.10 to the Company's Registration
Statement on Form S-2, No. 333-27597, as filed with the Securities and
Exchange Commission on May 22, 1997).
11.1 Statement regarding calculation of earnings per common share.
12.1 Statement regarding calculation of earnings to combined fixed
charges and preferred stock dividends.
21.1 Subsidiaries of the Registrant (Exhibit 21.1 to BankUnited's
Form S-4 Registration Statement, File No. 333-39921, as filed with the
Securities and Exchange Commission on November 10, 1997).
94
<PAGE>
23.1 Consent of Price Waterhouse LLP.
24.1 Power of attorney (set forth on the signature page in Part IV
of this Report on Form 10-K for the year ended September 30, 1997).
27.1 Financial Data Schedule.
- ----------------
* Exhibits followed by a parenthetical reference are incorporated herein by
reference from the documents described therein.
** Exhibits 10.1--10.5 are compensatory plans or arrangements.
(B) REPORTS ON FORM 8-K.
During the quarter ended September 30, 1997, the Company filed with the
Securities and Exchange Commission, (i) a Current Report on Form 8-K dated
September 12, 1997, which reported that the Company had called its 8%
Noncumulative Convertible Preferred Stock, Series 1996, for redemption, and
(ii) a Current Report on Form 8-K announcing that the Company had agreed to
acquire Consumers Savings Bancorp, Inc., the parent company of Consumers
Savings Bank.
SUPPLEMENTAL INFORMATION
As of the date of filing of this report on Form 10-K no annual report or
proxy material has been sent to security holders. Such material will be
furnished to security holders and the Securities and Exchange Commission
subsequent to the filing of this report on Form 10-K.
95
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K
to be signed on its behalf by the undersigned, thereunto duly authorized on
December 29, 1997.
BANKUNITED FINANCIAL CORPORATION
By: /s/ Alfred R. Camner
-----------------------------------
Alfred R. Camner
Chairman of the Board, President
and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Alfred R. Camner, Earline G. Ford and Marc
Jacobson and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any or all amendments to
this report on Form 10-K and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or his substitutes, may lawfully do or
cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on December 29, 1997 on behalf of the Registrant by the
following persons and in the capacities indicated.
<TABLE>
<S> <C>
/s/ Alfred R. Camner Chairman of the Board, Chief Executive
- ---------------------------- Officer, President and Director
Alfred R. Camner (Principal Executive Officer)
/s/ Earline G. Ford Executive Vice President, Treasurer and
- ---------------------------- Director
Earline G. Ford
/s/ James A. Dougherty Executive Vice President and Director
- ----------------------------
James A. Dougherty
/s/ Samuel A. Milne Executive Vice President and Chief Financial
- ---------------------------- Officer (Principal Financial Officer and
Samuel A. Milne Principal Accounting Officer)
/s/ Marc D. Jacobson Director
- ----------------------------
Marc D. Jacobson
/s/ Allen M. Bernkrant Director
- ----------------------------
Allen M. Bernkrant
/s/ Lawrence H. Blum Director
- ----------------------------
Lawrence H. Blum
/s/ Patricia L. Frost Director
- ----------------------------
Patricia L. Frost
</TABLE>
96
<PAGE>
<TABLE>
<S> <C>
- --------------------------- Director
Anne W. Solloway
/s/ Neil Messinger Director
- ---------------------------
Neil Messinger
/s/ Christina Cuervo Director
- ---------------------------
Christina Cuervo
- --------------------------- Director
Elia J. Giusti
- --------------------------- Director
Norman Mains
/s/ Bruce Friesner Director
- ---------------------------
Bruce Friesner
/s/ Marc Lipsitz Director and Corporate Secretary
- ---------------------------
Marc Lipsitz
</TABLE>
97
<PAGE>
BANKUNITED FINANCIAL CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED SEPTEMBER 30, 1997
INDEX TO EXHIBITS*
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. PAGE
- ---------------- -----------------
<S> <C> <C>
3.1 Articles of Incorporation of the Company
3.8 Form of Letter Agreement between BankUnited and the holders of
shares of BankUnited Noncumulative Convertible Preferred Stock,
Series B
11.1 Statement regarding calculation of earnings per common share.
12.1 Statement regarding calculation of ratios
23.1 Consent of Price Waterhouse LLP
24.1 Power of Attorney (set forth on the signature page of this
annual report on Form 10-K)
27.1 Financial Data Schedule
</TABLE>
- -------------
* All other exhibits listed under Item 14 of Part IV of the Form 10-K are
incorporated by reference to documents previously filed, as indicated
therein.
98
ARTICLES OF INCORPORATION OF
BANKUNITED FINANCIAL CORPORATION
(as amended)
ARTICLE I
NAME
The name of the corporation is "BANKUNITED FINANCIAL CORPORATION" (the
"Corporation").
ARTICLE II
PRINCIPAL OFFICE
The principal office and mailing address of the Corporation is 255
Alhambra Circle, Coral Gables, Florida 33134.
ARTICLE III
REGISTERED OFFICE AND AGENT
The street address of the Corporation's initial registered office is
255 Alhambra Circle, Coral Gables, Florida 33134. The name of its registered
agent at such address is Nancy L. Ashton.
ARTICLE IV
TERM OF CORPORATE EXISTENCE
The duration of this Corporation is to be perpetual.
ARTICLE V
PURPOSE
The Corporation is a financial institution holding company and may
engage in any activity or business permitted under the laws of the State of
Florida.
ARTICLE VI
CAPITAL STOCK
The total number of shares of all classes of stock that the Corporation
is authorized to issue is 43,000,000 shares, of which 30,000,000 shall be Class
A Common Stock, $.01 par value (the "Class A Common Stock"), 3,000,000 shall be
Class B Common Stock, $.01 par value (the "Class B Common Stock"), and
10,000,000 shall be Preferred Stock, $.01 par value (the "Preferred Stock"). No
holder of the Corporation's stock shall have any preemptive right to acquire the
Corporation's securities.
CLASS A COMMON STOCK. The maximum number of shares of Class A
Common Stock that the Corporation is authorized to have outstanding is
30,000,000 shares at a par value of $.01 per share. The Class A Common
Stock shall be a special class of stock issuable from time to time in
one or more series as specified in Section 607.0602 of the Florida
Business Corporation Act (or in such other manner as may be permitted
by law), as determined from time to time by the Board of Directors and
stated in the resolution or resolutions providing for the issuance of
such series of Class A Common Stock adopted by the Board of Directors
pursuant to authority hereby vested in it, each such series to be
appropriately designated, prior to the issuance of any shares thereof,
by some distinguishing letter, number, or title. The Board of Directors
is hereby expressly granted authority to fix the authorized number of
shares of each series of common stock, and to fix the terms of such
series, including, but not limited to, the following:
(a) the rate or manner of payment of dividends;
1
<PAGE>
(b) whether shares may be redeemed and, if so, the
redemption price and the terms and conditions of redemption;
(c) the amount payable upon shares in the event of
voluntary or involuntary liquidation;
(d) sinking fund provisions, if any, for the
redemption or purchase of shares;
(e) the terms and conditions, if any, on which shares
may be converted;
(f) voting rights, if any; and
(g) the other special rights, if any, and the
qualifications, limitations or restrictions thereof, of the shares of
such series.
The designation of each particular series of Class A Common Stock and
its terms in respect of the foregoing particulars shall be fixed and
determined by the Board of Directors in any manner permitted by law and
stated in the resolution or resolutions providing for the issuance of
such shares adopted by the Board of Directors pursuant to authority
hereby vested in it, before any shares of such series are issued. The
Board of Directors may from time to time increase (but not above the
total number of authorized shares of the class) the number of shares of
any series of Class A Common Stock already created by providing that
any unissued Class A Common Stock shall constitute part of such series,
or may decrease (but not below the number of shares thereof then
outstanding) the number of shares of any series of Class A Common Stock
already created by providing that any unissued shares previously
assigned to such series shall no longer constitute part thereof. The
Board of Directors is hereby empowered to classify or reclassify any
unissued Class A Common Stock by fixing or altering the terms thereof
in respect of the above-mentioned particulars and by assigning the same
to an existing or newly created series from time to time before the
issuance of such shares.
For purposes of determining whether a non-voting series of
Class A Common Stock shall be entitled to vote as a class pursuant to
Section 607.1004 of the Florida Business Corporation Act (or any
successor section or statute hereinafter enacted) on an amendment to
the Corporation's Articles of Incorporation, an amendment that
increases the total number of authorized shares of Class A Common Stock
shall not be considered to be an adverse change to the terms of any
individual series of Class A Common Stock and shall not require a vote
or the consent of the holders of any such series of Class A Common
Stock.
Set forth in Appendix A hereto is the Statement of Designation
setting forth the terms of the Series I Class A Common Stock.
CLASS B COMMON STOCK. The maximum number of shares of Class B
Common Stock that the Corporation is authorized to have outstanding is
3,000,000 shares at a par value of $.01 per share. Holders of Class B
Common Stock are entitled to vote on all questions required by law on
the basis of one vote per share and there shall be no cumulative
voting. The shares of Class B Common Stock shall be convertible into
shares of other classes of capital stock of the Corporation in such
manner as may be provided by the Board of Directors by resolution.
Set forth in Appendix A hereto is the Statement of Designation
setting forth the conversion rights of the Class B Common Stock.
PREFERRED STOCK. The maximum number of shares of Preferred
Stock that the Corporation is authorized to have outstanding is
10,000,000 shares at a par value of $.01 per share. The Preferred Stock
may be issued from time to time in one or more series as specified in
Section 607.0602 of the Florida Business Corporation Act (or in such
other manner as may be permitted by law), as determined from time to
time by the Board of Directors and stated in the resolution or
resolutions providing for the issuance of such series of Preferred
Stock adopted by the Board of Directors pursuant to authority hereby
vested in
2
<PAGE>
it, each such series to be appropriately designated, prior to the
issuance of any shares thereof, by some distinguishing letter, number,
or title. The Board of Directors is hereby expressly granted authority
to fix the authorized number of shares of each series of Preferred
Stock, and to fix the terms of such series, including, but not limited
to, the following:
(a) the rate or manner of payment of dividends;
(b) whether shares may be redeemed and, if so, the
redemption price and the terms and conditions of redemption;
(c) the amount payable upon shares in the event of
voluntary or involuntary liquidation;
(d) sinking fund provisions, if any, for the redemption
or purchase of shares;
(e) the terms and conditions, if any, on which shares may
be converted;
(f) voting rights, if any; and
(g) the other special rights, if any, and the
qualifications, limitations or restrictions thereof, of the shares of
such series.
The designation of each particular series of Preferred Stock and its
terms in respect of the foregoing particulars shall be fixed and
determined by the Board of Directors in any manner permitted by law and
stated in the resolution or resolutions providing for the issuance of
such shares adopted by the Board of Directors pursuant to authority
hereby vested in it, before any shares of such series are issued. The
Board of Directors may from time to time increase (but not above the
total number of authorized shares of the class) the number of shares of
any series of Preferred Stock already created by providing that any
unissued Preferred Stock shall constitute part of such series, or may
decrease (but not below the number of shares thereof then outstanding)
the number of shares of any series of Preferred Stock already created
by providing that any unissued shares previously assigned to such
series shall no longer constitute part thereof. The Board of Directors
is hereby empowered to classify or reclassify any unissued Preferred
Stock by fixing or altering the terms thereof in respect of the
above-mentioned particulars and by assigning the same to an existing or
newly created series from time to time before the issuance of such
shares.
For purposes of determining whether a non-voting series of
Preferred Stock shall be entitled to a vote as a class pursuant to
Section 607.1004 of the Florida Business Corporation Act (or any
successor section or statute hereinafter enacted) on an amendment to
the Corporation's Articles of Incorporation, an amendment that
increases the total number of authorized shares of Preferred Stock
shall not be considered to be an adverse change to the terms of any
individual series of Preferred Stock and shall not require a vote or
the consent of the holders of any such series of Preferred Stock.
Set forth in Appendices B, C, D, E, F and G hereto are the
Statements of Designation setting forth the terms of the Noncumulative
Convertible Preferred Stock, Series A; Noncumulative Convertible
Preferred Stock, Series B; Noncumulative Convertible Preferred Stock,
Series C; Noncumulative Convertible Preferred Stock, Series C-II; 8%
Noncumulative Convertible Preferred Stock, Series 1993; and 9%
Noncumulative Perpetual Preferred Stock, respectively."
ARTICLE VII
DISTRIBUTIONS TO STOCKHOLDERS
The Board of Directors may authorize and the Corporation may make
distributions to its stockholders subject to (a) the other provisions of these
Articles of Incorporation, and (b) except as the following otherwise provides,
the law currently in effect or hereinafter enacted:
3
<PAGE>
No distribution may be made if, after giving it effect:
(i) The Corporation would not be able to pay its
debts as they become due in the usual course of business; or
(ii) The Corporation's total assets would be less than the sum of
its total liabilities plus, unless the Board of Directors
determines otherwise, the amount that would be needed, if the
Corporation were to be dissolved at the time of distribution,
to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights are superior to those
receiving the distribution.
ARTICLE VIII
DIRECTORS
The number of directors constituting the Board of Directors shall be
such number, equal to or greater than one, as may be fixed from time to time in
the bylaws of the Corporation.
Except as may be set forth in Statements of Designation creating series
of Class A Common Stock and Preferred Stock, the Board of Directors shall be
divided into three classes of directors of as nearly equal numbers as is
possible, designated Class I, Class II and Class III, respectively, serving
staggered three-year terms, with the term of a class expiring at each Annual
Meeting of Stockholders. At each Annual Meeting of Stockholders a number of
directors equal to the number of directors of the class whose term expires at
such meeting (or the number of directors properly nominated and qualified for
election) shall be elected to hold office until the third succeeding Annual
Meeting of Stockholders after their election. In all cases, each director shall
serve until a successor has been elected and qualified or until such director's
earlier resignation (including, without limitation, as may be provided by the
terms of an employment agreement), removal from office, death or disability.
ARTICLE IX
LIMITATION OF LIABILITY
The Corporation shall indemnify and may insure its officers and
directors to the fullest extent permitted by law currently in effect or
hereinafter enacted.
ARTICLE X
AMENDMENT
These Articles of Incorporation may be amended in the manner authorized
by law at the time of amendment.
ARTICLE XI
ACTION BY STOCKHOLDERS WITHOUT A MEETING
No action required or permitted to be taken at an Annual Meeting of
Stockholders or at a Special Meeting of Stockholders may be taken without a
meeting. The power of the stockholders to consent in writing, without a meeting,
to the taking of any action is expressly denied hereby.
ARTICLE XII
AFFILIATED TRANSACTIONS AND CONTROL-SHARE ACQUISITIONS
The Corporation shall not be governed by the Affiliated Transactions
and Control-Share Acquisitions sections (Sections 607.0901 through 607.0903) of
the Florida Business Corporation Act or any successor sections or statutes
hereinafter enacted.
4
<PAGE>
ARTICLE XIII
INCORPORATOR
The name and address of the incorporator of the Corporation is Maria E.
Chang, 1221 Brickell Avenue, 25th Floor, Miami, Florida 33131.
The undersigned incorporator has executed these Articles of
Incorporation this 10th day of January, 1995.
/S/ MARIA E. CHANG
-----------------------------------
Maria E. Chang, Incorporator
IN WITNESS WHEREOF, I, Nancy L. Ashton, having been named Registered
Agent and to accept service of process for BankUnited Financial Corporation at
the place designated in these Articles of Incorporation, hereby accept the
appointment as Registered Agent and agree to act in this capacity. I further
agree to comply with the provisions of all statutes relating to the proper and
complete performance of my duties, and I am familiar with and accept the
obligations of my position as Registered Agent this 10th day of January, 1995.
/S/ NANCY L. ASHTON
---------------------------------
Nancy L. Ashton, Registered Agent
STATE OF FLORIDA )
)SS:
COUNTY OF DADE )
The foregoing instrument was acknowledged before me this ____ day of
January, 1995 by Nancy L. Ashton, who is personally known to me and who did take
an oath.
_________________________________
Notary Public
State of Florida
Printed Name:____________________
Commission No.:__________________
My Commission Expires:
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APPENDIX A
STATEMENT OF DESIGNATION
OF
SERIES I CLASS A COMMON STOCK
AND
CLASS B COMMON STOCK
OF
BANKUNITED FINANCIAL CORPORATION
WHEREAS, pursuant to Article VI of the Articles of Incorporation of
BankUnited Financial Corporation (the "Corporation") as in effect on the date
hereof and Section 607.0602 of the Florida Business Corporation Act, the Board
of Directors of the Corporation is authorized, within limitations set forth
therein, (i) to divide the Corporation's Class A Common Stock, par value $.01
per share ("Class A Common Stock"), into series and fix and determine the
relative rights and preferences of the shares of any series so established, and
(ii) to fix and determine certain rights of the Corporation's Class B Common
Stock, par value $.01 per share ("Class B Stock"); and
WHEREAS, the Board of Directors desires to (i) establish a series of the
Class A Common Stock, designating such series "Series I Class A Common Stock,"
(ii) allocate 10,000,000 shares of the authorized Class A Common Stock to the
Series I Class A Common Stock, (iii) fix and determine the relative rights and
preferences of the shares of the Series I Class A Common Stock, and (iv) fix and
determine the conversion rights of the Class B Stock;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors (i) hereby
allocates a portion of the Class A Common Stock to a series thereof designated
Series I Class A Common Stock, and fixes and determines the relative rights and
preferences of the Series I Class A Common Stock, as set forth in Section I
below, and (ii) hereby sets forth in Section II below the conversion rights of
the Class B Stock.
I. DESIGNATION, ALLOCATION AND RIGHTS OF SERIES I CLASS A COMMON
STOCK.
(1) DESIGNATION AND ALLOCATION. 20,000,000 of the 30,000,000
shares of Class A Common Stock authorized by the Articles of Incorporation
of the Corporation hereby are determined to be and shall be of a series
designated as Series I Class A Common Stock (herein called "Series I Class
A Stock")."
(2) DIVIDENDS. The holders of shares of the Series I Class A
Common Stock shall be entitled to receive, when, as, and if declared by the
Board of Directors and out of the assets of the Corporation which are by
law available for the payment of dividends to the holders of common stock,
a per share dividend equal to 110% of the amount per share of any dividend
declared on Class B Stock (the "Dividend Rate"). The Dividend Rate shall be
subject to adjustment as provided by the formula set forth in subsection
I(3) of this resolution.
(3) DIVIDEND RATE ADJUSTMENTS. The Dividend Rate shall be subject
to adjustment from time to time as follows:
(a) If the Corporation shall (i) pay a dividend in and on
shares of its Series I Class A Common Stock or Class B Stock, (ii)
subdivide its outstanding shares of Series I Class A Common Stock
or Class B Stock into a greater number of shares, (iii) combine
its outstanding shares of Series I Class A Common Stock or Class B
Stock into a smaller number of shares, or (iv) issue by
reclassification of its shares of Series I Class A Common Stock or
Class B Stock any shares of its capital stock, then the Dividend
Rate in effect immediately prior thereto shall be adjusted so that
the holder of Series I Class A Common Stock or Class B Stock
entitled to receive a dividend upon his or her Series I Class A
Common Stock or Class B Stock after the record date fixing
stockholders to be affected by such event shall be entitled to
receive upon declaration of a dividend on common stock such
dividend which such holder would have been entitled to receive
after the happening of such event had such dividend been declared
and paid immediately prior to such record date. Such adjustment
shall be made whenever any of such events shall happen, and shall
also be effective retroactively as to the happening of any such
event between such record date and the payment of dividends on the
common stock of the Corporation.
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(b) (i) If the Corporation has issued Series I Class A
Common Stock which is not listed on a national securities
exchange or traded over-the-counter by a nationally
recognized securities firm or association and the
Corporation shall issue rights or warrants to the holders
of any of its capital stock entitling them to subscribe
for or purchase shares of common stock at a price per
share less than the Book Value Per Share (as defined in
subsection II(4)(b)(iii) of this resolution) of such
common stock at the record date mentioned below; or
(ii) If the Corporation has issued Series I Class
A Common Stock which is listed on a national securities
exchange or traded over-the-counter by a nationally
recognized securities firm or association, and the
Corporation shall issue rights or warrants to the holders
of its capital stock entitling them to subscribe for or
purchase shares of common stock at a price per share less
than the current market price per share (as defined in
subsection II(4)(e) of this resolution) of such common
stock at the record date mentioned below; then, in either
of the above events, the Dividend Rate shall be adjusted
by multiplying the Dividend Rate existing immediately
prior to such event by a fraction as provided below:
(A) If the Class B Stock may be
subscribed for or purchased at less than the Book Value
Per Share or the current market price per share, as the
case may be, then the numerator of such fraction shall be
the number of shares of Class B Stock outstanding on the
date of issuance of such rights or warrants plus the
number of additional shares of Class B Stock offered for
subscriptions or purchase, and the denominator of which
shall be the number of shares of Class B Stock outstanding
on the date of issuance of such rights or warrants plus
the number of shares of Class B Stock which the aggregate
offering price of the total number of shares of Class B
Stock so offered would purchase based on current Book
Value Per Share at the record date mentioned below or
current market price per share (as defined in subsection
II(4)(e) of this resolution), as the case may be.
(B) If the Series I Class A Common Stock
may be subscribed for or purchased at less than the Book
Value Per Share or the current market price per share, as
the case may be, then the numerator of such fraction shall
be the number of shares of Series I Class A Common Stock
outstanding on the date of issuance of such rights or
warrants plus the number of shares of Series I Class A
Common Stock which the aggregate offering price of the
total number of shares of Series I Class A Common Stock so
offered would purchase based on Book Value Per Share at
the record date mentioned below or current market price
per share (as defined in subsection II(4)(e) of this
resolution), as the case may be, and the denominator of
which shall be the number of shares of Series I Class A
Common Stock outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of
Series I Class A Common Stock offered for subscription or
purchase.
(iii) An adjustment to the Dividend Rate as
provided in subsections I(3)(b)(ii)(A) or (B), above,
shall be made whenever such rights or warrants are issued,
and also shall be effective retroactively as to dividends
declared on the common stock of the Corporation between
the record date for the determination of stockholders
entitled to receive such rights or warrants and the date
such rights or warrants are issued.
(c) No adjustment in the Dividend Rate shall be required
unless such adjustment would require an increase or decrease of at
least 2% in such Dividend Rate; provided, however, that any
adjustments which by reason of this subsection I(3)(c) are not
required to be made, and are not made, shall be carried forward
and taken into account in any subsequent adjustment.
(4) VOTING.
(a) Except as otherwise provided in the Articles of
Incorporation of the Corporation, or as provided in any resolution
of the Board of Directors or the stockholders of the Corporation,
the Series I Class A Common Stock, the Class B Stock, and the
Preferred Stock shall vote together as a single class on all
matters submitted to the stockholders of the Corporation for a
vote. In any such vote, each share of Series I Class A Common
Stock is entitled to cast 1/10 of the vote that each share of
Class B Stock is entitled to cast.
(b) Notwithstanding the provision contained in subsection
I(4)(a) above, in the event of any consolidation of the
Corporation with or merger of the Corporation into another
corporation, or in the event of any sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other
consideration) of
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all or substantially all of the property or assets of the
Corporation to another corporation, then, in any such
consolidation, merger, sale, conveyance, exchange or transfer, if
the consideration per share (as adjusted consistent with the
provisions of Sections I and II hereof) to be received for the
shares of Series I Class A Common Stock differs in any substantial
kind or amount from the per share (as adjusted consistent with the
provisions of Sections I and II hereof) consideration to be
received for Class B Stock, the majority of the holders of the
outstanding Series I Class A Common Stock, by a separate vote of
the holders of the Series I Class A Common Stock, must approve
such consolidation, merger, sale, conveyance, exchange or
transfer; provided, however, that nothing in this subsection
I(4)(b) shall in any way grant any rights to the holders of the
Series I Class A Common Stock in connection with the sale of any
shares of the capital stock of the Corporation by a stockholder of
the Corporation to any person or entity other than the
Corporation. Notwithstanding any other provision of this
subsection I(4)(b), the receipt by the holders of the Series I
Class A Common Stock of limited voting stock in an acquiring
company shall not be deemed to be consideration which differs in
any substantial respect from that received by the holders of the
Class B Stock, provided such limited voting common stock bears
substantially the same relative rights and privileges to the
acquiring company's voting stock as the Series I Class A Common
Stock bears to the Class B Stock.
II. CONVERSION RIGHTS OF CLASS B STOCK.
(1) CONVERSION. Subject to and upon compliance with the provisions
of this resolution, the holder of any shares of Class B Stock may
at such holder's option convert any such shares of Class B Stock
into such number of fully paid and non-assessable shares of Series
I Class A Common Stock as are issuable pursuant to the formula set
forth in subsections II(3), (4) and (5) of this resolution.
No adjustment shall be made for dividends on any Series I
Class A Common Stock that shall be issuable because of the
conversion of shares of Class B Stock, but all dividends accrued
and unpaid on any Class B Stock up to and including the dividend
payment date immediately preceding the date of conversion shall
constitute a debt of the Corporation payable to the converting
holder.
(2) MECHANICS OF CONVERSION. The surrender of any Class B Stock
for conversion shall be made by the holder thereof to the
Corporation at its principal office and such holder shall give
written notice to the Corporation at said office that such holder
elects to convert such Class B Stock in accordance with the
provisions hereof. Such notice also shall state the name or names
(with addresses) in which the certificate or certificates for
Series I Class A Common Stock, which shall be issuable on such
conversion, shall be issued. Subject to the provisions of
subsection II(1) hereof, every such notice of election to convert
shall constitute a contract between the holder of such shares and
the Corporation, whereby such holder shall be deemed to subscribe
for the number of shares of Series I Class A Common Stock which
such holder will be entitled to receive upon such conversion and,
in payment and satisfaction of such subscription, to surrender
such Class B Stock and to release the Corporation from all
obligations thereon, and whereby the Corporation shall be deemed
to agree that the surrender of such Class B Stock and the
extinguishment of its obligations thereon shall constitute full
payment for the Series I Class A Common Stock so subscribed for
and to be issued upon such conversion.
As soon as practicable after the receipt of such notice
and the shares of Class B Stock, the Corporation shall issue and
shall deliver to the person for whose account such shares of Class
B Stock were so surrendered, or on such holder's written order, a
certificate or certificates for the number of full shares of
Series I Class A Common Stock issuable upon the conversion of such
shares of Class B Stock and a check or cash for the payment (if
any) to which such person is entitled pursuant to subsection II(5)
hereof, together with a certificate or certificates representing
the shares of Class B Stock, if any, which are not to be
converted, but which constituted part of the Class B Stock
represented by the certificates or certificates surrendered by
such person. Such conversion shall be deemed to have been effected
on the date on which the Corporation shall have received such
notice and such Class B Stock, and the person or persons in whose
name or names any certificate or certificates for Series I Class A
Common Stock shall be issuable upon such conversion shall be
deemed to have become on said date the holder or holders of record
of the shares represented thereby.
(3) BASIC CONVERSION RATE. The initial rate at which holders may
convert Class B Stock into Series I Class A Common Stock
("Conversion Rate") shall be one share of Series I Class A Common
Stock for each share of Class B Stock surrendered for conversion.
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(4) CONVERSION RATE ADJUSTMENT. The Conversion Rate shall be
subject to adjustment from time to time as follows:
(a) If the Corporation shall (i) pay a dividend in and on
shares of its Series I Class A Common Stock or its Class B Stock,
(ii) subdivide its outstanding shares of Series I Class A Common
Stock or its Class B Stock into a greater number of shares, (iii)
combine its outstanding shares of Series I Class A Common Stock or
its Class B Stock into a smaller number of shares, or (iv) issue
by reclassification of its shares of Series I Class A Common Stock
or its Class B Stock any shares of its capital stock, then the
Conversion Rate in effect immediately prior thereto shall be
adjusted so that the holder of Class B Stock surrendered for
conversion after the record date fixing stockholders to be
affected by such event shall be entitled to receive upon
conversion the number of such shares of the Corporation which such
holder would have been entitled to receive after the happening of
such event had such shares been converted immediately prior to
such record date. Such adjustment, if applicable, shall be made
whenever any of such events shall happen, and shall also be
effective retroactively as to shares converted between such record
date and the date of the happening of any such event.
(b) (i) If the Series I Class A Common Stock is not listed
on a national securities exchange or traded over-the-counter by a
nationally recognized securities firm or association, and the
Corporation issues rights or warrants (a) to the holders of its
Series I Class A Common Stock entitling them to subscribe for or
purchase shares of Series I Class A Common Stock or (b) to the
holders of its Class B Stock entitling them to subscribe for or
purchase shares of Class B Stock, in either case at a price per
share less than the Book Value Per Share (as defined below) of
Series I Class A Common Stock at the record date mentioned below;
or
(ii) If the Series I Class A Common Stock is listed on a
national securities exchange or traded over-the-counter by a
nationally recognized securities firm or association, and the
Corporation issued rights or warrants (a) to the holders of its
Series I Class A Common Stock entitling them to subscribe for or
purchase shares of Series I Class A Common Stock or (b) to the
holders of its Class B Stock entitling them to subscribe for or
purchase shares of Class B Stock, in either case at a price per
share less than the current market price per share of Series I
Class A Common Stock (as defined in subsection II(4)(e) of this
resolution) at the record date mentioned below;
then, in either of the above events in which the Series I Class A
Common Stock rights or warrants are issued at a price per share
below Book Value Per Share or current market price per share, as
the case may be, the number of shares of Series I Class A Common
Stock into which each share of Class B Stock shall thereafter be
convertible shall be determined by multiplying the number of
shares of Series I Class A Common Stock into which such shares of
Class B Stock were theretofore convertible by a fraction, the
numerator of which shall be the number of shares of Series I Class
A Common Stock outstanding on the date of issuance of such rights
or warrants plus the number of additional shares of Series I Class
A Common Stock offered for subscription or purchase, and the
denominator of which shall be the number of shares of Series I
Class A Common Stock outstanding on the date of issuance of such
rights or warrants plus the number of shares of Series I Class A
Common Stock which the aggregate offering price of the total
number of shares so offered would purchase based on Book Value Per
Share at the record date mentioned below or current market price
per share (as defined in subsection II(4)(e) of this resolution),
as the case may be. If the Corporation issues Class B Stock rights
or warrants at a price per share below Book Value Per Share or
current market price per share, as the case may be, then the above
formula shall be used except that when calculating the fraction in
such formula, Class B Stock shall be substituted for Series I
Class A Common Stock. Such adjustment shall be made whenever such
rights or warrants are issued, and shall also be effective
retroactively as to shares of Class B Stock converted between the
record date for the determination of stockholders entitled to
receive such rights or warrants and the date such rights or
warrants are issued.
(iii) The term "Book Value Per Share," as used herein,
shall mean such amount which is determined by (a) reducing total
stockholders' equity by the amount contributed to capital in
exchange for all classes of stock other than common stock,
adjusted to reflect any proportion of the Corporation's net income
or loss from operations since payment for such shares of stock
other than common stock (such adjustment arrived at by adding all
shares of outstanding stock, adjusted to reflect any conversion
ratios, the resulting number to be the denominator of a fraction
the numerator of which is to be the number of shares of the
Corporation's stock other than common stock, adjusted to reflect
conversion ratios, the resulting fractions to be multiplied by the
net income or loss from the Corporation's operations since payment
for the stock other than common stock); and (b) dividing the
resulting amount by the number of shares of common stock
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outstanding, adjusted to compensate for any common stock to common
stock conversion ratio other than one to one.
(c) If the Corporation shall distribute to the holders of
its Series I Class A Common Stock or Class B Stock evidence of its
indebtedness or assets (excluding cash dividends or distributions
made out of current or retained earnings) or rights or warrants to
subscribe other than as referred to in subsection II(4)(b) of this
resolution, then, when such distribution is made to the holders of
Series I Class A Common Stock the number of shares of Series I
Class A Common Stock into which each share of Class B Stock shall
thereafter be convertible shall be determined by multiplying the
number of shares of Series I Class A Common Stock into which such
shares of Class B Stock was theretofore convertible by a fraction,
the numerator of which shall be the Book Value Per Share of Series
I Class A Common Stock at the record date mentioned below or, if
the Series I Class A Common Stock is listed on a national
securities exchange or traded over-the-counter by a nationally
recognized securities firm or association, the market price per
share of Series I Class A Common Stock (as defined in subsection
II(4)(e) of this resolution) on the date of such distribution, and
the denominator of which shall be such Book Value Per Share of the
Series I Class A Common Stock at the record date mentioned below
or such current market price per share of the Series I Class A
Common Stock, as the case may be, less the then fair market value
(as determined by the Board of Directors of the Corporation, whose
determination shall be conclusive) of the portion of the assets,
evidence of indebtedness, subscription rights or warrants so
distributed applicable to one share of the Series I Class A Common
Stock. If the Corporation distributes such evidence of
indebtedness or assets to the holders of the Class B Stock, the
above formula shall be used except that when calculating the
fraction in such formula, Class B Stock shall be substituted for
Series I Class A Common Stock. Such adjustment shall be made
whenever any such distribution is made, and shall also be
effective retroactively as to the shares converted between the
record date for the determination of stockholders entitled to
receive such distribution and the date such distribution is made.
(d) In the event of any consolidation of the Corporation
with, or the merger of the Corporation into, another corporation,
or in the event of any sale, conveyance, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all
or substantially all of the property or assets of the Corporation
to another corporation, or in the case of any reorganization of
the Corporation, the holder of each share of Class B Stock then
outstanding shall have the right thereafter to convert such share
into the kind and amount of shares of stock and other securities
and property, including cash, which would have been deliverable to
such holder upon such consolidation, merger, sale, conveyance,
exchange, transfer or reorganization if such holder had converted
such holder's shares of Class B Stock into Series I Class A Common
Stock immediately prior to such consolidation, merger, sale,
conveyance, exchange, transfer or reorganization. In any such
event, effective provision shall be made in the instrument
effecting or providing for such consolidation, merger, sale,
conveyance, exchange, transfer or reorganization so that the
provisions set forth herein for the protection of the conversion
rights of the shares of Class B Stock shall thereafter be
applicable, as nearly as may be practicable, in relation to any
shares of stock or other securities or property, including cash,
deliverable after such consolidation, merger, sale, conveyance,
exchange, transfer or reorganization upon the conversion. The
provisions of this subsection II(4)(d) shall similarly apply to
successive consolidations, mergers, sales, conveyances, exchanges,
transfers and reorganizations.
(e) For purposes of computation under Sections I and II of
this resolution, the current market price per share of Series I
Class A Common Stock at any date shall be deemed to be the average
of the daily closing prices for the 20 consecutive business days
immediately prior to the day in question. The closing price for
each day shall be the last reported sales price, regular way, on
the principal national securities exchange upon which the Series I
Class A Common Stock is listed, or in case no such reported sale
takes place on such day, the average of the reported closing bid
and asked prices, regular way, on such national securities
exchange, or if the Series I Class A Common Stock is not then
listed on a national securities exchange, the average of the
closing prices or, if applicable, closing bid and asked prices in
the over-the-counter market as furnished by the nationally
recognized securities firm or association selected from time to
time by the Corporation for that purpose.
(f) No adjustments in the Conversion Rate shall be
required unless such adjustment would require an increase or
decrease of at least 2% in such Conversion Rate; provided,
however, that any adjustments which by reason of this subsection
II(4)(f) are not required to be made, and are not made, shall be
carried forward and taken into account in any subsequent
adjustment. All calculations under this subsection II(4)(f) shall
be made to the nearest cent or one-hundredth of a share, as the
case may be.
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(5) FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any
shares. If more than one share shall be surrendered for conversion
at one time by the same holder, the number of full shares issuable
upon conversion thereof shall be computed on the basis of the
aggregate number of such shares so surrendered. If the conversion
of any shares results in a fraction, an amount equal to such
fraction multiplied by the current market price (determined as
provided in subsection II(4)(e) of this resolution) of the Series
I Class A Common Stock on the business day next preceding the date
of conversion shall be paid to such holder in cash by the
Corporation; or if the Series I Class A Common Stock is not listed
on a national securities exchange or traded over-the-counter by a
nationally recognized securities firm, an amount equal to such
fraction multiplied by the Book Value Per Share of the Class B
Stock on the business day next preceding the date of conversion
shall be paid to such holder in cash by the Corporation.
(6) TAX. The issue of stock certificates on conversion of shares
shall be made free of any tax in respect of such issue. The
Corporation shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issue
and delivery of stock in a name other than that of the holder of
the shares converted, and the Corporation shall not be required to
issue or deliver any such stock certificates unless and until the
person or persons requesting the issuance thereof shall have paid
to the Corporation the amount of any such tax or shall have
established to the satisfaction of the Corporation that such tax
has been paid.
(7) POWER RESERVED BY THE BOARD OF DIRECTORS. If in any case a
state of facts occurs wherein in the opinion of the Board of
Directors, the other provisions of this Section II are not
strictly applicable, or if strictly applicable, would not fairly
protect the conversion rights of the Class B Stock in accordance
with the essential intent and principles of such provisions, then
the Board of Directors shall make an adjustment in the application
of such provisions in accordance with such essential intent and
principles so as to protect such conversion rights as aforesaid.
(8) RESERVATION OF SHARES. The Corporation shall at all times
reserve and keep available out of its authorized Series I Class A
Common Stock the full number of shares of Series I Class A Common
Stock deliverable upon the conversion of all outstanding shares of
Class B Stock and shall take all such corporate action as may be
required from time to time in order that it may validly and
legally issue fully paid and non-assessable shares of Series I
Class A Common Stock upon conversion of the Class B Stock.
(9) STATUS OF CONVERTED SHARES. Shares of Class B Stock converted
shall assume the status of authorized but unissued shares of Class
B Stock of the Corporation.
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APPENDIX B
STATEMENT OF DESIGNATION
OF
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES A
OF
BANKUNITED FINANCIAL CORPORATION
WHEREAS, pursuant to Article VI of the Articles of Incorporation of
BankUnited Financial Corporation (the "Corporation") and Section 607.0602 of the
Florida Business Corporation Act, the Board of Directors of the Corporation is
authorized to divide the Corporation's authorized Preferred Stock into series
and, within the limitations set forth therein, fix and determine the relative
rights and preferences of the shares of any series so established; and
WHEREAS, the Board of Directors desires to (i) establish a series of
Preferred Stock, designating such series "Noncumulative Convertible Preferred
Stock, Series A," (ii) allocate 55,000 shares of the authorized Preferred Stock
to the Noncumulative Convertible Preferred Stock, Series A, and (iii) fix and
determine the relative rights and preferences of the shares of the Noncumulative
Convertible Preferred Stock, Series A;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
designates the following as the relative rights of the Noncumulative Convertible
Preferred Stock, Series A;
RESOLVED, that 55,000 of the 10,000,000 shares of Preferred Stock
authorized by the Articles of Incorporation of the Corporation be and hereby are
determined to be and shall be a series designated as Noncumulative Convertible
Preferred Stock, Series A (the "Series A Preferred Stock"), and that the
following is a statement fixing and determining the variations in the relative
rights and preferences of the Series A Preferred Stock pursuant to authority
vested in the Board of Directors by the Articles of Incorporation of the
Corporation:
1. PARITY. The Series A Preferred Stock is of the same class as and shall
be on a parity with the Corporation's currently outstanding Noncumulative
Convertible Preferred Stock, Series B, C and C-II (the "Outstanding Parity
Stock"), except as provided elsewhere herein.
2. DIVIDENDS. The holders of the Series A Preferred Stock shall be entitled
to receive, when, as, and if declared by the Board of Directors and out of
the assets of the Corporation which are by law available for the payment of
dividends, preferential cash dividends payable quarterly on the last day of
February, May, August and November of each year unless such day is a
non-business day, in which event, on the next business day, at the fixed
annual rate of $1.00 per share and no more.
So long as any Series A Preferred Stock remains outstanding:
(a) no dividend whatsoever shall be declared or paid upon
or set apart for payment, and no distribution shall be ordered or
made in respect of: (i) the Class B Common Stock, par value $.01
per share (the "Class B Common Stock") or the Corporation's Series
I Class A Common Stock, par value $.01 per share (the "Class A
Common Stock") or any other outstanding common stock of the
Corporation or (ii) any other class of stock or series thereof
ranking junior to the Series A Preferred Stock in the payment of
dividends;
(b) no shares of Class B Common Stock or Class A Common
Stock and no shares of any other class of stock or series thereof
ranking junior to the Series A Preferred Stock in the payment of
dividends shall be redeemed or purchased by the Corporation or any
subsidiary thereof; and
(c) no moneys, funds or other assets shall be paid to or
made available for a sinking fund for the redemption or purchase
of any shares of: (i) Class B Common Stock or Class A Common
Stock; or (ii) any other class of stock or series thereof ranking
junior to the Series A Preferred Stock in the payment of
dividends;
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unless, in each instance, full dividends on all outstanding shares
of Series A Preferred Stock for the then current calendar quarter
shall have been paid or declared and set aside for payment.
In addition, so long as any Series A Preferred Stock
remains outstanding, no dividend whatsoever shall be declared or
paid upon or set apart for payment, and no distribution shall be
ordered or made in respect of, any share or shares of any class of
stock or series thereof ranking on a parity with the Series A
Preferred Stock (including the Outstanding Parity Stock) in the
payment of dividends, unless, for the applicable calendar quarter:
(a) full dividends shall be paid or declared and set apart
for payment on all shares of: (i) the Series A Preferred Stock;
and (ii) any class of stock or series thereof ranking on a parity
with the Series A Preferred Stock (including the Outstanding
Parity Stock) in the payment of dividends; or
(b) in the event all such dividends for the applicable
calendar quarter are not or cannot be paid or declared and set
apart for payment in full, a pro rata portion of the full
dividends shall be paid or declared and set apart for payment on
all shares of: (i) the Series A Preferred Stock; and (ii) any
class of stock or series thereof ranking on a parity with the
Series A Preferred Stock (including the Outstanding Parity Stock)
in the payment of dividends. Such pro rata portion shall be
calculated based on the ratio that the total amount available for
the payment of all required dividends on the Series A Preferred
Stock and such parity stock for the applicable calendar quarter
bears to the total required dividends on the Series A Preferred
Stock and such parity stock for such calendar quarter.
3. PREFERENCE ON LIQUIDATION. In the event of any dissolution, liquidation
or winding up of the affairs of the Corporation, after payment or provision
for payment of any debts and other liabilities of the Corporation, the
holders of the Series A Preferred Stock shall be entitled to receive the
following amounts out of the net assets of the Corporation, and before any
distribution shall be made to the holders of any common stock or to the
holders of any other class of stock or series thereof ranking junior to the
Series A Preferred Stock in the distribution of assets:
(a) if such dissolution, liquidation or winding up is
voluntary, the applicable redemption price per share determined as
provided in Section 4 of these resolutions;
(b) if such dissolution, liquidation or winding up is
involuntary, $10.00 per share;
and no more. If upon such voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Corporation, the net assets of the
Corporation shall be insufficient to permit payment in full of the amounts
required to be paid to the holders of the Series A Preferred Stock and to
the holders of any class of stock or series thereof ranking on a parity
with the Series A Preferred Stock (including the Outstanding Parity Stock)
in respect of the distribution of assets, then a pro rata portion of the
full amount required to be paid upon such dissolution, liquidation or
winding up shall be paid to: (i) the holders of Series A Preferred Stock;
and (ii) the holders of any class of stock or series thereof ranking on a
parity with the Series A Preferred Stock (including the Outstanding Parity
Stock) in respect of the distribution of assets. Such pro rata portion
shall be calculated based on the ratio that the total amount available for
distribution to such holders bears to the total distribution required to be
made on the Series A Preferred Stock and such parity stock.
Nothing herein contained shall be deemed to prevent redemption of
Series A Preferred Stock by the Corporation in the manner provided in
Section 4 of these resolutions. Neither the merger nor consolidation of the
Corporation into or with any other corporation, nor the merger or
consolidation of any other corporation into or with the Corporation, nor a
sale, transfer or lease of all or any part of the assets of the Corporation
shall be deemed to be a dissolution, liquidation or winding up of the
Corporation within the meaning of this Section 3.
Written notice of any voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Corporation, stating a
payment date and the place where the distribution amounts shall be payable
and containing a statement of or reference to the conversion right set
forth in Section 6 of these resolutions, shall be given by mail, postage
prepaid, at least 30 days but not more than 60 days prior to the payment
date stated therein, to the holders of record of the Series A Preferred
Stock at their respective addresses as the same shall appear on the books
of the Corporation.
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4. REDEMPTION. The Corporation shall have the right, at its option and by
resolution of the Board of Directors, to redeem at any time and from time
to time the Series A Preferred Stock, in whole or in part, upon payment in
cash in respect of each share redeemed, if redeemed during the twelve month
period ending July 31, 1995, $10.15, or if redeemed after July 31, 1995,
$10.00.
If less than all of the outstanding shares of the Series A
Preferred Stock shall be redeemed, the particular shares to be redeemed
shall be allocated among the respective holders of Series A Preferred Stock
pro rata or by lot, as the Board of Directors may determine.
Notice of any redemption specifying the date fixed for said
redemption and the place where the amount to be paid upon redemption is
payable and containing a statement of or reference to the conversion right
set forth in Section 6 of these resolutions shall be mailed, postage
prepaid, at least 30 days but not more than 60 days prior to said
redemption date to the holders of record of the Series A Preferred Stock to
be redeemed at their respective addresses as the name shall appear on the
books of the Corporation. If such notice of redemption shall have been so
mailed, and if on or before the redemption date specified in such notice
all funds necessary for such redemption shall have been set aside by the
Corporation separate and apart from its other funds, in trust for the
account of the holders of the shares so to be redeemed, so as to be and
continue to be available therefor, then, on and after said redemption date,
notwithstanding that any certificate for shares of the Series A Preferred
Stock so called for redemption shall not have been surrendered for
cancellation, the shares represented thereby so called for redemption shall
be deemed to be no longer outstanding, the right to receive dividends
thereon shall cease to accrue, and all rights with respect to such shares
of the Series A Preferred Stock so called for redemption shall forthwith
cease and terminate, except only the right of the holders thereof to
receive out of the funds so set aside in trust the amount payable on
redemption thereof, but without interest.
Shares of Series A Preferred Stock redeemed or otherwise purchased
or acquired by the Corporation shall not be reissued as shares of Series A
Preferred Stock but shall assume the status of authorized but unissued
shares of Preferred Stock of the Corporation.
5. VOTING RIGHTS. The holders of the Series A Preferred Stock shall have
two and one-half votes per share on all matters requiring the vote of
stockholders, and additionally if the voting rights of the Class B Common
Stock are increased, then the voting rights of the Series A Preferred Stock
shall be increased by an amount which will maintain the two and one-half to
one proportion between the voting rights of the Class B Common Stock and
the Series A Preferred Stock as is hereby established.
Additionally, if at any time the equivalent of six or more full
quarterly dividends (whether or not consecutive) payable on the Series A
Preferred Stock shall not be paid, the number of directors constituting the
Board of Directors of the Corporation shall be increased by two, and the
holders of the Series A Preferred Stock (whether or not the payment of
quarterly dividends shall not be paid on other Preferred Stock outstanding)
shall have the exclusive right, voting together as a class, to elect two
directors to fill such newly-created directorships. This right shall remain
vested until dividends on the Series A Preferred Stock have been paid for
four consecutive quarters, at which time: (i) the right shall terminate
(subject to revesting in the case of any subsequent failure to pay of the
kind described above); (ii) the term of the directors then in office
elected by the holders of the Series A Preferred Stock as a class shall
terminate; and (iii) the number of directors constituting the Board of
Directors of the Corporation shall be reduced by two.
Whenever such right shall vest, it may be exercised initially
either at a special meeting of holders of the Series A Preferred Stock or
at any annual stockholders' meeting, but thereafter it shall be exercised
only at annual stockholders' meetings. Any director who shall have been
elected by the holders of the Series A Preferred Stock as a class pursuant
to this Section 5 shall hold office for a term expiring (subject to the
earlier payment of dividends) at the next annual meeting of stockholders,
and during such term may be removed at any time, either for or without
cause, by, and only by, the affirmative votes of the holders of record of a
majority of the outstanding shares of the Series A Preferred Stock given at
a special meeting of such stockholders called for such purpose, and any
vacancy created by such removal may also be filled at such meeting. Any
vacancy caused by the death or resignation of a director who shall have
been elected by the holders of the Series A Preferred Stock as a class
pursuant to this Section 5 may be filled by the remaining director elected
by the holders of the Series A Preferred Stock then in office.
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Whenever a meeting of the holders of Series A Preferred Stock is
permitted or required to be held pursuant to this Section 5, such meeting
shall be held at the earliest practicable date and the Secretary of the
Corporation shall call such meeting, providing written notice to all
holders of record of Series A Preferred Stock in accordance with law, upon
the earlier of the following:
(a) as soon as reasonably practicable following the
occurrence of the event or events permitting or requiring such
meeting hereunder; or
(b) within 20 days following receipt by said Secretary of
a written request for such a meeting, signed by the holders of
record of at least 20% of the shares of Series A Preferred Stock
then outstanding.
If such meeting shall not be called by the proper
corporate officer within 20 days after the receipt of such request
by the Secretary of the Corporation, or within 25 days after the
mailing of the same within the United States of America by
registered mail addressed to the Secretary of the Corporation at
its principal office, then the holders of record of at least 20%
of the shares of Series A Preferred Stock then outstanding may
designate one of their members to call such a meeting at the
expense of the Corporation, and such meeting may be called by such
person in the manner and at the place provided in this Section 5.
Any holder of Series A Preferred Stock so designated to call such
meeting shall have access to the stock books of the Corporation
for the purpose of causing a meeting of such stockholders to be so
called.
Notwithstanding any provision of this Section 5, no
special meeting of the holders of shares of Series A Preferred
Stock: (i) shall be held during the 90 day period next preceding
the date fixed for the annual meeting of stockholders of the
Corporation; or (ii) shall be required to be called or held in
violation of any law, rule or regulation.
Any meeting of the holders of all outstanding Series A
Preferred Stock entitled to vote as a class for the election of
directors shall be held at the place at which the last annual
meeting of stockholders was held. At such meeting, the presence in
person or by proxy of the holders of a majority of the outstanding
shares of the Series A Preferred Stock shall be required to
constitute a quorum; in the absence of a quorum, a majority of the
holders present, in person or by proxy, shall have the power to
adjourn the meeting from time to time without notice, other than
an announcement at the meeting, until a quorum shall be present.
6. CONVERTIBILITY. Shares of the Series A Preferred Stock
(hereinafter in this Section 6 called the "Shares") shall be convertible
into Class B Common Stock on the following terms and conditions:
(a) Subject to and upon compliance with the provisions of
this Section 6, the holder of any Shares may, at such holder's
option, convert any such Shares into such number of fully paid and
non-assessable shares of Class B Common Stock as are issuable
pursuant to the formula set forth in subsections (c) and (d) of
this Section 6. No adjustment shall be made for dividends on any
Class B Common Stock that shall be issuable upon the conversion of
such Shares.
(b) The surrender of any Shares for conversion shall be
made by the holder thereof to the Corporation at its principal
office and such holder shall give written notice to the
Corporation at said office that such holder elects to convert such
Shares in accordance with the provisions thereof and this Section
6. Such notice also shall state the name or names (with addresses)
in which the certificate or certificates for Class B Common Stock,
which shall be issuable on such conversion, shall be issued.
Subject to the provisions of subsection (a) of this Section 6,
every such notice of election to convert shall constitute a
contract between the holder of such shares and the Corporation,
whereby such holder shall be deemed to subscribe for the number of
shares of Class B Common Stock which such holder will be entitled
to receive upon such conversion and, in payment and satisfaction
of such subscription, to surrender such Shares and to release the
Corporation from all obligations thereon, and whereby the
Corporation shall be deemed to agree that the surrender of such
Shares and the extinguishment of its obligations thereon shall
constitute full payment for the Class B Common Stock so subscribed
for and to be issued upon such conversion.
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<PAGE>
As soon as practicable after the receipt of such notice
and Shares, the Corporation shall issue and shall deliver to the
person for whose account such Shares were so surrendered, or on
such holder's written order, a certificate or certificates for the
number of full shares of Class B Common Stock issuable upon the
conversion of such Shares and a check or cash for the payment (if
any) to which such person is entitled pursuant to subsection (e)
of this Section 6, together with a certificate or certificates
representing the Shares, if any, which are not to be converted,
but which constituted part of the Shares represented by the
certificate or certificates surrendered by such person. Such
conversion shall be deemed to have been effected on the date on
which the Corporation shall have received such notice and such
Shares, and the person or persons in whose name or names any
certificate or certificates for Class B Common Stock shall be
issuable upon such conversion shall be deemed to have become on
said date the holder or holders of record of the shares
represented thereby.
(c) The Conversion Rate shall be 1.495919425 shares of
Class B Common Stock for each share of Series A Preferred Stock
surrendered for conversion.
(d) The Conversion Rate shall be subject to adjustment
from time to time as follows:
(1) If the Corporation shall (i) pay a dividend
in shares of its Class B Common Stock, (ii) subdivide its
outstanding shares of Class B Common Stock into a greater
number of shares, (iii) combine its outstanding shares of
Class B Common Stock into a smaller number of shares, or
(iv) issue by reclassification of its shares of Class B
Common Stock any shares of its capital stock, then the
Conversion Rate in effect immediately prior thereto shall
be adjusted so that the holder of a Share surrendered for
conversion after the record date fixing stockholders to be
affected by such event shall be entitled to receive upon
conversion the number of such shares of the Corporation
which such holder would have been entitled to receive
after the happening of such event had such shares been
converted immediately prior to such record date. Such
adjustment shall be made whenever any of such events shall
happen, and shall also be effective retroactively as to
shares converted between such record date and the date of
the happening of any such event.
(2) If the Corporation shall issue rights or
warrants to the holders of its Class B Common Stock
entitling them to subscribe for or purchase shares of
Class B Common Stock, at a price per share less than the
current market price per share of the Class A Common Stock
(as defined in subsection (d)(5) of this Section 6) at the
record date mentioned below, then the number of shares of
Class B Common Stock into which each share shall
thereafter be convertible shall be determined by
multiplying the number of shares of Class B Common Stock
into which such share was theretofore convertible by a
fraction, the numerator of which shall be the number of
shares of the Class B Common Stock outstanding on the date
of issuance of such rights or warrants plus the number of
additional shares of the Class B Common Stock offered for
subscription or purchase, and the denominator of which
shall be the number of shares of the Class B Common Stock
outstanding on the date of issuance of such rights or
warrants plus the number of shares of the Class B Common
Stock which the aggregate offering price of the total
number of shares so offered would purchase based on
current market price per share (as defined in subsection
(d)(5) of this Section 6). Such adjustment shall be made
whenever such rights or warrants are issued, and shall
also be effective retroactively as to shares converted
between the record date for the determination of
stockholders entitled to receive such rights or warrants
and the date such rights or warrants are issued.
(3) If the Corporation shall distribute to the
holders of its Class B Common Stock evidence of its
indebtedness or assets (excluding cash dividends or
distributions made out of current or retained earnings) or
rights or warrants to subscribe other than as referred to
in subsection (d)(2) of this Section 6, then in each such
case the number of shares of Class B Common Stock into
which each share shall thereafter be convertible shall be
determined by multiplying the number of shares of Class B
Common Stock into which such share was theretofore
convertible by a fraction, the numerator of which shall be
the current market price per share of Class A Common Stock
(as defined in subsection (d)(5) of Section 6) on the date
of such distribution, and the denominator of which shall
be such current market price per share of the Class A
Common Stock, as the case may be, less the then fair
market value (as determined by the Board of Directors of
the Corporation, whose determination
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<PAGE>
shall be conclusive) of the portion of the assets,
evidence of indebtedness, subscription rights or warrants
so distributed applicable to one share of Class B Common
Stock. Such adjustment shall be made whenever any such
distribution is made, and shall also be effective
retroactively as to the shares converted between the
record date for the determination of stockholders entitled
to receive such distribution and the date such
distribution is made.
(4) In the event of any consolidation of the
Corporation with or merger of the Corporation into another
corporation, or in the event of any sale, conveyance,
exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially
all of the property or assets of the Corporation to
another corporation, or in the case of any reorganization
of the Corporation, the holder of each share then
outstanding shall have the right thereafter to convert
such shares into the kind and amount of shares of stock
and other securities and property, including cash, which
would have been deliverable to such holder upon such
consolidation, merger, sale, conveyance, exchange,
transfer or reorganization if such holder had converted
such holder's shares into Class B Common Stock immediately
prior to such consolidation, merger, sale, conveyance,
exchange, transfer or reorganization. In any such event,
effective provision shall be made in the instrument
effecting or providing for such consolidation, merger,
sale, conveyance, exchange, transfer or reorganization so
that the provisions set forth herein for the protection of
the conversion rights of the Shares shall thereafter be
applicable, as nearly as may be practicable, in relation
to any shares of stock or other securities or property
including cash, deliverable after such consolidation,
merger, sale, conveyance, exchange, transfer or
reorganization upon the conversion of the Series A
Preferred Stock, or such other securities as shall have
been issued to the holders thereof in lieu thereof or in
exchange therefor. The provisions of this subsection
(d)(4) shall similarly apply to successive consolidations,
mergers, sales, conveyances, exchanges, transfers and
reorganizations.
(5) For purposes of computation under subsections
(d)(2) and (d)(3) of this Section 6, the current market
price per share of Class A Common Stock at any date shall
be deemed to be the average of the daily closing prices
for the 20 consecutive business days immediately prior to
the day in question, if the Class B Common Stock is
convertible into Class A Common Stock on a one-for-one
basis, and if the Class B Common Stock is not convertible
into Class A Common Stock on a one-for-one basis, then the
current market price per share of Class A Common Stock at
any date shall be deemed to be such average multiplied by
the then current conversion rate of Class B Common Stock
into Class A Common Stock. The closing price for each day
shall be the last reported sales price, regular way, on
the principal national securities exchange upon which the
Class A Common Stock is listed, or in case no such
reported sales take place on such day, the average of the
reported closing bid and asked prices, regular way, on
such national securities exchange, or if the Class A
Common Stock is not then listed on a national securities
exchange, the average of the closing prices or, if
applicable, closing bid and asked prices in the
over-the-counter market as furnished by the nationally
recognized securities firm or association selected from
time to time by the Corporation for that purpose.
(6) No adjustment in the Conversion Rate shall be
required unless such adjustment would require an increase
or decrease of at least 2% in the Conversion Rate;
provided, however, that any adjustments which by reason of
this subsection (d)(6) are not required to be made, and
are not made, shall be carried forward and taken into
account in any subsequent adjustment. All calculations
under this subsection (d)(6) shall be made to the nearest
cent or one-hundredth of a share, as the case may be.
(e) Receipt by a holder of Series A Preferred Stock of a
notice of redemption pursuant to Section 4 of these resolutions
shall not terminate the conversion rights set forth in this
Section 6, but rather such conversion rights shall continue until
the redemption date set forth in the notice of redemption.
(f) No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of any shares. If more
than one share shall be surrendered for conversion at one time by
the same holder, the
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<PAGE>
number of full shares issuable upon conversion thereof shall be
computed on the basis of the aggregate number of such shares so
surrendered. If the conversion of any shares results in a
fraction, an amount equal to such fraction multiplied by the
current market price (determined as provided in subsection (d)(5)
of this Section 6) of the Class A Common Stock on the business day
next preceding the date of conversion shall be paid to such holder
in cash by the Corporation.
(g) The issue of stock certificates on conversion of
shares shall be made free of any tax in respect of such issue. The
Corporation shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issue
and delivery of stock in a name other than that of the holder of
the shares converted, and the Corporation shall not be required to
issue or deliver any such stock certificates unless and until the
person or persons requesting the issuance thereof shall have paid
to the Corporation the amount of any such tax or shall have
established to the satisfaction of the Corporation that such tax
has been paid.
(h) If in any case a state of facts occurs wherein in the
opinion of the Board of Directors, the other provisions of this
Section 6 are not strictly applicable, or if strictly applicable,
would not fairly protect the conversion rights of the Series A
Preferred Stock in accordance with the essential intent and
principles of such provisions, then the Board of Directors shall
make an adjustment in the application of such provisions in
accordance with such essential intent and principles so as to
protect such conversion rights as aforesaid.
(i) The Corporation shall at all times reserve and keep
available out of its authorized Class B Common Stock the full
number of shares of Class B Common Stock deliverable upon the
conversion of all outstanding shares of Series A Preferred Stock
and shall take all such corporate action as may be required from
time to time in order that it may validly and legally issue fully
paid and non-assessable shares of Class B Common Stock upon
conversion of the Series A Preferred Stock.
(j) Shares of Series A Preferred Stock converted shall not
be reissued as shares of Series A Preferred Stock but shall assume
the status of authorized but unissued shares of Preferred Stock of
the Corporation.
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<PAGE>
APPENDIX C
STATEMENT OF DESIGNATION
OF
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES B
OF
BANKUNITED FINANCIAL CORPORATION
WHEREAS, pursuant to Article VI of the Articles of Incorporation of
BankUnited Financial Corporation (the "Corporation"), and Section 607.0602 of
the Florida Business Corporation Act, the Board of Directors of the Corporation
is authorized to divide the Corporation's authorized Preferred Stock into series
and, within the limitations set forth therein, fix and determine the relative
rights and preferences of the shares of any series so established; and
WHEREAS, the Board of Directors of the Corporation desires to (i) establish
a second series of its class of Preferred Stock, designating such series
"Noncumulative Convertible Preferred Stock, Series B," (ii) allocate 500,000
shares of the authorized Preferred Stock to the Noncumulative Convertible
Preferred Stock, Series B, and (iii) fix and determine the relative rights and
preferences of the shares of the Noncumulative Convertible Preferred Stock,
Series B;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
designates the following as the relative rights of the Noncumulative Convertible
Preferred Stock, Series B:
RESOLVED, that 500,000 of the 10,000,000 shares of the class of Preferred
Stock authorized by the Articles of Incorporation of the Corporation be and
hereby are determined to be and shall be of a series designated as Noncumulative
Convertible Preferred Stock, Series B (the "Series B Preferred Stock") and that
the following is a statement fixing and determining the variations in the
relative rights and preferences of the Series B Preferred Stock pursuant to
authority vested in the Board of Directors by the Articles of Incorporation of
the Corporation:
1. PARITY. The Series B Preferred Stock is of the same class as and shall
be on a parity with the Corporation's currently outstanding Noncumulative
Convertible Preferred Stock, Series A, C and C-II (the "Outstanding Parity
Stock"), except as provided elsewhere herein.
2. DIVIDENDS. The holders of the Series B Preferred Stock shall be entitled
to receive, when, as, and if declared by the Board of Directors and out of
the assets of the Corporation which are by law available for the payment of
dividends, preferential cash dividends payable quarterly on the last day of
February, May, August and November of each year unless such day is a
non-business day, in which event on the next business day, at the fixed
annual rate of $0.7375 per share and no more.
So long as any Series B Preferred Stock remains outstanding:
(a) no dividend whatsoever shall be declared or paid upon or set
apart for payment, and no distribution shall be ordered or made in
respect of: (i) the Class B Common Stock, par value $.01 per share
("Class B Common Stock") or the Corporation's Series I Class A
Common Stock, par value $.01 per share (the "Class A Common
Stock") or any other outstanding common stock of the Corporation,
or (ii) any other class of stock or series thereof ranking junior
to the Series B Preferred Stock in the payment of dividends;
(b) no shares of the Class B Common Stock or the Class A Common
Stock and no shares of any other class of stock or series thereof
ranking junior to the Series B Preferred Stock in the payment of
dividends shall be redeemed or purchased by the Corporation or any
subsidiary thereof; and
(c) no moneys, funds or other assets shall be paid to or made
available for a sinking fund for the redemption or purchase of any
shares of: (i) the Class B Common Stock or the Class A Common
Stock, or (ii) any other class of stock or series thereof ranking
junior to the Series B Preferred Stock in the payment of
dividends;
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<PAGE>
unless, in each instance, full dividends on all outstanding shares
of Series B Preferred Stock for the then current calendar quarter
shall have been paid or declared and set aside for payment.
In addition, so long as any Series B Preferred Stock
remains outstanding, no dividend whatsoever shall be declared or
paid upon or set apart for payment, and no distribution shall be
ordered or made in respect of, any share or shares of any class of
stock or series thereof ranking on a parity with the Series B
Preferred Stock (including the Outstanding Parity Stock) in the
payment of dividends, unless, for the applicable calendar quarter:
(a) full dividends shall be paid or declared and set apart for
payment on all shares of: (i) the Series B Preferred Stock, and
(ii) any class of stock or series thereof ranking on a parity with
the Series B Preferred Stock (including the Outstanding Parity
Stock) in the payment of dividends; or
(b) in the event all such dividends for the applicable calendar
quarter are not or cannot be paid or declared and set apart for
payment in full, a pro rata portion of the full dividends shall be
paid or declared and set apart for payment on all shares of: (i)
the Series B Preferred Stock, and (ii) any class of stock or
series thereof ranking on a parity with the Series B Preferred
Stock (including the Outstanding Parity Stock) in the payment of
dividends. Such pro rata portion shall be calculated based on the
ratio that the total amount available for the payment of all
required dividends on the Series B Preferred Stock and such parity
stock for the applicable calendar quarter bears to the total
required dividends on the Series B Preferred Stock and such parity
stock for such calendar quarter.
3. PREFERENCE ON LIQUIDATION. In the event of any dissolution, liquidation
or winding up of the affairs of the Corporation, after payment or provision
for payment of any debts and other liabilities of the Corporation, the
holders of the Series B Preferred Stock shall be entitled to receive the
following amounts out of the net assets of the Corporation, and before any
distribution shall be made to the holders of any common stock or to the
holders of any other class of stock or series thereof ranking junior to the
Series B Preferred Stock in the distribution of assets:
(a) if such dissolution, liquidation or winding up is voluntary,
the applicable redemption price per share determined as provided
in Section 4 of these resolutions;
(b) if such dissolution, liquidation or winding up is involuntary,
$7.375 per share;
and no more. If upon such voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Corporation, the
net assets of the Corporation shall be insufficient to permit
payment in full of the amounts required to be paid to the holders
of the Series B Preferred Stock and to the holders of any class of
stock or series thereof ranking on a parity with the Series B
Preferred Stock (including the Outstanding Parity Stock) in
respect of the distribution of assets, then a pro rata portion of
the full amount required to be paid upon such dissolution,
liquidation or winding up shall be paid to: (i) the holders of
Series B Preferred Stock, and (ii) the holders of any class of
stock or series thereof ranking on a parity with the Series B
Preferred Stock (including the Outstanding Parity Stock) in
respect of the distribution of assets. Such pro rata portion shall
be calculated based on the ratio that the total amount available
for distribution to such holders bears to the total distribution
required to be made on the Series B Preferred Stock and such
parity stock.
Nothing herein contained shall be deemed to prevent
redemption of Series B Preferred Stock by the Corporation in the
manner provided in Section 4 of these resolutions. Neither the
merger nor consolidation of the Corporation into or with any other
corporation, nor the merger or consolidation of any other
corporation into or with the Corporation, nor a sale, transfer or
lease of all or any part of the assets of the Corporation shall be
deemed to be a dissolution, liquidation or winding up of the
Corporation within the meaning of this Section 3.
Written notice of any voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the
Corporation, stating a payment date and the place where the
distribution amounts shall be payable and containing a statement
of or reference to the conversion right set forth in Section 6 of
these resolutions, shall be given by mail, postage prepaid, at
least 30 days but not more than 60 days prior to the payment date
stated
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<PAGE>
therein, to the holders of record of the Series B Preferred Stock
at their respective addresses as the same shall appear on the
books of the Corporation.
4. REDEMPTION. the Corporation shall have the right, at its option
and by resolution of its Board of Directors, to redeem at any time and from
time to time the Series B Preferred Stock, in whole or in part, upon
payment in cash in respect of each share redeemed at the then applicable
redemption price set forth below:
<TABLE>
<CAPTION>
<S> <C> <C>
If redeemed during the twelve month period ending January 31, 1995 $7.67
If redeemed during the twelve month period ending January 31, 1996 $7.59625
If redeemed during the twelve month period ending January 31, 1997 $7.5225
If redeemed during the twelve month period ending January 31, 1998 $7.44875
If redeemed after January 31, 1998 $7.375
</TABLE>
If less than all of the outstanding shares of the Series B
Preferred Stock shall be redeemed, the particular shares to be redeemed
shall be allocated among the respective holders of Series B Preferred
Stock, pro rata or by lot, as the Board of Directors may determine.
Notice of any redemption specifying the date fixed for said
redemption and the place where the amount to be paid upon redemption is
payable and containing a statement of or reference to the conversion right
set forth in Section 6 of these resolutions shall be mailed, postage
prepaid, at least 30 days but not more than 60 days prior to said
redemption date to the holders of record of the Series B Preferred Stock to
be redeemed at their respective addresses as the same shall appear on the
books of the Corporation. If such notice of redemption shall have been so
mailed, and if on or before the redemption date specified in such notice,
all funds necessary for such redemption shall have been set aside by the
Corporation separate and apart from its other funds, in trust for the
account of the holders of the shares so to be redeemed, so as to be and
continue to be available therefor, then, on and after said redemption date,
notwithstanding that any certificate for shares of the Series B Preferred
Stock so called for redemption shall not have been surrendered for
cancellation, the shares represented thereby so called for redemption shall
be deemed to be no longer outstanding and all rights with respect to such
shares of the Series B Preferred Stock so called for redemption shall
forthwith cease and terminate, except only the right of the holders thereof
to receive out of the funds so set aside in trust the amount payable on
redemption thereof, but without interest.
Shares of Series B Preferred Stock redeemed or otherwise purchased
or acquired by the Corporation shall not be reissued as shares of Series B
Preferred Stock but shall assume the status of authorized but unissued
shares of Preferred Stock of the Corporation.
5. VOTING RIGHTS. The holders of the Series B Preferred Stock shall have
two and one-half votes per share on all matters requiring the vote of
stockholders, and additionally, if the voting rights of the Class B Common
Stock are increased, then the voting rights of the Series B Preferred Stock
shall be increased by an amount which will maintain the two and one-half to
one proportion between the voting rights of the Class B Common Stock and
the Series B Preferred Stock as is hereby established.
Additionally, if at any time the equivalent of six or more full
quarterly dividends (whether or not consecutive) payable on the Series B
Preferred Stock shall not be paid, the number of directors constituting the
Board of Directors of the Corporation shall be increased by two, and the
holders of the Series B Preferred Stock (whether or not the payment of
quarterly dividends shall not be paid on other Preferred Stock outstanding)
shall have the exclusive right, voting together as a class, to elect two
directors to fill such newly created directorships. This right shall remain
vested until dividends on the Series B Preferred Stock have been paid for
four consecutive quarters, at which time: (i) the right shall terminate
(subject to revesting in the case of any subsequent failure to pay of the
kind described above); (ii) the term of the directors then in office
elected by the holders of the Series B Preferred Stock as a class shall
terminate; and (iii) the number of directors constituting the Board of
Directors of the Corporation shall be reduced by two.
C-3
<PAGE>
Whenever such right shall vest, it may be exercised initially
either at a special meeting of holders of the Series B Preferred Stock or
at any annual stockholders' meeting, but thereafter it shall be exercised
only at annual stockholders' meetings. Any director who shall have been
elected by the holders of the Series B Preferred Stock as a class pursuant
to this Section 5 shall hold office for a term expiring at the next annual
meeting of stockholders, and during such term may be removed at any time,
either for or without cause, by, and only by, the affirmative votes of the
holders of record of a majority of the outstanding shares of the Series B
Preferred Stock given at a special meeting of such stockholders called for
such purpose, and any vacancy created by such removal may also be filled at
such meeting. Any vacancy caused by the death or resignation of a director
who shall have been elected by the holders of the Series B Preferred Stock
as a class pursuant to this Section 5 may be filled only by the remaining
director elected by the holders of the Series B Preferred Stock then in
office.
Whenever a meeting of the holders of Series B Preferred Stock is
permitted or required to be held pursuant to this Section 5, such meeting
shall be held at the earliest practicable date and the Secretary of the
Corporation shall call such meeting, providing written notice to all
holders of record of Series B Preferred Stock, in accordance with law, upon
the earlier of the following:
(a) as soon as reasonably practicable following the occurrence of
the event or events permitting or requiring such meeting
hereunder; or
(b) within 20 days following receipt by said Secretary of a
written request for such a meeting, signed by the holders of
record of at least 20% of the shares of Series B Preferred Stock
then outstanding.
If such meeting shall not be called by the proper
corporate officer within 20 days after the receipt of such request
by the Secretary of the Corporation, or within 25 days after the
mailing of the same within the United States of America by
registered mail addressed to the Secretary of the Corporation at
its principal office, then the holders of record of at least 20%
of the shares of Series B Preferred Stock then outstanding may
designate one of their members to call such a meeting at the
expense of the Corporation, and such meeting may be called by such
person in the manner and at the place provided in this Section 5.
Any holder of Series B Preferred Stock so designated to call such
meeting shall have access to the stock books of the Corporation
for the purpose of causing a meeting of such stockholders to be so
called.
Notwithstanding any provision of this Section 5 to the
contrary, no special meeting of the holders of shares of Series B
Preferred Stock: (i) shall be held during the 90-day period next
preceding the date fixed for the annual meeting of stockholders of
the Corporation; or (ii) shall be required to be called or held in
violation of any law, rule or regulation.
Any meeting of the holders of all outstanding Series B
Preferred Stock entitled to vote as a class for the election of
directors shall be held at the place at which the last annual
meeting of stockholders was held. At such meeting, the presence in
person or by proxy of the holders of a majority of the outstanding
shares of the Series B Preferred Stock shall be required to
constitute a quorum; in the absence of a quorum, a majority of the
holders present, in person or by proxy, shall have the power to
adjourn the meeting from time to time without notice, other than
an announcement at the meeting, until a quorum shall be present.
6. CONVERTIBILITY. Shares of the Series B Preferred Stock
(hereinafter in this Section 6 called the "Shares") shall be convertible
into Class B Common Stock on the following terms and conditions:
(a) Subject to and upon compliance with the provisions of this
Section 6, the holder of any Shares may at such holder's option
convert any such Shares into such number of fully paid and
non-assessable shares of Class B Common Stock as are issuable
pursuant to the formula set forth in subsections (c) and (d) of
this Section 6. No adjustment shall be made for dividends on any
Class B Common Stock that shall be issuable upon the conversion of
such Shares.
(b) The surrender of any Shares for conversion shall be made by
the holder thereof to the Corporation at its principal office and
such holder shall give written notice to the Corporation at said
office that such holder elects to convert such Shares in
accordance with the provisions thereof and this Section 6. Such
notice also
C-4
<PAGE>
shall state the name or names (with addresses) in which the
certificate or certificates for the Class B Common Stock, which
shall be issuable on such conversion, shall be issued. Subject to
the provisions of subsection (a) of this Section 6, every such
notice of election to convert shall constitute a contract between
the holder of such shares and the Corporation, whereby such holder
shall be deemed to subscribe for the number of shares of Class B
Common Stock which such holder will be entitled to receive upon
such conversion and, in payment and satisfaction of such
subscription, to surrender such Shares and to release the
Corporation from all obligations thereon, and whereby the
Corporation shall be deemed to agree that the surrender of such
Shares and the extinguishment of its obligations thereon shall
constitute full payment for the Class B Common Stock so subscribed
for and to be issued upon such conversion.
As soon as practicable, after the receipt of such notice
and Shares, the Corporation shall issue and shall deliver to the
person for whose account such Shares were so surrendered, or on
such holder's written order, a certificate or certificates for the
number of full shares of Class B Common Stock issuable upon the
conversion of such Shares and a check or cash for the payment (if
any) to which such person is entitled pursuant to subsection (e)
of this Section 6, together with a certificate or certificates
representing the Shares, if any, which are not to be converted,
but which constituted part of the Shares represented by the
certificate or certificates surrendered by such person. Such
conversion shall be deemed to have been effected on the date on
which the Corporation shall have received such notice and such
Shares, and the person or persons in whose name or names any
certificate or certificates for Class B Common Stock shall be
issuable upon such conversion shall be deemed to have become on
said date the holder or holders of record of the shares
represented thereby.
(c) The Conversion Rate shall be 1.495919425 shares of Class B
Common Stock for each share of Series B Preferred Stock
surrendered for conversion.
(d) The Conversion Rate shall be subject to adjustment from time
to time as follows:
(1) If the Corporation shall (i) pay a dividend in shares
of its Class B Common Stock, (ii) subdivide the outstanding shares
of Class B Common Stock into a greater number of shares, (iii)
combine its outstanding shares of the Class B Common Stock into a
smaller number of shares, or (iv) issue by reclassification of its
shares of Class B Common Stock any shares of its capital stock,
then the Conversion Rate in effect immediately prior thereto shall
be adjusted so that the holder of a Share surrendered for
conversion after the record date fixing stockholders to be
affected by such event shall be entitled to receive upon
conversion the numbers of such shares of the Corporation which
such holder would have been entitled to receive after the
happening of such event had such shares been converted immediately
prior to such record date. Such adjustment shall be made whenever
any of such events shall happen, and shall also be effective
retroactively as to shares converted between such record date and
the date of the happening of any such event.
(2) If the Corporation shall issue rights or warrants to
the holders of its Class B Common Stock entitling them to
subscribe for or purchase shares of Class B Common Stock, at a
price per share less than the current market price per share of
the Class A Common Stock (as defined in subsection (d)(5) of this
Section 6) at the record date mentioned below, then the number of
shares of Class B Common Stock into which each share shall
thereafter be convertible shall be determined by multiplying the
number of shares of Class B Common Stock into which such share was
theretofore convertible by a fraction, the numerator of which
shall be the number of shares of the Class B Common Stock
outstanding on the date of issuance of such rights or warrants
plus the number of additional shares of the Class B Common Stock
offered for subscription or purchase, and the denominator of which
shall be the number of shares of the Class B Common Stock
outstanding on the date of issuance of such rights or warrants
plus the number of shares of the Class B Common Stock which the
aggregate offering price of the total number of shares so offered
would purchase based on current market price per share (as defined
in subsection (d)(5) of this Section 6). Such adjustment shall be
made whenever such rights or warrants are issued, and shall also
be effective retroactively as to shares converted between the
record date for the determination of stockholders entitled to
receive such rights or warrants and the date such rights or
warrants are issued.
(3) If the Corporation shall distribute to the holders of the
Class B Common Stock evidence of its indebtedness or assets
(excluding cash dividends or distributions made out of current or
retained earnings) or
C-5
<PAGE>
rights or warrants to subscribe other than as referred to in
subsection (d)(2) of this Section 6, then in each such case the
number of shares of the Class B Common Stock into which each share
shall thereafter be convertible shall be determined by multiplying
the number of shares of the Class B Common Stock into which such
share was theretofore convertible by a fraction, the numerator of
which shall be the current market price per share of the Class A
Common Stock (as defined in subsection (d)(5) of this Section 6)
on the date of such distribution, and the denominator of which
shall be such current market price per share of the Class A Common
Stock, as the case may be, less the then fair market value (as
determined by the Board of Directors of the Corporation, whose
determination shall be conclusive) of the portion of the assets,
evidence of indebtedness, subscription rights or warrants so
distributed applicable to one share of the Class B Common Stock.
Such adjustment shall be made whenever any such distribution is
made, and shall also be effective retroactively as to the shares
converted between the record date for the determination of
stockholders entitled to receive such distribution and the date
such distribution is made.
(4) In the event of any consolidation of the Corporation
with or merger of the Corporation into another corporation, or in
the event of any sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the Corporation to
another corporation, or in the case of any reorganization of the
Corporation, the holder of each share then outstanding shall have
the right thereafter to convert such shares into the kind and
amount of shares of stock and other securities and property,
including cash, which would have been deliverable to such holder
upon such consolidation, merger, sale, conveyance, exchange,
transfer or reorganization if such holder had converted such
holder's shares into the Class B Common Stock immediately prior to
such consolidation, merger, sale, conveyance, exchange, transfer
or reorganization. In any such event, effective provision shall be
made in the instrument effecting or providing for such
consolidation, merger, sale, conveyance, exchange, transfer or
reorganization so that the provisions set forth herein for the
protection of the conversion rights of the Shares shall thereafter
be applicable, as nearly as may be practicable, in relation to any
shares of stock or other securities or property including cash,
deliverable after such consolidation, merger, sale, conveyance,
exchange, transfer or reorganization upon the conversion of the
Series B Preferred Stock, or such other securities as shall have
been issued to the holders thereof in lieu thereof or in exchange
therefor. The provisions of this subsection (d)(4) shall similarly
apply to successive consolidations, mergers, sales, conveyances,
exchanges, transfers and reorganizations.
(5) For purposes of computation under subsections (d)(2)
and (d)(3) of this Section 6, the current market price per share
of the Class A Common Stock at any date shall be deemed to be the
average of the daily closing prices for the 20 consecutive
business days immediately prior to the day in question, if the
Class B Common Stock is convertible into Class A Common Stock on a
one-for-one basis, and if the Class B Common Stock is not
convertible into Class A Common Stock on a one-for-one basis, then
the current market price per share of Class A Common Stock at any
date shall be deemed to be such average multiplied by the then
current conversion rate of the Class B Common Stock into the Class
A Common Stock. The closing price for each day shall be the last
reported sales price, regular way, on the principal national
securities exchange upon which the Class A Common Stock is listed,
or in case no such reported sale take place on such day, the
average of the reported closing bid and asked prices, regular way,
on such national securities exchange, or if the Class A Common
Stock is not then listed on a national securities exchange, the
average of the closing prices or, if applicable, closing bid and
asked prices in the over-the-counter market as furnished by the
nationally recognized securities firm or association selected from
time to time by the Corporation for that purpose.
(6) No adjustment in the Conversion Rate shall be required
unless such adjustment would require an increase or decrease of at
least 2% in the Conversion Rate; provided, however, that any
adjustments which by reason of this subsection (d)(6) are not
required to be made, and are not made, shall be carried forward
and taken into account in any subsequent adjustment. All
calculations under this subsection (d)(6) shall be made to the
nearest cent or one-hundredth of a share, as the case may be.
<PAGE>
(e) Receipt by a holder of Series B Preferred Stock of a notice of
redemption pursuant to Section 4 of these resolutions shall not
terminate the conversion rights set forth in this Section 6, but
rather such conversion rights shall continue until the redemption
date set forth in the notice of redemption.
C-6
<PAGE>
(f) No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of any shares. If more than
one share shall be surrendered for conversion at one time by the
same holder, the number of full shares issuable upon conversion
thereof shall be computed on the basis of the aggregate number of
such shares so surrendered. If the conversion of any shares
results in a fraction, an amount equal to such fraction multiplied
by the current market price (determined as provided in subsection
(d)(5) of this Section 6) of the Class A Common Stock on the
business day next preceding the date of conversion shall be paid
to such holder in cash by the Corporation.
(g) The issue of stock certificates on conversion of shares shall
be made free of any tax in respect of such issue. The Corporation
shall not, however, be required to pay any tax which may be
payable in respect to any transfer involved in the issue and
delivery of stock in a name other than that of the holder of the
shares converted, and the Corporation shall not be required to
issue or deliver any such stock certificates unless and until the
person or persons requesting the issuance thereof shall have paid
to the Corporation the amount of any such tax or shall have
established to the satisfaction of the Corporation that such tax
has been paid.
(h) If in any case a state of facts occurs wherein the opinion of
the Board of Directors and the other provisions of this Section 6
are not strictly applicable, or if strictly applicable, would not
fairly protect the conversion rights of the Series B Preferred
Stock in accordance with the essential intent and principles of
such provisions, then the Board of Directors shall make an
adjustment in the application of such provisions in accordance
with such essential intent and principles so as to protect such
conversion rights as aforesaid.
(i) The Corporation shall at all times reserve and keep available
out of its authorized Class B Common Stock the full number of
shares of the Class B Common Stock deliverable upon the conversion
of all outstanding shares of Series B Preferred Stock and shall
take all such corporate action as may be required from time to
time in order that it may validly and legally issue fully paid and
non-assessable shares of Class B Common Stock upon conversion of
the Series B Preferred Stock.
(j) Shares of Series B Preferred Stock converted shall not be
reissued as shares of Series B Preferred Stock but shall assume
the status of authorized but unissued shares of Preferred Stock of
the Corporation.
C-7
<PAGE>
APPENDIX D
STATEMENT OF DESIGNATION
OF
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES C
OF
BANKUNITED FINANCIAL CORPORATION
WHEREAS, pursuant to Article VI of the Articles of Incorporation of
BankUnited Financial Corporation (the "Corporation") and Section 607.0602 of the
Florida Business Corporation Act, the Board of Directors of the Corporation is
authorized to divide the Corporation's authorized Preferred Stock into series
and, within the limitations set forth therein, fix and determine the relative
rights and preferences of the shares of any series so established;
WHEREAS, the Board of Directors desires to (i) establish a series of the
Preferred Stock, designating such series "Noncumulative Convertible Preferred
Stock, Series C," (ii) allocate 363,636 shares of the authorized Preferred Stock
to the Noncumulative Convertible Preferred Stock, Series C, and (iii) fix and
determine the relative rights and preferences of the Noncumulative Convertible
Preferred Stock, Series C;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
allocates a portion of the Preferred Stock to a series designated Noncumulative
Convertible Preferred Stock, Series C and fixes and determines the relative
rights and preferences of the Noncumulative Convertible Preferred Stock, Series
C, as set forth below:
1. DESIGNATION AND ALLOCATION. Of the 10,000,000 shares of Preferred Stock
authorized by the Articles of Incorporation of the Corporation, 363,636 shares
are hereby determined to be and shall be of a series designated as Noncumulative
Convertible Preferred Stock, Series C ("Series C Preferred Stock").
2. PARITY. The Series C Preferred Stock is of the same class as and shall
be on a parity with the Corporation's currently outstanding Noncumulative
Convertible Preferred Stock, Series A, B and C-II (the "Outstanding Parity
Stock"), except as may be provided elsewhere herein.
3. DIVIDENDS. The holders of the Series C Preferred Stock shall be entitled
to receive, when, as, and if declared by the Board of Directors and out of the
assets of the Corporation which are by law available for the payment of
dividends, preferential cash dividends payable quarterly on the last day of
February, May, August and November of each year unless such day is a
non-business day, in which event on the next business day, at the fixed annual
rate of $0.55 per share and no more.
So long as any Series C Preferred Stock remains outstanding:
(a) no dividend whatsoever shall be declared or paid upon or set
apart for payment, and no distribution shall be ordered or made in respect of:
(i) the Corporation's Series I Class A Common Stock, par value $.01 per share
(the "Class A Common Stock"), or the Class B Common Stock, par value $.01 per
share (the "Class B Common Stock"), or any other outstanding common stock of the
Corporation, or (ii) any other class of stock or series thereof ranking junior
to the Series C Preferred Stock in the payment of dividends; and
(b) no shares of the Class A Common Stock or the Class B Common
Stock and no shares of any other class of stock or series thereof ranking junior
to the Series C Preferred Stock in the payment of dividends shall be redeemed or
purchased by the Corporation or any subsidiary thereof; and
(c) no moneys, funds or other assets shall be paid to or made
available for a sinking fund for the redemption or purchase of any shares of:
(i) the Class A Common Stock or the Class B Common Stock; or (ii) any other
class of stock or series thereof ranking junior to the Series C Preferred Stock
in the payment of dividends;
unless, in each instance, full dividends on all outstanding shares of Series C
Preferred Stock for the then current calendar quarter shall have been paid or
declared and set aside for payment.
D-1
<PAGE>
In addition, so long as any Series C Preferred Stock remains outstanding,
no dividend whatsoever shall be declared or paid upon or set apart for payment,
and no distribution shall be ordered or made in respect of, any share or shares
of any class of stock or series thereof ranking on a parity with the Series C
Preferred Stock (including the Outstanding Parity Stock) in the payment of
dividends, unless, for the applicable calendar quarter:
(a) full dividends shall be paid or declared and set apart for
payment on all shares of: (i) the Series C Preferred Stock; and (ii) any class
of stock or series thereof ranking on a parity with the Series C Preferred Stock
(including the Outstanding Parity Stock) in the payment of dividends; or
(b) in the event all such dividends for the applicable calendar
quarter are not or cannot be paid or declared and set apart for payment in full,
a pro rata portion of the full dividends shall be paid or declared and set apart
for payment on all shares of: (i) the Series C Preferred Stock; and (ii) any
class of stock or series thereof ranking on a parity with the Series C Preferred
Stock (including the Outstanding Parity Stock) in the payment of dividends. Such
pro rata portion shall be calculated based on the ratio that the total amount
available for the payment of all required dividends on the Series C Preferred
Stock and such parity stock for the applicable calendar quarter bears to the
total required dividends on the Series C Preferred Stock and such parity stock
for such calendar quarter.
4. PREFERENCE ON LIQUIDATION. In the event of any dissolution, liquidation
or winding up of the affairs of the Corporation, after payment or provision for
payment of any debts and other liabilities of the Corporation, the holders of
the Series C Preferred Stock shall be entitled to receive the following amounts
out of the net assets of the Corporation, and before any distribution shall be
made to the holders of any common stock or to the holders of any other class of
stock or series thereof ranking junior to the Series C Preferred Stock in the
distribution of assets:
(a) if such dissolution, liquidation or winding up is voluntary,
the applicable redemption price per share determined as provided in section 5 of
these resolutions;
(b) if such dissolution, liquidation or winding up is involuntary,
$5.50 per share;
and no more. If upon such voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Corporation the net assets of the Corporation
shall be insufficient to permit payment in full of the amounts required to be
paid to the holders of the Series C Preferred Stock and to the holders of any
class of stock or series thereof ranking on a parity with the Series C Preferred
Stock (including the Outstanding Parity Stock) in respect of the distribution of
assets, then a pro rata portion of the full amount required to be paid upon such
dissolution, liquidation or winding up shall be paid to: (i) the holders of
Series C Preferred Stock; and (ii) the holders of any class of stock or series
thereof ranking on a parity with the Series C Preferred Stock (including the
Outstanding Parity Stock) in respect of the distribution of assets. Such pro
rata portion shall be calculated upon the ratio that the total amount available
for distribution to such holders bears to the total distribution required to be
made on the Series C Preferred Stock and such parity stock.
Neither the merger nor consolidation of the Corporation into or with any
other corporation, nor the merger or consolidation of any other corporation into
or with the Corporation, nor a sale, transfer or lease of all or any part of the
assets of the Corporation shall be deemed to be a dissolution, liquidation or
winding up of the Corporation within the meaning of this section 4.
Written notice of any voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Corporation, stating a payment date and the
place where the distribution amounts shall be payable, shall be given by mail,
postage prepaid, at least 30 days but not more than 60 days prior to the payment
date stated therein, to the holders of record of the Series C Preferred Stock at
their respective addresses as the same shall appear on the books of the
Corporation.
5. REDEMPTION. The Corporation shall have the right, at its option and by
resolution of its Board of Directors, to redeem at any time and from time to
time the Series C Preferred Stock in whole or in part, upon payment in cash in
respect of each share redeemed at the redemption price of $5.50.
If less than all of the outstanding shares of the Series C Preferred Stock
shall be redeemed, the particular shares to be redeemed shall be allocated among
the respective holders of Series C Preferred Stock pro rata or by lot, as the
Board of Directors may determine.
D-2
<PAGE>
Notice of any redemption specifying the date fixed for said redemption and
the place where the amount to be paid upon redemption is payable and containing
a statement of, or reference to, the conversion right set forth in section 7 of
these resolutions shall be mailed, postage prepaid, at least 30 days but not
more than 60 days prior to said redemption date to the holders of record of the
Series C Preferred Stock, to be redeemed at their respective addresses as the
same shall appear on the books of the Corporation. If such notice of redemption
shall have been so mailed, and if on or before the redemption date specified in
such notice, all funds necessary for such redemption shall have been set aside
by the Corporation separate and apart from its other funds, in trust for the
account of the holders of the shares so to be redeemed, so as to be and continue
to be available therefor, then, on and after said redemption date,
notwithstanding that any certificate for shares of the Series C Preferred Stock
so called for redemption shall not have been surrendered for cancellation, the
shares represented thereby so called for redemption shall be deemed to be no
longer outstanding, the right to receive dividends thereon shall cease, and all
rights with respect to such shares of the Series C Preferred Stock so called for
redemption shall forthwith cease and terminate, except only the right of the
holders thereof to receive out of the funds so set aside in trust the amount
payable on redemption thereof, but without interest.
Shares of Series C Preferred Stock redeemed or otherwise purchased or
acquired by the Corporation shall not be reissued as shares of Series C
Preferred Stock but shall assume the status of authorized but unissued shares of
Preferred Stock of the Corporation.
6. VOTING RIGHTS. Except as may be otherwise provided by
applicable law, the Series C Preferred Stock shall be non-voting
7. CONVERTIBILITY. Shares of the Series C Preferred Stock
(hereinafter in this section 7 called the "Shares") shall be convertible into
the Corporation's Class A Common Stock on the following terms and conditions:
(a) CONVERSION. Subject to and upon compliance with the provisions
of this section 7, the holder of any Shares may, at such holder's option,
convert any such Shares into such number of fully paid and non-assessable shares
of the Class A Common Stock as are issuable pursuant to the formula set forth in
subsections 7(b), (c) and (d) of this section 7 by surrendering any Shares for
conversion to the Corporation at its principal office and by furnishing written
notice to the Corporation at said office that such holder elects to convert in
accordance with the provisions hereof. Such notice also shall state the name or
names (with addresses) in which the certificate or certificates for Class A
Common Stock which shall be issuable on such conversion shall be issued. Every
such notice of election to convert shall constitute a contract between the
holder and the Corporation, whereby such holder shall be deemed to subscribe for
the number of shares of Class A Common Stock which such holder will be entitled
to receive upon such conversion and, in payment and satisfaction of such
subscription, to surrender such Shares and to release the Corporation from all
obligations thereon, and whereby the Corporation shall be deemed to agree that
the surrender of such Shares and the extinguishment of its obligations thereon
shall constitute full payment for the Class A Common Stock so subscribed for and
to be issued upon such conversion.
As soon as practicable after the receipt of such notice and Shares, the
Corporation shall issue and shall deliver to the holder for whose account such
Shares were so surrendered, or on such holder's written order, a certificate or
certificates for the number of full shares of Class A Common Stock issuable upon
the conversion of such Shares and a check or cash for the payment (if any) to
which such person is entitled pursuant to subsection 7(d) hereof, together with
a certificate or certificates representing the Shares, if any, which are not to
be converted, but which constituted part of the Shares represented by the
certificate or certificates surrendered by such holder. Such conversion shall be
deemed to have been effected on the date on which the Corporation shall have
received such notice and such Shares, and the person or persons in whose name or
names any certificate or certificates for Class A Common Stock shall be issuable
upon such conversion shall be deemed to have become on said date the holder or
holders of record of the shares represented thereby.
(b) BASIC CONVERSION RATE. The rate at which the holder of any
Shares may convert such Shares into Class A Common Stock (the "Conversion Rate")
shall be 1.45475 shares of Class A Common Stock for each Share which is
surrendered for conversion, subject to adjustment as provided in subsection 7(c)
hereinbelow.
(c) CONVERSION RATE ADJUSTMENT. The Conversion Rate shall be
subject to adjustment from time to time as follows:
(1) If the Corporation shall (i) pay a stock dividend in
and on shares of its Class A Common Stock, (ii) subdivide its outstanding shares
of Class A Common Stock into a greater number of shares, (iii) combine its
outstanding
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shares of Class A Common Stock into a smaller number of shares, or (iv) issue by
reclassification of its shares of Class A Common Stock any shares of its capital
stock, then the Conversion Rate in effect immediately prior thereto shall be
adjusted so that the holder of any Shares surrendered for conversion after the
record date fixing stockholders to be affected by such event shall be entitled
to receive upon conversion the number of such shares of Class A Common Stock
which such holder would have been entitled to receive after the happening of
such event had such Shares been converted immediately prior to such record date.
Such adjustment, if applicable, shall be made whenever any of such events shall
happen, and shall also be effective retroactively as to the Shares converted
between such record date and the date of the happening of any such event.
(2) In the event of any consolidation of the Corporation
with or merger of the Corporation into another corporation, or in the event of
any sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the property
or assets of the Corporation to another corporation, or in the case of any
reorganization of the Corporation, the Corporation or the surviving entity shall
have the right to require that if the holder of such Shares shall thereafter
convert such Shares such conversion shall be into the kind and amount of shares
of stock and other securities and property, including cash, which would have
been deliverable to such holder upon such consolidation, merger, sale,
conveyance, exchange, transfer or reorganization if such holder had converted
such holder's Shares into Class A Common Stock immediately prior to such
consolidation, merger, sale, conveyance, exchange, transfer or reorganization.
In any such event, effective provision shall be made in the instrument effecting
or providing for such consolidation, merger, sale, conveyance, exchange,
transfer or reorganization so that the provisions set forth herein for the
conversion rights of the holder of Shares shall thereafter be applicable, as
nearly as may be practicable, in relation to any shares of stock or other
securities or property, including cash, deliverable after such consolidation,
merger, sale, conveyance, exchange, transfer or reorganization upon the
conversion. The provisions of this subsection 7(c)(2) shall similarly apply to
successive consolidations, mergers, sales, conveyances, exchanges, transfers and
reorganizations.
The Corporation shall provide written notice of any action contemplated
pursuant to this subsection 7(c)(2) at least 10 days prior to the record date of
such action, to the holders of record of the Series C Preferred Stock to their
respective addresses as the same shall appear on the books of the Corporation.
The Corporation shall also provide the holders of record of the Series C
Preferred Stock with written notice at least 10 days prior to the record date
set for the consideration of any other extraordinary business matters (provided,
however, that any routine business matters including, but not limited to, the
setting of record dates for (i) the declaration of regular dividends and (ii)
annual stockholders' meetings that do not require the filing of a preliminary
proxy statement with the Securities and Exchange Commission or its successor
shall be excluded from such notice provisions).
(3) No adjustment in the Conversion Rate shall be required
unless such adjustment would require an increase or decrease of at least 2% in
such Conversion Rate; provided, however, that any adjustments which by reason of
this subsection 7(c)(3) are not required to be made, and are not made, shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this subsection 7(c)(3) shall be made to the nearest cent or
one-hundredth of a share, as the case may be.
(d) FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any Shares. If more
than one Share shall be surrendered for conversion at one time by the same
holder, the number of full shares issuable upon conversion thereof shall be
computed on the basis of the aggregate face amount of such Shares so
surrendered. If the conversion of any Shares results in a fraction, an amount
equal to such fraction multiplied by the Conversion Rate, subject to adjustment
as provided in subsection (c) hereof, shall be paid to such holder in cash by
the Corporation.
(e) TAX. The Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of stock in the name other than that of the holder of the Shares
converted, and the Corporation shall not be required to issue or deliver any
such stock certificates unless and until the person or persons requesting the
issuance thereof shall have paid to the Corporation the amount of any such tax
or shall have established to the satisfaction of the Corporation that such tax
has been paid.
(f) RESERVATION OF SHARES. The Corporation shall at all times
reserve and keep available out of its authorized Class A Common Stock the full
number of shares of Class A Common Stock deliverable upon the conversion of all
outstanding Shares and shall take all such corporate action as may be required
from time to time in order that it may validly and legally issue fully paid and
non-assessable shares of Class A Common Stock upon conversion of the Shares.
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APPENDIX E
STATEMENT OF DESIGNATION
OF
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES C-II
OF
BANKUNITED FINANCIAL CORPORATION
WHEREAS, pursuant to Article VI of the Articles of Incorporation of the
Corporation, the Board of Directors of the Corporation is authorized to divide
the Corporation's authorized Preferred Stock, $.01 par value (the "Preferred
Stock"), into series and, within the limitations set forth therein, fix and
determine the relative rights and preferences of the shares of any series so
established;
WHEREAS, the Board of Directors desires to (i) establish a series of the
Preferred Stock, designating such series "Noncumulative Convertible Preferred
Stock, Series C-II," (ii) allocate 222,223 shares of the authorized Preferred
Stock to the Noncumulative Convertible Preferred Stock, Series C-II, and (iii)
fix and determine the relative rights and preferences of the Noncumulative
Convertible Preferred Stock, Series C-II;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
allocates a portion of the Preferred Stock to a series designated Noncumulative
Convertible Preferred Stock, Series C-II (the "Series C-II Preferred Stock"),
and fixes and determines the relative rights and preferences of the Series C-II
Preferred Stock, as set forth below:
1. DEFINITIONS
(a) Articles of Incorporation - the Articles of
Incorporation, as amended, of the Corporation as filed with the Florida
Secretary of State.
(b) Board of Directors - the Board of Directors of the
Corporation.
(c) The Corporation - BankUnited Financial Corporation.
(d) Common Stock - the Corporation's Series I Class A Common
Stock, $.01 par value, and Class B Common Stock, $.01 par value.
(e) Dividend Payment Date - the last day of each quarter during
which a dividend on the Series C-II Preferred Stock is declared by the Board of
Directors, unless such day is a non-business day, in which event such Dividend
Payment Date shall be the next business day.
(f) Dividend Payment Period - a Dividend Period for which a
dividend on the Series C-II Preferred Stock is declared by the Board of
Directors.
(g) Dividend Period - a quarterly period for which a dividend is
due and payable on the Series C-II Preferred Stock when, as and if declared by
the Board of Directors, commencing on and including the first day of a quarter
for which a dividend is due and payable and ending on and including the last day
of such quarter, unless such day is a non-business day, in which event on the
next business day.
(h) Junior Stock - the Common Stock and such other classes and/or
series of equity securities which, as designated by the Board of Directors in
its sole discretion, rank junior to the Series C-II Preferred Stock with respect
to any one or more of the following: (i) dividend rights, (ii) rights upon
liquidation, dissolution or winding up of the Corporation, (iii) redemption
rights or (iv) any other rights specified by the Board of Directors.
(i) Parity Stock - any classes and/or series of equity securities
which, as designated by the Board of Directors in its sole discretion, rank on a
parity with the Series C-II Preferred Stock with respect to any one or more of
the following: (i) dividend rights, (ii) rights upon liquidation, dissolution or
winding up of the Corporation, (iii) redemption rights
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or (iv) any other rights specified by the Board of Directors, whether or not the
dividend rates, dividend periods, or liquidation prices per share thereof are
different from those of the Series C-II Preferred Stock.
(j) Passed Dividend - a dividend for a Dividend Period which the
Board of Directors omits or fails to declare or determines not to declare
whether or not dividends are declared on any future Dividend Payment Periods.
(k) Preferred Stock - the Corporation's Preferred Stock, $.01
par value.
(l) Senior Stock - any classes and/or series of equity securities
of the Corporation in which, as designated by the Board of Directors in its sole
discretion, the holders of such classes and/or series shall be entitled to any
one or more of the following: (i) dividend rights, (ii) rights upon liquidation,
dissolution or winding up of the Corporation, (iii) redemption rights or (iv)
any other rights specified by the Board of Directors, in preference or priority
to the holders of Series C-II Preferred Stock.
(m) Series A Preferred Stock - the Corporation's Noncumulative
Convertible Preferred Stock, Series A.
(n) Series B Preferred Stock - the Corporation's Noncumulative
Convertible Preferred Stock, Series B.
(o) Series C Preferred Stock - the Corporation's Noncumulative
Convertible Preferred Stock, Series C.
2. DESIGNATION AND ALLOCATION. Of the 10,000,000 shares of Preferred Stock
authorized by the Articles of Incorporation of the Corporation, 222,223 shares
are hereby determined to be and shall be of a series designated as Noncumulative
Convertible Preferred Stock, Series C-II.
3. RANK. The Series C-II Preferred Stock shall rank, with respect to
dividend rights and rights upon liquidation, dissolution or winding up of the
Corporation, senior to the Common Stock. The Series C-II Preferred Stock shall
rank, as to dividend rights, rights upon liquidation and dissolution or winding
up of the Corporation, on a parity with the Series A, Series B and Series C
Preferred Stock.
The Series C-II Preferred Stock shall be subject to the future
authorization and issuance of additional classes and/or series of equity
securities ranking junior to, on a parity with, or senior to the Series C-II
Preferred Stock with respect to any one or more of the following: (i) dividend
rights, (ii) rights upon liquidation, dissolution or winding up of the
Corporation, (iii) redemption rights or (iv) any other rights specified by the
Board of Directors, including, without limitation, series of Preferred Stock
that are cumulative as to dividends. The Board of Directors shall, in its sole
discretion, determine whether any such additional classes and/or series of
equity securities shall be designated as Junior Stock, Parity Stock or Senior
Stock.
4. DIVIDENDS
(a) RATE AND PAYMENTS. Holders of shares of the Series C-II
Preferred Stock shall be entitled to receive, when, as, and if declared by the
Board of Directors out of the funds legally available for payment, noncumulative
cash dividends, payable quarterly, from the date of issue thereof at the annual
rate of 8.9% ($0.801 per share). Dividends on the Series C-II Preferred Stock,
when declared by the Board of Directors, shall be payable quarterly on each
Dividend Payment Date.
The amount of dividends payable for any period other than a full
Dividend Payment Period shall be computed on the basis of a 365-day year and the
actual number of days elapsed in the period. Dividends payable for each full
Dividend Period shall be computed by dividing the annual dividend rate by four.
Each declared dividend shall be payable to holders of record as
they appear at the close of business on the stock books of the Corporation on
such record dates, not more than 20 calendar days and not less than 10 calendar
days preceding the payment dates therefor, as are determined by the Board of
Directors.
(b) NONCUMULATIVE DIVIDENDS. Dividends on the shares of Series
C-II Preferred Stock shall be noncumulative, that is, if the Board of Directors
omits or fails to declare or determines, in its sole discretion, not to declare
a dividend for any Dividend Period, then the Corporation shall have no
obligation to pay such Passed Dividend and the
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holders of the Series C-II Preferred Stock will have no right to, or a prior
claim or preference to, the Passed Dividend, whether or not funds are or
subsequently become available for the payment of such Passed Dividend.
The Board of Directors may determine, in its sole discretion, that
the Corporation shall pay less than the stated amount of dividends on the Series
C-II Preferred Stock for any Dividend Period notwithstanding that funds are or
subsequently become available for the payment of such dividend. Any portion of a
dividend for a Dividend Period not declared shall be deemed a Passed Dividend
and treated as described above.
(c) PARITY AND JUNIOR STOCK RIGHTS. No full dividends shall be
declared and paid, or declared and set apart for payment, on any stock ranking,
as to dividend rights, on a parity with the Series C-II Preferred Stock, unless
full dividends shall have been or contemporaneously are declared and paid, or
declared and set apart for payment, on all shares of the Series C-II Preferred
Stock.
If at any time with respect to any Dividend Period, dividends are
declared in part and paid in part, or declared in part and set apart for payment
in part, on the Series C-II Preferred Stock, a pro rata portion shall be
declared and paid, or declared and set apart for payment, on all shares of the
Series C-II Preferred Stock together with any stock ranking, as to dividend
rights, on a parity with the Series C-II Preferred Stock. Such pro rata portion
shall be calculated based on the ratio that the total amount available for the
payment of dividends on the Series C-II Preferred Stock plus such stock ranking,
as to dividend rights, on a parity with the Series C-II Preferred Stock bears to
the total payment of full dividends on the Series C-II Preferred Stock together
with such stock ranking, as to dividend rights, on a parity with the Series C-II
Preferred Stock.
Unless full dividends have been declared and paid, or declared and
set apart for payment, on all outstanding shares of Series C-II Preferred Stock
for the applicable Dividend Period, the Corporation shall not (i) declare any
dividends on any stock ranking, as to dividend rights, junior to the Series C-II
Preferred Stock (other than in other Junior Stock), (ii) redeem, purchase or
otherwise acquire any stock ranking, as to dividend rights, on a parity with or
junior to the Series C-II Preferred Stock, for any consideration except by
conversion into or exchange for Junior Stock or (iii) pay or make available any
monies, funds or other assets for any sinking fund for the redemption or
purchase of any stock ranking, as to dividend rights, on a parity with or junior
to the Series C-II Preferred Stock.
Holders of the Series C-II Preferred Stock shall not be entitled
to any dividends, whether payable in cash, property or stock, in excess of the
dividends actually declared by the Board of Directors.
Except as expressly otherwise limited herein, and to the extent
permitted by applicable law, the Board of Directors: (i) may declare and the
Corporation may pay or set apart for payment dividends on any Junior Stock or
Parity Stock, (ii) may make any payment on account of or set apart payment for a
sinking fund or other similar fund or agreement for the purchase or other
acquisition, redemption, retirement or other requirement of, or with respect to,
any Junior Stock or Parity Stock or any warrants, rights, calls or options
exercisable or exchangeable for or convertible into any Junior Stock or Parity
Stock, (iii) may make any distribution with respect to any Junior Stock or
Parity Stock or any warrants, rights, calls or options exercisable or
exchangeable for or convertible into any Junior Stock or Parity Stock, whether
directly or indirectly, and whether in cash, obligations or securities of the
Corporation or other property and (iv) may purchase or otherwise acquire, redeem
or retire any Junior Stock or Parity Stock or any warrants, rights, calls or
options exercisable or exchangeable for or convertible into any Junior Stock or
Parity Stock; and the holders of the Series C-II Preferred Stock shall not be
entitled to share or participate therein.
5. PREFERENCE ON LIQUIDATION. In the event of any liquidation, dissolution
or winding up of the Corporation, voluntary or involuntary, after payment or
provision for payment of any debts and other liabilities of the Corporation as
required by law, the holders of the Series C-II Preferred Stock shall be
entitled to receive $9.00 per share out of the assets of the Corporation
available for distribution to stockholders, before any distribution of assets is
made to the holders of any stock ranking junior to the Series C-II Preferred
Stock in the distribution of assets. If, upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation legally available for distribution to stockholders shall be
insufficient to permit payment in full of the amounts required to be paid to the
holders of the Series C-II Preferred Stock together with the holders of any
stock ranking on a parity with the Series C-II Preferred Stock in the
distribution of assets, then a pro rata portion of the full amount required to
be paid upon such liquidation, dissolution or winding up shall be paid to the
holders of the Series C-II Preferred Stock together with any stock ranking on a
parity with the Series C-II Preferred Stock in the distribution of assets. Such
pro rata portion shall be calculated based on the ratio that
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the total amount available for distribution to such holders bears to the total
distribution required to be made on the Series C-II Preferred Stock together
with any stock ranking on a parity with the Series C-II Preferred Stock in the
distribution of assets. After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of the Series C-II
Preferred Stock will not be entitled to any further participation in any
distribution of assets of the Corporation.
Neither the merger nor consolidation of the Corporation into or
with any other entity or entities, nor the merger or consolidation of any other
entity or entities into or with the Corporation, nor a sale, transfer, lease or
exchange (for cash, securities or other consideration) of all or any part of the
assets of the Corporation shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section 5, unless such
sale, transfer, lease or exchange shall be in connection with and intended to be
a plan of complete liquidation, dissolution or winding up of the Corporation.
Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, stating a payment date and the
place where the distribution amounts shall be payable, shall be given by mail,
postage prepaid, at least 30 days but not more than 60 days prior to the payment
date stated therein, to the holders of record of the Series C-II Preferred Stock
at their respective addresses as the same shall appear on the books of the
Corporation.
6. OPTIONAL REDEMPTION. The Series C-II Preferred Stock is redeemable at
the option of the Corporation for cash, in whole or in part, at any time and
from time to time upon payment in cash with respect to each share redeemed at
$9.00 per share plus any dividends that have been declared but are unpaid as of
the date of redemption to the extent that the Corporation has funds legally
available therefor.
Subject to any limitations provided herein and to the extent
permitted by law, the Corporation may, at its option, redeem the Series C-II
Preferred Stock at any time without regard to whether or not shares of any other
series of Preferred Stock are also being redeemed. If less than all of the
outstanding shares of Series C-II Preferred Stock shall be redeemed, the
particular shares to be redeemed shall be allocated among the respective holders
of the Series C-II Preferred Stock, pro rata or by lot, as the Board of
Directors may determine. The Corporation may, in its sole discretion, also
determine to redeem other series of Preferred Stock without redeeming any shares
of the Series C-II Preferred Stock.
Notice of any redemption specifying the date fixed for said
redemption and the place where the amount to be paid upon redemption is payable
shall be mailed, postage prepaid, at least 30 days but not more than 60 days
prior to said redemption date, to the holders of record of the Series C-II
Preferred Stock to be redeemed at their respective addresses as the same shall
appear on the books of the Corporation. If such notice of redemption shall have
been so mailed, unless default shall be made by the Corporation in providing for
the payment of the redemption price, and if on or before the redemption date
specified in such notice all funds necessary for such redemption shall have been
set aside by the Corporation separate and apart from its other funds, in trust
for the account of the holders of the shares so to be redeemed, so as to be and
continue to be available therefor, then, on and after said redemption date,
notwithstanding that any certificate for shares of the Series C-II Preferred
Stock so called for redemption shall not have been surrendered for cancellation,
the shares represented thereby so called for redemption shall be deemed to be no
longer outstanding, the right to receive dividends thereon shall cease, and all
rights with respect to such shares of the Series C-II Preferred Stock so called
for redemption shall forthwith cease and terminate, except only the right of the
holders thereof to receive out of the funds so set aside in trust the amount
payable on redemption thereof, including any dividends that have been declared
but are unpaid as of the date of redemption.
Shares of Series C-II Preferred Stock redeemed or otherwise
purchased or acquired by the Corporation shall not be reissued as shares of
Series C-II Preferred Stock, but shall assume the status of authorized but
unissued shares of Preferred Stock of the Corporation, without designation as to
series until such shares are once more designated as part of a particular series
by the Board of Directors.
7. VOTING RIGHTS. Except as required by applicable law, the
holders of the Series C-II Preferred Stock will not be entitled to vote for any
purpose.
8. SINKING FUND. No sinking fund shall be provided for the
purchase or redemption of shares of the Series C-II Preferred Stock.
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9. CONVERTIBILITY. Shares of the Series C-II Preferred Stock
(hereinafter in this section 9 called the "Shares") shall be convertible into
the Corporation's Class A Common Stock on the following terms and conditions:
(a) CONVERSION. Subject to and upon compliance with the provisions
of this section 9, the holder of any Shares may at such holder's option, convert
any such Shares into such number of fully paid and non-assessable shares of the
Class A Common Stock as are issuable pursuant to the formula set forth in
subsections 9(b), (c) and (d) of this section 9 by surrendering any Shares for
conversion to the Corporation at its principal office and by furnishing written
notice to the Corporation at said office that such holder elects to convert in
accordance with the provisions hereof. Such notice also shall state the name or
names (with addresses) in which the certificate or certificates for Class A
Common Stock which shall be issuable on such conversion shall be issued. Every
such notice of election to convert shall constitute a contract between the
holder and the Corporation, whereby such holder shall be deemed to subscribe for
the number of shares of Class A Common Stock which such holder will be entitled
to receive upon such conversion and, in payment and satisfaction of such
subscription, to surrender such Shares and to release the Corporation from all
obligations thereon, and whereby the Corporation shall be deemed to agree that
the surrender of such Shares and the extinguishment of its obligations thereon
shall constitute full payment for the Class A Common Stock so subscribed for and
to be issued upon such conversion.
As soon as practicable after the receipt of such notice and
Shares, the Corporation shall issue and shall deliver to the holder for whose
account such Shares were so surrendered, or on such holder's written order, a
certificate or certificates for the number of full shares of Class A Common
Stock issuable upon the conversion of such Shares and a check or cash for the
payment (if any) to which such person is entitled pursuant to subsection 9(d)
hereof, together with a certificate or certificates representing the Shares, if
any, which are not to be converted, but which constituted part of the Shares
represented by the certificate or certificates surrendered by such holder. Such
conversion shall be deemed to have been effected on the date on which the
Corporation shall have received such notice and such Shares, and the person or
persons in whose name or names any certificate or certificates for Class A
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder or holders of record of the shares represented
thereby.
(b) BASIC CONVERSION RATE. The rate at which the holder of any
Shares may convert such Shares into Class A Common Stock (the "Conversion Rate")
shall be 1.3225 shares of Class A Common Stock for each Share which is
surrendered for conversion, subject to adjustment as provided in subsection 9(c)
hereinbelow.
(c) CONVERSION RATE ADJUSTMENT. The Conversion Rate shall be
subject to adjustment from time to time as follows:
(1) If the Corporation shall (i) pay a stock dividend in
and on shares of its Class A Common Stock, (ii) subdivide its outstanding shares
of Class A Common Stock into a greater number of shares, (iii) combine its
outstanding shares of Class A Common Stock into a smaller number of shares, or
(iv) issue by reclassification of its shares of Class A Common Stock any shares
of its capital stock, then the Conversion Rate in effect immediately prior
thereto shall be adjusted so that the holder of any Shares surrendered for
conversion after the record date fixing stockholders to be affected by such
event shall be entitled to receive upon conversion the number of such shares of
Class A Common Stock which such holder would have been entitled to receive after
the happening of such event had such Shares been converted immediately prior to
such record date. Such adjustment, if applicable, shall be made whenever any of
such events shall happen, and shall also be effective retroactively as to the
Shares converted between such record date and the date of the happening of any
such event.
(2) In the event of any consolidation of the Corporation
with or merger of the Corporation into another corporation, or in the event of
any sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the property
or assets of the Corporation to another corporation, or in the case of any
reorganization of the Corporation, the Corporation or the surviving entity shall
have the right to require that if the holder of such Shares shall thereafter
convert such Shares such conversion shall be into the kind and amount of shares
of stock and other securities and property, including cash, which would have
been deliverable to such holder upon such consolidation, merger, sale,
conveyance, exchange, transfer or reorganization if such holder had converted
such holder's Shares into Class A Common Stock immediately prior to such
consolidation, merger, sale, conveyance, exchange, transfer or reorganization.
In any such event, effective provision shall be made in the instrument effecting
or providing for such consolidation, merger, sale, conveyance, exchange,
transfer or reorganization so that the provisions set forth herein for the
conversion rights of the holder of Shares shall thereafter be applicable, as
nearly as may be practicable, in relation to any shares of stock or other
securities or property, including cash, deliverable after such consolidation,
merger, sale, conveyance,
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exchange, transfer or reorganization upon the conversion. The provisions of this
subsection 9(c)(2) shall similarly apply to successive consolidations, mergers,
sales, conveyances, exchanges, transfers and reorganizations.
The Corporation shall provide written notice of any action
contemplated pursuant to this subsection 9(c)(2) at least 10 days prior to the
record date of such action, to the holders of record of the Series C-II
Preferred Stock to their respective addresses as the same shall appear on the
books of the Corporation. The Corporation shall also provide the holders of
record of the Series C-II Preferred Stock with written notice at least 10 days
prior to the record date set for the consideration of any other extraordinary
business matters (provided, however, that any routine business matters
including, but not limited to, the setting of record dates for (i) the
declaration of regular dividends and (ii) annual stockholders' meetings that do
not require the filing of a preliminary proxy statement with the Securities and
Exchange Commission or its successor shall be excluded from such notice
provisions).
(3) No adjustment in the Conversion Rate shall be required
unless such adjustment would require an increase or decrease of at least 2% in
such Conversion Rate; provided, however, that any adjustments which by reason of
this subsection 9(c)(3) are not required to be made, and are not made, shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this subsection 9(c)(3) shall be made to the nearest cent or
one-hundredth of a share, as the case may be.
(d) FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any Shares. If more
than one Share shall be surrendered for conversion at one time by the same
holder, the number of full shares issuable upon conversion thereof shall be
computed on the basis of the aggregate face amount of such Shares so
surrendered. If the conversion of any Shares results in a fraction, an amount
equal to such fraction multiplied by the Conversion Rate, subject to adjustment
as provided in subsection (c) hereof, shall be paid to such holder in cash by
the Corporation.
(f) TAX. The Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of stock in the name other than that of the holder of the Shares
converted, and the Corporation shall not be required to issue or deliver any
such stock certificates unless and until the person or persons requesting the
issuance thereof shall have paid to the Corporation the amount of any such tax
or shall have established to the satisfaction of the Corporation that such tax
has been paid.
(g) RESERVATION OF SHARES. The Corporation shall at all times
reserve and keep available out of its authorized Class A Common Stock the full
number of shares of Class A Common Stock deliverable upon the conversion of all
outstanding Shares and shall take all such corporate action as may be required
from time to time in order that it may validly and legally issue fully paid and
non-assessable shares of Class A Common Stock upon conversion of the Shares.
11. NO OTHER RIGHTS. The shares of Series C-II Preferred Stock
shall not have any preferences, voting powers or relative, participating,
optional or other special rights except as set forth above and in the Articles
of Incorporation or as otherwise required by law.
12. AMENDMENTS. The Board of Directors reserves the right to amend
these resolutions in accordance with applicable law.
E-6
<PAGE>
APPENDIX F
STATEMENT OF DESIGNATION
OF
8% NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES 1993
OF
BANKUNITED FINANCIAL CORPORATION
BankUnited Financial Corporation (the "Corporation"), a corporation
organized and existing under the Florida Business Corporation Act, in accordance
with the provisions of Section 607.0602 thereof and Article VI the Corporation's
Articles of Incorporation, DOES HEREBY CERTIFY:
That pursuant to authority conferred upon the Board of Directors by the
Articles of Incorporation of the Corporation, said Board of Directors acting at
a meeting thereof adopted resolutions providing for the issuance of 1,610,000
shares of the Corporation's Preferred Stock, $.01 par value, designated "8%
Noncumulative Convertible Preferred Stock, Series 1993," which resolutions are
as follows:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Articles of Incorporation, the Board of
Directors does hereby provide for and authorize the issuance of 1,610,000
shares of the Preferred Stock, $.01 par value, of the Corporation, of the
presently authorized but unissued shares of Preferred Stock (the "Preferred
Stock") to be designated "8% Noncumulative Convertible Preferred Stock,
Series 1993" (the "Series 1993 Preferred Stock"). The voting powers,
designations, preferences, and relative, participating, optional or other
special rights of the Series 1993 Preferred Stock authorized hereunder and
the qualifications, limitations and restrictions of such preferences and
rights are as follows:
1. DIVIDENDS.
(a) The holders of the Series 1993 Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of
Directors out of funds of the Corporation legally available for
payment, noncumulative cash dividends, payable quarterly in
arrears, at the rate of $.80 per share per annum. Dividends, when
declared on the Series 1993 Preferred Stock, shall have accrued
from the date of issuance or thereafter, from the most recent date
on which dividends were payable and be payable quarterly on March
31, June 30, September 30 and December 31 of each year (each a
"Dividend Payment Date"), commencing on September 30, 1993;
PROVIDED, HOWEVER, that if any such day is a non-business day, the
Dividend Payment Date will be the next business day. Each declared
dividend shall be payable to holders of record as they appear at
the close of business on the stock books of the Corporation on
such record dates, not more than 30 calendar days and not less
than 10 calendar days preceding the Dividend Payment Date
therefor, as determined by the Board of Directors (each of such
dates a "Record Date"). Quarterly dividend periods (each a
"Dividend Period") shall commence on and include the first day of
January, April, July and October of each year and shall end on and
include the day next preceding the next following Dividend Payment
Date.
(b) No full dividends shall be declared or paid or set
apart for payment on any series of Preferred Stock or other
capital stock of any series ranking, as to dividends or
liquidation preference, on a parity ("Parity Stock") with the
Series 1993 Preferred Stock during any calendar quarter unless
full dividends on the Series 1993 Preferred Stock for the Dividend
Period ending during such calendar quarter have been or contempo
raneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for such payment. When
dividends are not so paid in full (or a sum sufficient for such
full payment is not so set apart) upon the Series 1993 Preferred
Stock and any other Parity Stock, dividends upon the Series 1993
Preferred Stock and dividends on such other Parity Stock payable
during such calendar quarter shall be declared pro rata so that
the amount of such dividends so payable per share on the Series
1993 Preferred Stock and such other Parity Stock shall in all
cases bear to each other the same ratio that full dividends for
the then-current calendar quarter on the shares of Series 1993
Preferred Stock (which shall not include any accumulation in
respect of unpaid dividends for prior Dividend Periods) and full
dividends, including required or permitted accumulations,
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<PAGE>
if any, on shares of such other Parity Stock, bear to each other.
If full dividends on the Series 1993 Preferred Stock have not been
declared and paid or set apart for payment for the Dividend
Payment Date falling in the then-current Dividend Period, then,
with respect to such then-current Dividend Period, the following
restrictions shall be applicable: (i) no dividend or distribution,
other than in shares of capital stock ranking junior to the Series
1993 Preferred Stock as to dividends or liquidation preference
("Junior Stock"), may be declared, set aside or paid on any shares
of Junior Stock, (ii) the Corporation may not repurchase, redeem
or otherwise acquire any shares of its Junior Stock (except by
conversion into or exchange for Junior Stock) and (iii) the
Corporation may not, directly or indirectly, repurchase, redeem or
otherwise acquire (except by conversion into or exchange for
Junior Stock) any shares of any class or series of Junior Stock or
warrants, calls, options or other rights to acquire capital stock
of the Corporation or other security exercisable or exchangeable
into capital stock of the Corporation, otherwise than pursuant to
pro rata offers to purchase or a concurrent redemption of all, or
a pro rata portion, of the outstanding shares of Series 1993
Preferred Stock. Holders of the Series 1993 Preferred Stock shall
not be entitled to any dividends, whether payable in cash,
property or stock, in excess of declared noncumulative dividends,
as herein provided, on the Series 1993 Preferred Stock. No
interest or sum of money in lieu of interest shall be payable in
respect of any declared dividend payment or payments on the Series
1993 Preferred Stock which may be in arrears. As used herein, the
phrase "set apart" in respect of the payment of dividends shall
require deposit of any funds in a bank or trust company in a
separate deposit account maintained for the benefit of the holders
of the Series 1993 Preferred Stock.
2. REDEMPTION.
(a) The shares of Series 1993 Preferred Stock shall be
redeemable by the Corporation, in whole or in part, at any time
and from time to time from and after July 1, 1998. The shares of
Series 1993 Preferred Stock shall be redeemable by the
Corporation, in whole, or in part, at any time and from time to
time prior to July 1, 1998 only if the Corporation's Series I
Class A Common Stock, $.01 par value (the "Class A Common Stock"),
shall have a closing bid price which is at least 140% of the
Conversion Price (as defined below) for any 20 consecutive trading
days ending within five trading days of the giving of notice of
redemption as provided for below. The Series 1993 Preferred Stock
shall be redeemable by the Corporation at a price of $10.00 per
share until June 30, 1998 and thereafter at the following per
share prices during the twelve month period beginning July 1:
YEAR REDEMPTION PRICE
---- ----------------
1998..................... $10.40
1999..................... 10.32
2000..................... 10.24
2001..................... 10.16
2002..................... 10.08
2003 and thereafter...... 10.00
plus, in each case, an amount equal to all accrued but unpaid
dividends (whether or not declared) for the then-current Dividend
Period immediately preceding the date fixed for redemption (the
"Redemption Date"). For purposes of this Section 2, the Conversion
Price shall not give effect to adjustment for missed dividend
payments pursuant to Section 3(d)(v) hereof.
(b) The Series 1993 Preferred Stock shall be redeemable by
the Corporation, in accordance with applicable law, in whole or in
part, upon not less than 30 nor more than 60 calendar days' prior
written notice by mail.
(c) In the event that fewer than all the outstanding
shares of the Series 1993 Preferred Stock are to be redeemed as
permitted by this Section (2), the number of shares to be redeemed
shall be determined by the Board of Directors and the shares to be
redeemed shall be determined by lot or PRO RATA as may be
determined by the Board of Directors or by such other method as
may be approved by the Board of Directors that is required to
conform to any rule or regulation of any stock exchange or
automated quotation system upon which the shares of the Series
1993 Preferred Stock may at the time be listed.
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<PAGE>
(d) Notice of redemption of the Series 1993 Preferred
Stock, specifying the Redemption Date and place of redemption,
shall be given by first class mail to each holder of record of the
shares to be redeemed, at his or her address of record, not less
than 30 nor more than 60 calendar days prior to the Redemption
Date. In the event of a redemption prior to July 1, 1998, such
notice shall be given not more than five business days following
the expiration of the 20 consecutive trading day period specified
in Section 2(a). Each such notice shall also specify the
redemption price applicable to the shares to be redeemed. If less
than all the shares owned by such holder are then to be redeemed,
the notice shall also specify the number of shares thereof which
are to be redeemed and the fact that a new certificate or
certificates representing any unredeemed shares shall be issued
without cost to such holder.
(e) Notice of redemption of shares of the Series 1993
Preferred Stock having been given as provided in Section 2(d),
then unless the Corporation shall have defaulted in providing for
the payment of the redemption price and all accrued and unpaid
dividends (whether or not declared) for the then-current Dividend
Period immediately preceding the Redemption Date, all rights of
the holders thereof (except the right to receive the redemption
price and all accrued and unpaid dividends, whether or not
declared, for the then-current Dividend Period immediately
preceding the Redemption Date) shall cease with respect to such
shares and such shares shall not, after the Redemption Date, be
deemed to be outstanding and shall not have the status of
Preferred Stock. In case fewer than all the shares represented by
any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares without cost to the
holder thereof.
(f) Any shares of Series 1993 Preferred Stock which shall
at any time have been redeemed or converted shall, after such
redemption or conversion, have the status of authorized but
unissued shares of Preferred Stock, without designation as to
series until such shares are once more designated as part of a
particular series by the Board of Directors.
(g) Shares of the Series 1993 Preferred Stock are not
subject or entitled to the benefit of a sinking fund.
(h) Notwithstanding the foregoing, if notice of redemption
shall have been given pursuant to this Section 2 and any holder of
the Series 1993 Preferred Stock shall, prior to the close of
business on the date three business days next preceding the
Redemption Date, give written notice to the Corporation pursuant
to Section 3 hereof of the conversion of any or all of the shares
held by the holder (accompanied by a certificate or certificates
for such shares, duly endorsed or assigned to the Corporation),
then the redemption shall not become effective as to such shares
and the conversion shall become effective as provided in Section 3
below."
3. CONVERSION.
(a) Subject to and upon compliance with the provisions of
this Section 3, the holder of any shares of the Series 1993
Preferred Stock shall have the right, at his or her option, at any
time, to convert the shares into a number of fully paid and
nonassessable shares (calculated as to each conversion to the
nearest 1/100th of a share) of the Corporation's Series I Class A
Common Stock, $.01 par value (the "Class A Common Stock"), equal
to $10.00 for each share surrendered for conversion divided by the
Conversion Price (as defined in Section 3(d) below); PROVIDED,
HOWEVER, that if the Corporation shall have called the Series 1993
Preferred Stock for redemption, such right shall terminate on the
close of business on the third business day preceding the
Redemption Date unless the Corporation has defaulted in making the
payment due on the Redemption Date.
(b) (i) In order to exercise the conversion privilege, the
holder of each share of the Series 1993 Preferred Stock to
be converted shall surrender the certificate representing
such share to the Corporation's transfer agent for the
Series 1993 Preferred Stock with the Notice of Election to
Convert on the back of said certificate duly completed and
signed. Unless the shares issuable on conversion are to be
issued in the same name as the name in which the shares of
the Series 1993 Preferred Stock are registered, each share
surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the
Corporation, duly executed by the holder or his or her
duly authorized attorney and by funds in an amount
sufficient to pay any transfer or
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<PAGE>
similar tax. The holders of shares of the Series 1993
Preferred Stock at the close of business on a Record Date
shall be entitled to receive any dividend declared payable
on those shares for the corresponding Dividend Period on
the applicable Dividend Payment Date, notwithstanding the
conversion of the shares after the Record Date.
(ii) As promptly as practicable after the
surrender by a holder of the certificates for shares of
the Series 1993 Preferred Stock in accordance with Section
3, the Corporation shall issue and shall deliver at the
office of the transfer agent to the holder, or on his or
her written order, a certificate or certificates for the
number of full shares of Class A Common Stock issuable
upon the conversion of those shares in accordance with the
provisions of this Section 2, and any fractional interest
in respect of a share of Class A Common Stock arising upon
the conversion shall be settled as provided in Section
3(c) below.
(iii) Each conversion shall be deemed to have
been effected immediately prior to the close of business
on the date on which all of the conditions specified in
Section 3(b) hereof shall have been satisfied, and, the
person or persons in whose name or names any certificate
or certificates for shares of Class A Common Stock shall
be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares of
Class A Common Stock represented by those certificates at
such time on such date and such conversion shall be at the
Conversion Price in effect at such time on such date,
unless the stock transfer books of the Corporation shall
be closed on that date, in which event such person or
persons shall be deemed to have become such holder or
holders of record at the close of business on the next
succeeding day on which such stock transfer books are
open, but such conversion shall be at the Conversion Price
in effect on the date upon which all of the conditions
specified in Section 3(b) hereof shall have been
satisfied. All shares of Class A Common Stock delivered
upon conversion of the Series 1993 Preferred Stock will
upon delivery be duly and validly issued and fully paid
and nonassessable, free of all liens and charges and not
subject to any preemptive rights. Upon the surrender of
certificates representing shares of the Series 1993
Preferred Stock to be converted, the shares shall no
longer be deemed to be outstanding and all rights of a
holder with respect to the shares surrendered for
conversion shall immediately terminate except the right to
receive the Class A Common Stock or other securities, cash
or other assets as herein provided.
(c) No fractional shares or securities representing
fractional shares of Class A Common Stock shall be issued upon
conversion of the Series 1993 Preferred Stock. Any fractional
interest in a share of Class A Common Stock resulting from
conversion of a share of the Series 1993 Preferred Stock shall be
paid in cash (computed to the nearest cent) based on the Current
Market Price (as defined in Section 3(d)(iv) below) of the Class A
Common Stock on the Trading Day (as defined in Section 3(d)(iv)
below) next preceding the day of conversion. If more than one
share shall be surrendered for conversion at one time by the same
holder, the number of whole shares of Class A Common Stock
issuable upon the conversion shall be computed on the basis of the
aggregate Liquidation Preference (as such term is defined in
Section 6 below) of the shares of the Series 1993 Preferred Stock
so surrendered.
(d) The "Conversion Price" per share of the Series 1993
Preferred Stock shall be $10.00, subject to adjustment from time
to time as follows:
<PAGE>
(i) In case the Corporation shall (1) pay a
dividend or make a distribution on its Class A Common
Stock in shares of its Class A Common Stock, (2) subdivide
its outstanding Class A Common Stock into a greater number
of shares, or (3) combine its outstanding Class A Common
Stock into a smaller number of shares, the Conversion
Price in effect immediately prior to such event shall be
proportionately adjusted so that the holder of any share
of the Series 1993 Preferred Stock thereafter surrendered
for conversion shall be entitled to receive the number and
kind of shares of Class A Common Stock of the Corporation
which he would have been entitled to receive had the share
been converted immediately prior to the happening of such
event. An adjustment made pursuant to this Section 3(d)(i)
shall become effective immediately after the Record Date
in the case of a dividend or distribution except as
provided in Section 3(d)(viii)
F-4
<PAGE>
below, and shall become effective immediately after the
effective date in the case of a subdivision or
combination. If any dividend or distribution is not paid
or made, the Conversion Price then in effect shall be
appropriately readjusted.
(ii) In case the Corporation shall issue rights
or warrants to all holders of its Class A Common Stock
entitling them (for a period expiring within 45 days after
the record date mentioned below) to subscribe for or
purchase Class A Common Stock at a price per share less
than the Current Market Price (as defined in Section
3(d)(iv) below) of the Class A Common Stock at the record
date for the determination of stockholders entitled to
receive the rights or warrants, the Conversion Price in
effect immediately prior to the issuance of such rights or
warrants shall be adjusted so that it shall equal the
price determined by multiplying the Conversion Price in
effect immediately prior to the date of issuance of the
rights or warrants by a fraction of which the numerator
shall be the number of shares of Class A Common Stock
outstanding on the date of the issuance of the rights or
warrants plus the number of shares of Class A Common Stock
which the aggregate offering price of the total number of
shares of Class A Common Stock so offered for subscription
or purchase would purchase at the Current Market Price at
that record date, and of which the denominator shall be
the number of shares of Class A Common Stock outstanding
on the date of issuance of the rights or warrants plus the
number of additional shares of Class A Common Stock for
subscription or purchase. The adjustment provided for in
this Section 3(d)(ii) shall be made successively whenever
any such rights or warrants are issued, and shall become
effective immediately, except as provided in Section
3(d)(viii) below after such record date. In determining
whether any rights or warrants entitle the holder of the
Class A Common Stock to subscribe for or purchase shares
of Class A Common Stock at less than the Current Market
Price, and in determining the aggregate offering price of
the shares of Class A Common Stock so offered, there shall
be taken into account any consideration received by the
Corporation for such rights or warrants, the value of such
consideration, if other than cash, to be determined by the
Board (whose determination, if made in good faith, shall
be conclusive). If any or all of such rights or warrants
are not so issued or expire or terminate without having
been exercised, the Conversion Price then in effect shall
be appropriately readjusted.
(iii) In case the Corporation shall distribute to
all holders of its Class A Common Stock any shares of
capital stock of the Corporation (other than Class A
Common Stock) or evidences of indebtedness or assets
(excluding cash dividends or distributions paid from
retained earnings of the Corporation) or rights or
warrants to subscribe for or purchase any of its
securities (excluding those referred to in Section
3(d)(ii) above), then, in each such case, the Conversion
Price shall be adjusted so that it shall equal the price
determined by multiplying the Conversion Price in effect
immediately prior to the date of the distribution by a
fraction, the numerator of which shall be the Current
Market Price of the Class A Common Stock on the record
date mentioned below less the then fair market value (as
determined by the Board, whose determination, if made in
good faith, shall be conclusive) of that portion of the
capital stock or assets or evidences of indebtedness so
distributed, or of the rights or warrants so distributed,
applicable to one share of Class A Common Stock, and the
denominator of which shall be the Current Market Price of
the Class A Common Stock on the record date. Such
adjustment shall become effective immediately, except as
provided in Section 3(d)(viii) below, after the record
date for the determination of stockholders entitled to
receive such distribution. If any such distribution is not
made or if any or all of such rights or warrants expire or
terminate without having been exercised, the Conversion
Price then in effect shall be appropriately readjusted.
Notwithstanding the foregoing, in the event that the
Corporation shall distribute rights or warrants (other
than those referred to in Section 3(d)(ii) above)
("Rights") pro rata to holders of Class A Common Stock,
the Corporation may, in lieu of making any adjustment
pursuant to this Section 3(d)(iii), make proper provision
so that each holder of the Series 1993 Preferred Stock who
converts such Series 1993 Preferred Stock (or any portion
thereof) after the record date for such distribution and
prior to the expiration or redemption of the Rights shall
be entitled to receive upon such conversion, in addition
to the shares of Class A Common Stock issuable upon such
conversion (the "Conversion Shares"), a number of Rights
to be determined as follows: (1) if such conversion
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<PAGE>
occurs on or prior to the date for the distribution to the
holders of Rights of separate certificates evidencing such
Rights (the "Distribution Date"), the same number of
Rights to which a holder of a number of shares of Class A
Common Stock equal to the number of Conversion Shares is
entitled at the time of such conversion in accordance with
the terms and provisions of and applicable to the Rights;
and (2) if such conversion occurs after the Distribution
Date, the same number of shares of Class A Common Stock
into which the number of shares of this Series 1993
Preferred Stock so converted was convertible immediately
prior to the Distribution Date would have been entitled on
the Distribution Date in accordance with the terms and
provisions of and applicable to the Rights.
(iv) For the purpose of any computation under
this Section 3, the "Current Market Price" of the Class A
Common Stock at any date shall be the average of the last
reported sale prices per share for the ten consecutive
Trading Days (as defined below) preceding the date of such
computation. The last reported sale price for each day
shall be (1) the last reported sale price of the Class A
Common Stock on the Nasdaq National Market, or any similar
system of automated dissemination of quotations of
securities prices then in common use, if so quoted, or (2)
if not quoted as described in clause (1), the mean between
the high bid and low asked quotations for the Class A
Common Stock as reported by the National Quotation Bureau
Incorporated if at least two securities dealers have
inserted both bid and asked quotations for the Class A
Common Stock on at least five of the ten preceding days,
or (3) if the Class A Common Stock is listed or admitted
for trading on any national securities exchange, the last
sale price, or the closing bid price if no sale occurred,
of the Class A Common Stock on the principal securities
exchange on which the Class A Common Stock is listed. If
the Class A Common Stock is quoted on a national
securities or central market system, in lieu of a market
or quotation system described above, the last reported
sale price shall be determined in the manner set forth in
clause (2) of the preceding sentence if bid and asked
quotations are reported but actual transactions are not,
and in the manner set forth in clause (3) of the preceding
sentence if actual transactions are reported. If none of
the conditions set forth above is met, he last reported
sale price of the Class A Common Stock on any day or the
average of such last reported sale prices for any period
shall be the fair market value of such class of stock as
determined by a member firm of the New York Stock
Exchange, Inc. selected by the Corporation. As used
herein, the term "Trading Days" means (1) if the Class A
Common Stock is quoted on the Nasdaq National Market or
any similar system of automated dissemination of
quotations of securities prices, days on which trades may
be made on such system, or (2) if not quoted as described
in clause (1), days on which quotations are reported by
the National Quotation Bureau Incorporated, or (3) if the
Class A Common Stock is listed or admitted for trading on
any national securities exchange, days on which such
national securities exchange is open for business.
(v) In the event that the Corporation shall fail
to declare and pay a dividend on the Series 1993 Preferred
Stock for more than three Dividend Periods (a "Dividend
Default") in any five-year period, then the Conversion
Price shall be reduced by an amount equal to 75% of the
first three missed dividend payments and 100% of any
dividend which is not declared and paid for any subsequent
Dividend Period. Notwithstanding the foregoing, if at any
time subsequent to an adjustment in the Conversion Price
pursuant to this Section 3(d)(v), the Corporation declares
and pays dividends on the Series 1993 Preferred Stock for
each Dividend Period in the five-year period commencing on
the date of the adjustment, then no further adjustment in
the Conversion Price pursuant to this Section 3(d)(v)
shall be made until a new Dividend Default shall have
occurred.
<PAGE>
(vi) No adjustment in the Conversion Price shall
be required unless such adjustment would require a change
of at least one percent in the Conversion Price; PROVIDED,
HOWEVER, that any adjustments which by reason of this
Section 3(d)(vi) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment; and PROVIDED, FURTHER, that adjustment shall
be required and made in accordance with the provisions of
this Section 3(d) (other than this Section 3(d)(vi)) not
later than three years of the date of the event requiring
the
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<PAGE>
adjustment. All calculations under this Section 3(d) shall
be made to the nearest cent or the nearest one hundredth
of a share, as the case may be. Notwithstanding anything
in this Section 3(d) to the contrary, the Corporation
shall be entitled to make such reductions in the
Conversion Price, in addition to those required by this
Section 3(d), as it, in its discretion, shall determine to
be advisable in order that any stock dividend, subdivision
or combination of shares, distribution of capital stock or
rights or warrants to purchase stock or securities, or
distribution of evidence of indebtedness or assets (other
than cash dividends or distributions paid from retained
earnings) hereinafter made by the Corporation to its
stockholders shall be a tax free distribution for federal
income tax purposes.
(vii) Whenever the Conversion Price is adjusted,
as herein provided, the Corporation shall promptly file
with its transfer agent an officers' certificate setting
forth the Conversion Price after the adjustment and
setting forth a brief statement of the facts requiring the
adjustment, which certificate shall be conclusive evidence
of the correctness of the adjustment. Promptly after
delivery of the certificate, the Corporation shall prepare
a notice of the adjustment of the Conversion Price setting
forth the adjusted Conversion Price and the date on which
the adjustment becomes effective and shall mail the notice
of such adjustment of the Conversion Price to the holders
of the Series 1993 Preferred Stock at their addresses as
shown on the stock books of the Corporation.
(viii) In any case in which this Section 3(d)
provides that an adjustment shall become effective
immediately after a record date for an event, the
Corporation may defer until the occurrence of the event
(1) issuing to the holder of any share of the Series 1993
Preferred Stock converted after the record date and before
the occurrence of the event, the additional shares of
Class A Common Stock issuable upon the conversion by
reason of the adjustment required by the event over and
above the Class A Common Stock issuable upon such
conversion before giving effect to the adjustment and (2)
paying to the holder any amount in cash in lieu of any
fractional share pursuant to Section 3(c) above.
(e) If:
(i) the Corporation shall authorize the granting
to the holders of the Class A Common Stock or rights or
warrants to subscribe for or purchase any shares of any
class or any other rights or warrants; or
(ii) there shall be any reclassification of the
Class A Common Stock (other than a subdivision or
combination of the outstanding Class A Common Stock and
other than a change in the par value, or from par value to
no par value, or from no par value to par value), or any
consolidation, merger, or statutory share exchange to
which the Corporation is a party, and for which approval
of any stockholders of the Corporation is required, or any
sale or transfer of all or substantially all the assets of
the Corporation; or
(iii) there shall be a voluntary or an
involuntary dissolution, liquidation or winding up of the
Corporation;
then the Corporation shall cause to be filed with the
transfer agent, and shall cause to be mailed to the
holders of shares of the Series 1993 Preferred Stock at
their addresses as shown on the stock books of the
Corporation, at least 15 days prior to the applicable date
hereinafter specified, a notice stating (1) the date on
which a record is to be taken for the purpose of the
dividend, distribution or rights or warrants, or, if a
record is not to be taken, the date as of which the
holders of Class A Common Stock of record to be entitled
to the dividend, distribution or rights or warrants are to
be determined or (2) the date on which the
reclassification, consolidation, merger, statutory share
exchange, sale, transfer, dissolution, liquidation or
winding up is expected to become effective, and the date
as of which it is expected that holders of Class A Common
Stock of record shall be entitled to exchange their shares
of Class A Common Stock for securities or other property
deliverable upon the
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<PAGE>
reclassification, consolidation, merger, statutory share
exchange, sale, transfer, dissolution, liquidation or
winding up. Failure to give any such notice or any defect
in the notice shall not affect the legality or validity of
the proceedings described in this Section 3(e).
(f) (i) The Corporation covenants that it will at all
times reserve and keep available, free from preemptive
rights, out of the aggregate of its authorized but
unissued shares of Class A Common Stock or its issued
shares of Class A Common Stock held by its treasury, or
both, for the purpose of effective conversions of the
Series 1993 Preferred Stock the full number of shares of
Class A Common Stock deliverable upon the conversion of
all outstanding shares of the Series 1993 Preferred Stock
not theretofore converted. For purposes of this Section
3(f), the number of shares of Class A Common Stock which
shall be deliverable upon the conversion of all
outstanding shares of the Series 1993 Preferred Stock
shall be computed as if at the time of computation all the
outstanding shares were held by a single holder.
(ii) Before taking any action which would cause
an adjustment reducing the Conversion Price below the then
par value (if any) of the shares of Class A Common Stock
deliverable upon conversion of the Series 1993 Preferred
Stock, the Corporation will take any corporate action
which may, in the opinion of its counsel, be necessary in
order that the Corporation may validly and legally issue
fully paid and nonassessable shares of Class A Common
Stock at the adjusted Conversion Price.
(iii) The Corporation will endeavor to list the
shares of Class A Common Stock or other securities
required to be delivered upon conversion of the Series
1993 Preferred Stock, prior to the delivery, upon each
national securities exchange or the Nasdaq National
Market, if any, upon which the outstanding Class A Common
Stock or other securities are listed at the time of
delivery.
(iv) Prior to the delivery of any Class A Common
Stock or other securities which the Corporation shall be
obligated to deliver upon conversion of the Series 1993
Preferred Stock, the Corporation will endeavor, in good
faith and as expeditiously as possible, to take all
reasonable measures to comply with all federal and state
laws and regulations thereunder requiring the registration
of those securities with, or any approval of or consent to
the delivery thereof by, any governmental authority.
(g) The Corporation will pay any and all documentary stamp
or similar issue or transfer taxes payable in respect of the issue
or delivery of shares of Class A Common Stock or other securities
on conversion of the Series 1993 Preferred Stock pursuant hereto;
PROVIDED, HOWEVER, that the Corporation shall not be required to
pay any tax which may be payable in respect of any transfer
involved in the issue or delivery of shares of Class A Common
Stock or other securities in a name other than that of the holder
of the Series 1993 Preferred Stock to be converted and no such
issue or delivery shall be made unless and until the person
requesting the issue or delivery has paid to the Corporation the
amount of any such tax or has established, to the satisfaction of
the Corporation, that the tax has been paid.
(h) In case of any reclassification or similar change of
outstanding shares of Class A Common Stock (other than change in
par value, or as a result of subdivision or combination), or in
case of any consolidation of the Corporation with, or merger of
the Corporation with or into, any other entity that results in a
reclassification, change, conversion, exchange or cancellation of
outstanding shares of Class A Common Stock or any sale or transfer
of all or substantially all of the assets of the Corporation, each
holder of shares of the Series 1993 Preferred Stock then
outstanding shall have the right thereafter to convert the shares
of the Series 1993 Preferred Stock held by the holder into the
kind and amount of securities, cash and other property which the
holder would have been entitled to receive upon such
reclassification, change, consolidation, merger, sale or transfer
if the holder had held the Class A Common Stock issuable upon the
conversion of the shares of the Series 1993 Preferred Stock
immediately prior to the reclassification, change, consolidation,
merger, sale or transfer.
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4. PREEMPTIVE RIGHTS. Shares of the Series 1993 Preferred Stock
are not entitled to any preemptive rights to acquire any unissued shares of
any capital stock of the Corporation, now or hereafter authorized, or any
other securities of the Corporation, whether or not convertible into shares
of capital stock of the Corporation or carrying a right to subscribe to or
acquire any such shares of capital stock.
5. VOTING. Except as required by law, the shares of the Series
1993 Preferred Stock shall not have any voting powers, either general or
special, except as follows:
(a) So long as any shares of the Series 1993 Preferred
Stock are outstanding, if the Corporation shall have failed to
declare and pay dividends on all outstanding shares of the Series
1993 Preferred Stock for six Dividend Periods, whether or not
consecutive, the number of directors of the Corporation shall
automatically be increased by two and the holders of the Series
1993 Preferred Stock shall have the right, voting together as a
class and separately from all other classes and series, to elect
such two additional directors. The right of the holders of the
Series 1993 Preferred Stock to elect such members of the Board of
Directors as aforesaid shall continue until dividends have been
declared and paid on the Series 1993 Preferred Stock for four
consecutive Dividend Periods. If at any time thereafter should the
Corporation fail to declare and pay dividends on all outstanding
shares of the Series 1993 Preferred Stock for four Dividend
Periods, whether or not consecutive, the voting right described in
this Section 5(a) shall vest until dividends shall have been
declared and paid on the Series 1993 Preferred Stock for four
consecutive Dividend Periods. Whenever the voting right described
in this Section 5(a) shall have vested in the holders of the
Series 1993 Preferred Stock, the right may be exercised initially
either at a special meeting of the holders of the Series 1993
Preferred Stock, called as hereinafter provided, or at any annual
meeting of stockholders held for the purpose of electing directors
and thereafter at each successive annual meeting.
(b) At any time when the voting right of the Series 1993
Preferred Stock provided in Section 5(a) above shall have become
operative and shall not have been exercised, or for the purpose of
the removal of a director as set forth in Section 5(d) below, a
proper officer of the Corporation shall, upon the written request
of the holders of record of at least 10% of the shares of the
Series 1993 Preferred Stock then outstanding addressed to the
Secretary of the Corporation, call a special meeting of the
holders of the Series 1993 Preferred Stock for the purpose of
electing the additional directors to be elected by the holders of
the Series 1993 Preferred Stock or removing any such director, as
the case may be. Such meeting shall be held at the earliest
practicable date upon the notice (and at the place) required for
annual meetings of stockholders. Such notice shall comply with the
requirements of all applicable laws and shall set forth the
purposes of such meeting. If such meeting shall not be called by
the proper officer of the Corporation within 20 days after the
personal service of such written request upon the Secretary of the
Corporation, or within 20 days after mailing the same within the
United States by registered or certified mail enclosed in a
postage-paid envelope addressed to the Secretary of the
Corporation at its principal office, then the holders of record of
at least 10% of the shares of the Series 1993 Preferred Stock then
outstanding may designate in writing one of their number to call
such meeting at the expense of the Corporation, and such meeting
may be called by the person so designated upon the notice (and at
the place) required for annual meetings of stockholders.
(c) Unless otherwise required by law, directors elected by
the holders of the Series 1993 Preferred Stock shall not become
members of any of the three classes of directors otherwise
required by the Articles of Incorporation and Bylaws of the
Corporation with respect to the remaining directors elected by
other classes or series of stock entitled to vote therefor, but
shall, subject to Section 5(e) below, serve until the next annual
meeting or until their respective successors shall be elected and
shall qualify. All rights of the holders of the Series 1993
Preferred Stock to elect such directors shall continue in effect
until the Corporation has declared and paid dividends for four
consecutive Dividend Periods as provided in Section 5(b) above. At
such time as such condition has been met, the voting rights of the
holders of the Series 1993 Preferred Stock shall, without further
action, terminate, subject to revesting in the event of each and
every subsequent failure of the Corporation to declare and pay
such dividends for the requisite number of Dividend Periods
described above.
(d) The term of office of all directors elected by the
holders of the Series 1993 Preferred Stock in office at any time
when the aforesaid voting right is vested in such holders shall
terminate upon the election of their successors at any meeting of
stockholders held for the purpose of selecting directors,
provided,
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<PAGE>
however, without further action, and unless required by law, any
director that shall have been elected by holders of the Series
1993 Preferred Stock as provided herein may be removed at any
time, either with or without cause, by affirmative vote of the
holders of record of a majority of outstanding shares of the
Series 1993 Preferred Stock, voting separately as one class, at a
duly held meeting of the holders of the Series 1993 Preferred
Stock called pursuant to the provisions set forth in Section 5(b).
(e) Upon the later of any termination of the aforesaid
voting right in accordance with the foregoing provisions or the
expiration of the minimum term of office required by law, the term
of office of all directors elected by the holders of the Series
1993 Preferred Stock pursuant thereto then in office shall,
without further action, thereupon terminate unless otherwise
required by law. Upon such termination, the number of directors
constituting the Board of Directors of the Corporation shall,
without further action, be reduced by two, subject always to the
increase of the number of directors pursuant to the provisions of
this Section 5(e) in the case of the future right of such holders
of the Series 1993 Preferred Stock to elect directors as provided
herein.
(f) Unless otherwise required by law, in case of any
vacancy occurring among the directors so elected, the remaining
director may appoint a successor to hold office for the unexpired
term of the director whose place shall be vacant, and if all
directors so elected shall cease to serve as directors before
their term shall expire, the holders of the Series 1993 Preferred
Stock then outstanding may, at a meeting of such holders duly
held, elect successors to hold office for the unexpired terms of
the directors whose places shall be vacant.
(g) The directors elected by the holders of the Series
1993 Preferred Stock in accordance with the provisions of this
Section 5 shall be entitled to one vote per director on any
matter, and otherwise to same rights and privileges as all other
directors of the Corporation.
(h) So long as any shares of the Series 1993 Preferred
Stock are outstanding, the Articles of Incorporation and Bylaws of
the Corporation shall contain provisions ensuring that the number
of directors of the Corporation shall at all times be such that
the exercise by the holder of shares of the Series 1993 Preferred
Stock of the right to elect directors under the circumstances
provided in this Section 5 will not contravene any provisions of
the Corporation's Articles of Incorporation or Bylaws.
(i) Unless the vote or consent of the holders of a greater
number of shares is required by law, the consent of the holders of
at least a majority of all of the shares of the Series 1993
Preferred Stock at the time outstanding given in person or by
proxy, either in writing or by a vote at a meeting called for that
purpose, on which matter the holders of shares of the Series 1993
Preferred Stock shall vote together as a separate class, shall be
necessary to authorize, effect or validate any amendment,
alteration or repeal of any of the provisions of the Articles of
Incorporation of the Corporation or of any certificate, amendatory
or supplemental thereto, which amendment, alteration or repeal
would, if effected, adversely affect the powers, preferences,
rights or privileges of the Series 1993 Preferred Stock.
(j) Unless the vote or consent of the holders of a greater
number of shares is required by law, the consent of the holders of
at least 66-2/3% of all of the shares of the Series 1993 Preferred
Stock at the time outstanding given in person or by proxy, either
in writing or by a vote at a meeting called for that purpose, on
which matter the holders of shares of the Series 1993 Preferred
Stock shall vote together as a separate class, shall be necessary
to create, authorize, issue or increase the authorized or issued
amount of any class or series of any equity securities of the
Corporation, or any warrants, options or other rights convertible
or exchangeable into any class or series of any equity securities
of the Corporation, ranking senior to the Series 1993 Preferred
Stock either as to payment of dividends or rights upon
liquidation.
<PAGE>
(k) Notwithstanding anything to the contrary set forth
herein, the creation or issuance of Parity Stock or Junior Stock
with respect to the payment of dividends or rights upon
liquidation, a merger, consolidation, reorganization or other
business combination in which the Corporation is not the surviving
entity, or an amendment that increases the number of authorized
shares of Preferred Stock or increases the number of authorized
shares of a series of Preferred Stock constituting Junior Stock or
Parity Stock shall not be considered to be an adverse change to
the terms of the Series 1993 Preferred Stock and shall not require
a vote or the consent of the holders of the Series 1993 Preferred
Stock.
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<PAGE>
6. LIQUIDATION RIGHTS.
(a) Upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of the
shares of the Series 1993 Preferred Stock shall be entitled to
receive out of the assets of the Corporation available for
distribution to stockholders under applicable law, before any
payment or distribution of assets shall be made on the Class A
Common Stock or on any other class or series of capital stock of
the Corporation ranking junior to the Series 1993 Preferred Stock
upon liquidation, the amount of $10.00 per share, in the event of
an involuntary liquidation and the applicable redemption price as
set forth in Section 2 hereof, in the event of a voluntary
liquidation (the "Liquidation Preference"), plus a sum equal to
all dividends accrued on such shares (whether or not declared) for
and unpaid for the then current Dividend Period. The sale,
conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all the
property and assets of the Corporation shall not be deemed a
dissolution, liquidation or winding up of the Corporation for the
purposes of this Section 6, nor shall the merger or consolidation
of the Corporation into or with any other corporation or
association or the merger or consolidation of any other
corporation or association into or with the Corporation, be deemed
to be a dissolution, liquidation or winding up of the Corporation
for the purposes of this Section 6.
(b) After the payment in cash (in New York Clearing House
funds or its equivalent) to the holders of the shares of the
Series 1993 Preferred Stock of the full preferential amounts for
the shares of the Series 1993 Preferred Stock, as set forth in
Section 6(a) above, the holders of the Series 1993 Preferred Stock
as such shall have no further right or claim to any of the
remaining assets of the Corporation.
(c) In the event the assets of the Corporation available
for distribution to the holders of shares of the Series 1993
Preferred Stock upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation shall be insufficient
to pay in full all amounts to which such holders are entitled
pursuant to Section 6(a) above, no distribution shall be made on
account of any shares of any other series of Preferred Stock or
any other class of capital stock of the Corporation ranking on a
parity with the shares of the Series 1993 Preferred Stock upon
such liquidation, dissolution or winding up unless proportionate
amounts shall be paid on account of the shares of the Series 1993
Preferred Stock, ratably, in proportion to the full amounts to
which holders of all such shares which are on a parity with the
shares of the Series 1993 Preferred Stock are respectively
entitled upon such dissolution, liquidation or winding up.
7. RANK. The Series 1993 Preferred Stock shall rank senior as to
payment of dividends and rights upon liquidation to all classes
and series of capital stock of the Corporation outstanding as of
May 24, 1993. Unless the Corporation shall have obtained the
consent of the holders as provided in Section 6 above, the
Corporation shall not issue any other series of Preferred Stock
ranking senior to the Series 1993 Preferred Stock as to the
payment of dividends or rights upon liquidation or any other
series of any equity securities ranking senior to the Series 1993
Preferred Stock as to the payment of dividends or rights upon
liquidation. The Corporation may issue shares of Preferred Stock
or other capital stock ranking junior to or on a parity with the
Series 1993 Preferred Stock as to the payment of dividends or
rights upon liquidation. For purposes of this statement of
designation, any capital stock of any series or class of the
Corporation shall be deemed to rank:
(a) senior to the shares of the Series 1993 Preferred
Stock, as to dividends or upon liquidation, if the holders of such
series or class shall be entitled to the receipt of dividends or
of amounts distributable upon dissolution, liquidation or winding
up of the Corporation, as the case may be, in preference or
priority to the holders of the shares of the Series 1993 Preferred
Stock;
<PAGE>
(b) on a parity with shares of the Series 1993 Preferred
Stock, as to dividends or upon liquidation, whether or not the
dividend rates, dividend payment dates or redemption or
liquidation prices per share or sinking fund provisions, if any,
be different from those of the Series 1993 Preferred Stock, if the
holders of such stock shall be entitled to the receipt of
dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, as the case may be,
in proportion to their respective dividend rates or liquidation
prices, without preference or priority, one over the other, as
between the holders of such stock and the holders of shares of the
Series 1993 Preferred Stock; and
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<PAGE>
(c) junior to shares of the Series 1993 Preferred Stock,
as to dividends or upon liquidation, if such stock shall be Class
A Common Stock or if the holders of shares of the Series 1993
Preferred Stock shall be entitled to receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding up
of the Corporation, as the case may be, in preference or priority
to the holders of shares of such series or class.
8. REPORTS AND NOTICES. So long as any shares of the Series 1993
Preferred Stock shall be outstanding, the Corporation shall provide to the
holder or holders of such shares copies of all annual, quarterly and other
reports of the Corporation and copies of all stockholder notices of the
Corporation when and as furnished to the holders of the Class A Common
Stock.
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<PAGE>
APPENDIX G
STATEMENT OF DESIGNATION
OF
9% NONCUMULATIVE PERPETUAL Preferred Stock
OF
BANKUNITED FINANCIAL CORPORATION
BankUnited Financial Corporation (the "Corporation"), a corporation
organized and existing under the Florida Business Corporation Act, in accordance
with the provisions of Section 607.0602 thereof and Article VI of the
Corporation's Articles of Incorporation, DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Articles of Incorporation of the Corporation, said Board of Directors acting at
a meeting thereof adopted resolutions providing for the issuance of 2,300,000
shares of the Corporation's Preferred Stock, $.01 par value, designated "9%
Noncumulative Perpetual Preferred Stock," which resolutions are as follows:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Articles of Incorporation, the Board of
Directors does hereby provide for and authorize the issuance of 2,300,000
shares of the Preferred Stock, $.01 par value, of the Corporation, of the
presently authorized but unissued shares of Preferred Stock (the "Preferred
Stock") to be designated "9% Noncumulative Perpetual Preferred Stock" (the
"Perpetual Preferred Stock"). The voting powers, designations, preferences,
and relative, participating, optional or other special rights of the
Perpetual Preferred Stock authorized hereunder and the qualifications,
limitations and restrictions of such preferences and rights are as follows:
1. DIVIDENDS.
(a) The holders of the Perpetual Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of
Directors out of funds of the Corporation legally available for
payment, noncumulative cash dividends, payable quarterly in
arrears, at the rate of $.90 per share per annum. Dividends, when
declared on the Perpetual Preferred Stock, shall have accrued from
the date of issuance or thereafter, from the most recent date on
which dividends were payable and shall be payable quarterly on
March 31, June 30, September 30 and December 31 of each year (each
a "Dividend Payment Date"), commencing on March 31, 1994;
PROVIDED, HOWEVER, that if any such day is a non-business day, the
Dividend Payment Date will be the next business day. Each declared
dividend shall be payable to holders of record as they appear at
the close of business on the stock books of the Corporation on
such record dates, not more than 30 calendar days and not less
than 10 calendar days preceding the Dividend Payment Date
therefor, as determined by the Board of Directors (each of such
dates a "Record Date"). Quarterly dividend periods (each a
"Dividend Period") shall commence on and include the first day of
January, April, July and October of each year and shall end on and
include the day next preceding the next following Dividend Payment
Date.
(b) No full dividends shall be declared or paid or set
apart for payment on any series of Preferred Stock or other
capital stock of any series ranking, as to dividends or
liquidation preference, on a parity ("Parity Stock") with the
Perpetual Preferred Stock during any calendar quarter unless full
dividends on the Perpetual Preferred Stock for the Dividend Period
ending during such calendar quarter have been or contemporaneously
are declared and paid or declared and a sum sufficient for the
payment thereof is set apart for such payment. When dividends are
not so paid in full (or a sum sufficient for such full payment is
not so set apart) upon the Perpetual Preferred Stock and any other
Parity Stock, dividends upon the Perpetual Preferred Stock and
dividends on such other Parity Stock payable during such calendar
quarter shall be declared pro rata so that the amount of such
dividends so payable per share on the Perpetual Preferred Stock
and such other Parity Stock shall in all cases bear to each other
the same ratio that full dividends for the then-current calendar
quarter on the shares of Perpetual Preferred Stock (which shall
not include any accumulation in respect of unpaid dividends for
prior Dividend Periods) and full dividends, including required or
permitted accumulations, if any, on shares
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<PAGE>
of such other Parity Stock, bear to each other. If full dividends
on the Perpetual Preferred Stock have not been declared and paid
or set aside for payment for the Dividend Payment Date falling in
the then-current Dividend Period, then, with respect to such
then-current Dividend Period, the following restrictions shall be
applicable: (i) no dividend or distribution, other than in shares
of capital stock ranking junior to the Perpetual Preferred Stock
as to dividends or liquidation preference ("Junior Stock"), may be
declared, set aside or paid on any shares of Junior Stock, (ii)
the Corporation may not repurchase, redeem or otherwise acquire
any shares of its Junior Stock (except by conversion into or
exchange for Junior Stock) and (iii) the Corporation may not,
directly or indirectly, repurchase, redeem or otherwise acquire
(except by conversion into or exchange for Junior Stock) any
shares of any class or series of Junior Stock or warrants, calls,
options or other rights to acquire capital stock of the
Corporation or other security exercisable or exchangeable into
capital stock of the Corporation, otherwise than pursuant to pro
rata offers to purchase or a concurrent redemption of all, or a
pro rata portion, of the outstanding shares of Perpetual Preferred
Stock. Holders of the Perpetual Preferred Stock shall not be
entitled to any dividends, whether payable in cash, property or
stock, in excess of declared noncumulative dividends, as herein
provided, on the Perpetual Preferred Stock. No interest or sum of
money in lieu of interest shall be payable in respect of any
declared dividend payment or payments on the Perpetual Preferred
Stock which may be in arrears. As used herein, the phrase "set
apart" in respect of the payment of dividends shall require
deposit of any funds in a bank or trust Corporation in a separate
deposit account maintained for the benefit of the holders of the
Perpetual Preferred Stock.
2. REDEMPTION.
(a) The shares of Perpetual Preferred Stock shall be
redeemable by the Corporation, in whole or in part, at any time
and from time to time from and after September 30, 1998 at a price
of $10.00 per share plus an amount equal to all accrued but unpaid
dividends (whether or not declared) for the then current Dividend
Period immediately preceding the date fixed for redemption (the
"Redemption Date").
(b) The Perpetual Preferred Stock shall be redeemable by
the Corporation, in accordance with applicable law, in whole or in
part, upon not less than 30 nor more than 60 calendar days' prior
written notice by mail.
(c) In the event that fewer than all the outstanding
shares of the Perpetual Preferred Stock are to be redeemed as
permitted by this Section 2, the number of shares to be redeemed
shall be determined by the Board of Directors and the shares to be
redeemed shall be determined by lot or PRO RATA as may be
determined by the Board of Directors or by such other method as
may be approved by the Board of Directors that is required to
conform to any rule or regulation of any stock exchange or
automated quotation system upon which the shares of the Perpetual
Preferred Stock may at the time be listed.
(d) Notice of redemption of the Perpetual Preferred Stock,
specifying the Redemption Date and place of redemption, shall be
given by first class mail to each holder of record of the shares
to be redeemed, at his or her address of record, not less than 30
nor more than 60 calendar days prior to the Redemption Date. If
less than all the shares owned by such holder are then to be
redeemed, the notice shall also specify the number of shares
thereof which are to be redeemed and the fact that a new
certificate or certificates representing any unredeemed shares
shall be issued without cost to such holder.
(e) Notice of redemption of shares of the Perpetual
Preferred Stock having been given as provided in Section 2(d),
then unless the Corporation shall have defaulted in providing for
the payment of the redemption price and all accrued and unpaid
dividends (whether or not declared) for the then-current Dividend
Period immediately preceding the Redemption Date, all rights of
the holders thereof (except the right to receive the redemption
price and all accrued and unpaid dividends, whether or not
declared, for the then-current Dividend Period immediately
preceding the Redemption Date) shall cease with respect to such
shares and such shares shall not, after the Redemption Date, be
deemed to be outstanding and shall not have the status of
Perpetual Preferred Stock. In case fewer than all the shares
represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
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<PAGE>
(f) Any shares of Perpetual Preferred Stock which shall at
any time have been redeemed shall, after such redemption, have the
status of authorized but unissued shares of Preferred Stock,
without designation as to series until such shares are once more
designated as part of a particular series by the Board of
Directors.
(g) Shares of the Perpetual Preferred Stock are not
subject or entitled to the benefit of a sinking fund."
3. PREEMPTIVE RIGHTS. Holders of the Perpetual Preferred Stock are
not entitled to any preemptive rights to acquire any unissued shares of any
capital stock of the Corporation, now or hereafter authorized, or any other
securities of the Corporation, whether or not convertible into shares of
capital stock of the Corporation or carrying a right to subscribe to or
acquire any such shares of capital stock.
4. VOTING. Except as required by law, the shares of the Perpetual
Preferred Stock shall not have any voting powers, either general or
special, except as follows:
(a) So long as any shares of the Perpetual Preferred Stock
are outstanding, if the Corporation shall have failed to declare
and pay dividends on all outstanding shares of the Perpetual
Preferred Stock for six Dividend Periods, whether or not
consecutive, the number of directors of the Corporation shall
automatically be increased by two and the holders of the Perpetual
Preferred Stock shall have the right, voting separately as a class
(together with the holders of shares of Parity Stock, if any, upon
which like voting rights have been conferred and are exercisable),
to elect such two additional directors. The right of the holders
of the Perpetual Preferred Stock (and Parity Stock, if any, with
parity voting rights) to elect such members of the Board of
Directors as aforesaid shall continue until dividends have been
declared and paid on the Perpetual Preferred Stock for four
consecutive Dividend Periods. If at any time thereafter should the
Corporation fail to declare and pay dividends on all outstanding
shares of the Perpetual Preferred Stock for four Dividend Periods,
whether or not consecutive, the voting right described in this
Section 4(a) shall vest until dividends shall have been declared
and paid on the Perpetual Preferred Stock for four consecutive
Dividend Periods. Whenever the voting right described in this
Section 4(a) shall have vested in the holders of the Perpetual
Preferred Stock, the right may be exercised initially either at a
special meeting of the holders of the Perpetual Preferred Stock
(and Parity Stock, if any, with parity voting rights), called as
hereinafter provided, or at any annual meeting of stockholders
held for the purpose of electing directors and thereafter at each
successive annual meeting.
(b) At any time when the voting right of the Perpetual
Preferred Stock provided in Section 4(a) above shall have become
operative and shall not have been exercised, or for the purpose of
the removal of a director as set forth in Section 4(d) below, a
proper officer of the Corporation shall, upon the written request
of the holders of record of at least 10% of the shares of the
Perpetual Preferred Stock (and Parity Stock, if any, with parity
voting rights) then outstanding addressed to the Secretary of the
Corporation, call a special meeting of the holders of the
Perpetual Preferred Stock (and Parity Stock, if any, with parity
voting rights) for the purpose of electing the additional
directors to be elected by such holders or removing any such
director, as the case may be. Such meeting shall be held at the
earliest practicable date upon the notice (and at the place)
required for annual meetings of stockholders. Such notice shall
comply with the requirements of all applicable laws and shall set
forth the purposes of such meeting. If such meeting shall not be
called by the proper officer of the Corporation within 20 days
after the personal service of such written request upon the
Secretary of the Corporation, or within 20 days after mailing the
same within the United States by registered or certified mail
enclosed in a postage-paid envelope addressed to the Secretary of
the Corporation at its principal office, then the holders of
record of at least 10% of the shares of the Perpetual Preferred
Stock (and Parity Stock, if any, with parity voting rights) then
outstanding may designate in writing one of their members to call
such meeting at the expense of the Corporation, and such meeting
may be called by the person so designated upon the notice (and at
the place) required for annual meetings of stockholders.
<PAGE>
(c) Unless otherwise required by law, directors elected by
the holders of the Perpetual Preferred Stock (and Parity Stock, if
any, with parity voting rights) shall not become members of any of
the three classes of directors otherwise required by the Articles
of Incorporation and Bylaws of the Corporation with respect to the
remaining directors elected by other classes or series of stock
entitled to vote therefor, but shall, subject to Section 4(e)
below, serve until the next annual meeting or until their
respective successors shall be elected
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<PAGE>
and shall qualify. All rights of the holders of the Perpetual
Preferred Stock (and Parity Stock, if any, with parity voting
rights) to elect such directors shall continue in effect until the
Corporation has declared and paid dividends for four consecutive
Dividend Periods as provided in Section 4(b) above. At such time
as such condition has been met, the voting rights of such holders
shall, without further action, terminate, subject to revesting in
the event of each and every subsequent failure of the Corporation
to declare and pay such dividends for the requisite number of
Dividend Periods described above.
(d) The term of office of all directors elected by the
holders of the Perpetual Preferred Stock (and Parity Stock, if
any, with parity voting rights) in office at any time when the
aforesaid voting right is vested in such holders shall terminate
upon the election of their successors at any meeting of
stockholders held for the purpose of selecting directors;
provided, however, without further action, and unless required by
law, any director that shall have been elected by such holders as
provided herein may be removed at any time, either with or without
cause, by affirmative vote of the holders of record of a majority
of outstanding shares of the Perpetual Preferred Stock (and Parity
Stock, if any, with parity voting rights), voting separately as
one class, at a duly held meeting of such holders called pursuant
to the provisions set forth in Section 4(b).
(e) Upon the later of any termination of the aforesaid
voting right in accordance with the foregoing provisions or the
expiration of the minimum term of office required by law, the term
of office of all directors elected by the holders of the Perpetual
Preferred Stock (and Parity Stock, if any, with parity voting
rights) pursuant thereto then in office shall, without further
action, thereupon terminate unless otherwise required by law. Upon
such termination, the number of directors constituting the Board
of Directors of the Corporation shall, without further action, be
reduced by two, subject always to the increase of the number of
directors pursuant to the provisions of this Section 4(e) in the
case of the future right of such holders to elect directors as
provided herein.
(f) Unless otherwise required by law, in case of any
vacancy occurring among the directors so elected, the remaining
director may appoint a successor to hold office for the unexpired
term of the director whose place shall be vacant, and if all
directors so elected shall cease to serve as directors before
their term shall expire, the holders of the Perpetual Preferred
Stock then outstanding (and any Parity Stock, if any, with parity
voting rights) may, at a meeting of such holders duly held, elect
successors to hold office for the unexpired terms of the directors
whose places shall be vacant.
(g) The directors elected by the holders of the Perpetual
Preferred Stock (and any Parity Stock, if any, with parity voting
rights) in accordance with the provisions of this Section 4 shall
be entitled to one vote per director on any matter, and otherwise
to same rights and privileges as all other directors of the
Corporation.
(h) So long as any shares of the Perpetual Preferred Stock
are outstanding, the Articles of Incorporation and Bylaws of the
Corporation shall contain provisions ensuring that the number of
directors of the Corporation shall at all times be such that the
exercise by the holders of shares of the Perpetual Preferred Stock
of the right to elect directors under the circumstances provided
in this Section 4 will not contravene any provisions of the
Corporation's Articles of Incorporation or Bylaws.
(i) Unless the vote or consent of the holders of a greater
number of shares is required by law, the consent of the holders of
at least a majority of all of the shares of the Perpetual
Preferred Stock at the time outstanding given in person or by
proxy, either in writing or by a vote at a meeting called for that
purpose, on which matter the holders of shares of the Perpetual
Preferred Stock shall vote together as a separate class, shall be
necessary to authorize, effect or validate any amendment,
alteration or repeal of any of the provisions of the Articles of
Incorporation of the Corporation or of any certificate, amendatory
or supplemental thereto, which amendment, alteration or repeal
would, if effected, adversely affect the powers, preferences,
rights or privileges of the Perpetual Preferred Stock.
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(j) Unless the vote or consent of the holders of a greater
number of shares is required by law, the consent of the holders of
at least 66-2/3% of all of the shares of the Perpetual Preferred
Stock at the time outstanding given in person or by proxy, either
in writing or by a vote at a meeting called for that purpose, on
which matter the holders of shares of the Perpetual Preferred
Stock shall vote together as a separate class
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(together with the holders of shares of Parity Stock, if any, upon
which like voting rights have been conferred and are exercisable),
shall be necessary to create, authorize, issue or increase the
authorized or issued amount of any class or series of any equity
securities of the Corporation, or any warrants, options or other
rights convertible or exchangeable into any class or series of any
equity securities of the Corporation, ranking senior to the
Perpetual Preferred Stock either as to payment of dividends or
rights upon liquidation.
(k) Notwithstanding anything to the contrary set forth
herein, the creation or issuance of Parity Stock or Junior Stock
with respect to the payment of dividends or rights upon
liquidation, a merger, consolidation, reorganization or other
business combination in which the Corporation is not the surviving
entity, or an amendment that increases the number of authorized
shares of Preferred Stock or increases the number of authorized
shares of a series of Preferred Stock constituting Junior Stock or
Parity Stock shall not be considered to be an adverse change to
the terms of the Perpetual Preferred Stock and shall not require a
vote or the approval of the holders of the Perpetual Preferred
Stock.
5. LIQUIDATION RIGHTS.
(a) Upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of the
shares of the Perpetual Preferred Stock shall be entitled to
receive out of the assets of the Corporation available for
distribution to stockholders under applicable law, before any
payment or distribution of assets shall be made on any class or
series of capital stock of the Corporation ranking junior to the
Perpetual Preferred Stock upon liquidation, the amount of $10.00
per share, in the event of a voluntary or involuntary liquidation
(the "Liquidation Preference"), plus a sum equal to all dividends
declared but unpaid for the then-current Dividend Period. For
purposes of this Section 5, the merger or consolidation of the
Corporation into or with any other corporation or association, the
merger or consolidation of any other corporation or association
into or with the Corporation, or the sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all the property and assets
of the Corporation shall not be deemed a dissolution, liquidation
or winding up of the Corporation, unless such sale, conveyance,
exchange or transfer shall be in connection with and intended to
be a plan of complete liquidation, dissolution or winding up of
the Corporation.
(b) After the payment in cash (in New York Clearing House
funds or its equivalent) to the holders of the shares of the
Perpetual Preferred Stock of the full preferential amounts for the
shares of the Perpetual Preferred Stock, as set forth in Section
5(a) above, the holders of the Perpetual Preferred Stock as such
shall have no further right or claim to any of the remaining
assets of the Corporation.
(c) In the event the assets of the Corporation available
for distribution to the holders of shares of the Perpetual
Preferred Stock upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation shall be insufficient
to pay in full all amounts to which such holders are entitled
pursuant to Section 5(a) above, no distribution shall be made on
account of any shares of any other series of Preferred Stock or
any other class of capital stock of the Corporation ranking on a
parity with the shares of the Perpetual Preferred Stock upon such
liquidation, dissolution or winding up unless proportionate
amounts shall be paid on account of the shares of the Perpetual
Preferred Stock, ratably, in proportion to the full amounts to
which holders of all such shares which are on a parity with the
shares of the Perpetual Preferred Stock are respectively entitled
upon such dissolution, liquidation or winding up.
<PAGE>
6. RANK. The Perpetual Preferred Stock shall rank on a parity with
the 8% Noncumulative Convertible Preferred Stock, Series 1993 and senior to
the Class A Common Stock, Class B Common Stock, Noncumulative Convertible
Preferred Stock, Series A, Noncumulative Convertible Preferred Stock,
Series B, Noncumulative Convertible Preferred Stock, Series C and
Noncumulative Convertible Preferred Stock, Series C-II of the Corporation
as to payment of dividends and rights upon liquidation. Unless the
Corporation shall have obtained the consent of the holders as provided in
Section 4 above, the Corporation shall not issue any other series of
Preferred Stock ranking senior to the Perpetual Preferred Stock as to the
payment of dividends or rights upon liquidation or any other series of any
equity securities ranking senior to the Perpetual Preferred Stock as to the
payment of dividends or rights upon liquidation. The Corporation may issue
shares of Preferred Stock or other capital stock ranking junior to or on a
parity with the Perpetual Preferred Stock as to the payment of dividends or
rights upon liquidation without the consent of the holders of the
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Perpetual Preferred Stock. For purposes of this Section 6, any capital
stock of any series or class of the Corporation shall be deemed to rank:
(a) senior to the shares of the Perpetual Preferred Stock,
as to dividends or upon liquidation, if the holders of such series
or class shall be entitled to the receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding up
of the Corporation, as the case may be, in preference or priority
to the holders of the shares of the Perpetual Preferred Stock;
(b) on a parity with shares of the Perpetual Preferred
Stock, as to dividends or upon liquidation, whether or not the
dividend rates, dividend payment dates or redemption or
liquidation prices per share or sinking fund provisions, if any,
be different from those of the Perpetual Preferred Stock, if the
holders of such stock shall be entitled to the receipt of
dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, as the case may be,
in proportion to their respective dividend rates or liquidation
prices, without preference or priority, one over the other, as
between the holders of such stock and the holders of shares of the
Perpetual Preferred Stock; and
(c) junior to shares of the Perpetual Preferred Stock, as
to dividends or upon liquidation, if the holders of shares of the
Perpetual Preferred Stock shall be entitled to receipt of
dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, as the case may be,
in preference or priority to the holders of shares of such series
or class.
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APPENDIX H
STATEMENT OF DESIGNATION
OF
8% NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES 1996
OF
BANKUNITED FINANCIAL CORPORATION
BankUnited Financial Corporation (the "Corporation"), a corporation
organized and existing under the Florida Business Corporation Act, in accordance
with the provisions of Section 607.0602 thereof and Article VI the Corporation's
Articles of Incorporation, DOES HEREBY CERTIFY:
That pursuant to authority conferred upon the Board of Directors by the
Articles of Incorporation of the Corporation, said Board of Directors acting at
a meeting thereof adopted resolutions providing for the issuance of 1,000,000
shares of the Corporation's Preferred Stock, $.01 par value, "8% Noncumulative
Convertible Preferred Stock, Series 1996," which resolutions are as follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation by the Articles of Incorporation, the Board of Directors does
hereby provide for and authorize the issuance of 1,000,000 shares of the
Preferred Stock, $.01 par value, of the Corporation, of the presently authorized
but unissued shares of Preferred Stock (the "Preferred Stock") to be designated
"8% Noncumulative Convertible Preferred Stock, Series 1996" (the "Series 1996
Preferred Stock"). The number of shares constituting the Series 1996 Preferred
Stock may be increased or decreased from time to time by a vote of not less than
a majority of the Board of Directors of the Corporation then in office;
PROVIDED, that no decrease shall reduce the number of shares of the Series 1996
Preferred Stock to a number less than the number of shares then outstanding plus
the number of shares reserved for issuance upon the exercise of any outstanding
options, rights or warrants to purchase Series 1996 Preferred Stock or upon the
conversion of any outstanding securities issued by the Corporation convertible
into shares of the Series 1996 Preferred Stock. The voting powers, designations,
preferences, and relative, participating, optional or other special rights of
the Series 1996 Preferred Stock authorized hereunder and the qualifications,
limitations and restrictions of such preferences and rights are as follows:
1. DIVIDENDS.
(a) The holders of the Series 1996 Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out
of funds of the Corporation legally available for payment, noncumulative
cash dividends, payable quarterly in arrears, at the rate of $1.20 per
share per annum. Dividends, when declared on the Series 1996 Preferred
Stock, shall have accrued from the date of issuance or thereafter, from the
most recent date on which dividends were payable and be payable quarterly
on March 31, June 30, September 30 and December 31 of each year (each a
"Dividend Payment Date"), commencing on December 31, 1996; PROVIDED,
HOWEVER, that if any such day is a non-business day, the Dividend Payment
Date will be the next business day. Each declared dividend shall be payable
to holders of record as they appear at the close of business on the stock
books of the Corporation on such record dates, not more than 30 calendar
days and not less than 10 calendar days preceding the Dividend Payment Date
therefor, as determined by the Board of Directors (each of such dates a
"Record Date"). Quarterly dividend periods (each a "Dividend Period") shall
commence on and include the first day of January, April, July and October
of each year and shall end on and include the day next preceding the next
following Dividend Payment Date. Dividends payable on the Series 1996
Preferred Stock for any period greater or less than a full Dividend Period
shall be computed on the basis of a 360-day year consisting of twelve
30-day months. Dividends payable on the Series 1996 Preferred Stock for
each full Dividend Period shall be computed by dividing the annual dividend
rate by four.
(b) No full dividends shall be declared, paid or set apart for
payment on any series of Preferred Stock or other capital stock of any
series ranking, as to dividends or liquidation preference, on a parity
("Parity Stock") with the Series 1996 Preferred Stock during any calendar
quarter unless full dividends on the Series 1996 Preferred Stock for the
Dividend Period ending during such calendar quarter have been or
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<PAGE>
contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for such payment. When dividends are
not so paid in full (or a sum sufficient for such full payment is not so
set apart) upon the Series 1996 Preferred Stock and any other Parity Stock,
dividends upon the Series 1996 Preferred Stock and dividends on such other
Parity Stock payable during such calendar quarter shall be declared pro
rata so that the amount of such dividends so payable per share on the
Series 1996 Preferred Stock and such other Parity Stock shall in all cases
bear to each other the same ratio that full dividends for the then-current
calendar quarter on the shares of Series 1996 Preferred Stock (which shall
not include any accumulation in respect of unpaid dividends for prior
Dividend Periods) and full dividends, including required or permitted
accumulations, if any, on shares of such other Parity Stock, bear to each
other. The Corporation shall not declare, pay or set apart funds for any
dividend or other distribution, other than in shares of capital stock
ranking junior to the Series 1996 Preferred Stock as to dividends or
liquidation preference ("Junior Stock"), on any shares of Junior Stock or
repurchase, redeem or otherwise acquire through a sinking fund or
otherwise, or set apart funds for the repurchase, redemption or other
acquisition of, any shares of Junior Stock (except by conversion into or
exchange for Junior Stock), unless (i) all declared and unpaid dividends
with respect to the Series 1996 Preferred Stock have been paid, or funds
have been set apart for payment of such dividends and (ii) the Corporation
has declared a cash dividend on the Series 1996 Preferred Stock at the
annual dividend rate for the then-current Dividend Period and sufficient
funds have been set apart for payment of such dividends. Holders of the
Series 1996 Preferred Stock shall not be entitled to any dividends, whether
payable in cash, property or stock, in excess of declared noncumulative
dividends, as herein provided, on the Series 1996 Preferred Stock. No
interest or sum of money in lieu of interest shall be payable in respect of
any declared dividend payment or payments on the Series 1996 Preferred
Stock which may be in arrears. As used herein, the phrase "set apart" in
respect of the payment of dividends shall require deposits of any funds in
a bank or trust company in a separate deposit account maintained for the
benefit of the holders of the Series 1996 Preferred Stock.
2. REDEMPTION.
(a) The shares of Series 1996 Preferred Stock shall be redeemable
by the Corporation, in whole, or in part, at any time and from time to time
at a price of $15.00 per share, plus an amount equal to declared but unpaid
dividends, if any, with respect to Dividend Periods preceding the date
fixed for redemption (the "Redemption Date"), if the Corporation's Series I
Class A Common Stock, $.01 par value (the "Class A Common Stock"), shall
have a closing price which is at least 120% of the Conversion Price (as
defined below) for any 20 out of 30 consecutive trading days ending within
five days of the giving of notice of redemption as provided for below. In
addition, the Series 1996 Preferred Stock shall be redeemable by the
Corporation in whole or in part, at any time and from time to time on or
after July 1, 1998 at the following per share prices during the twelve
month period beginning July 1:
YEAR REDEMPTION PRICE
---- ----------------
1998 $16.20
1999 15.96
2000 15.72
2001 15.48
2002 15.24
2003 and thereafter 15.00
plus, in each case, an amount equal to any declared but unpaid dividends,
if any, with respect to Dividend Periods preceding the Redemption Date.
(b) In the event that fewer than all the outstanding shares of the
Series 1996 Preferred Stock are to be redeemed as permitted by this Section
2, the number of shares to be redeemed shall be determined by the Board of
Directors and the shares to be redeemed shall be determined by lot or PRO
RATA as may be determined by the Board of Directors or by such other method
as may be approved by the Board of Directors that is
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<PAGE>
required to conform to any rule or regulation of any stock exchange or
automated quotation system upon which the shares of the Series 1996
Preferred Stock may at the time be listed.
(c) Notice of redemption of the Series 1996 Preferred Stock,
specifying the Redemption Date, the redemption price and the place of
redemption, shall be given by first class mail to each holder of record of
the shares to be redeemed at his or her address of record and by
publication in THE WALL STREET JOURNAL. In the case of a redemption in
whole, notice will be given once, not less than 30 nor more than 60
calendar days prior to the Redemption Date. In the case of a partial
redemption, the notice shall also specify the aggregate number of shares of
the Series 1996 Preferred Stock to be redeemed and the aggregate number of
shares of the Series 1996 Preferred Stock that shall be outstanding after
such partial redemption and the mailed notice shall specify the fact that a
new certificate or certificates representing any unredeemed shares shall be
issued without cost to a holder. The notice of partial redemption shall be
given twice: the first notice shall be given not more than 75 days nor less
than 60 days prior to the Redemption Date; and the second notice shall be
given at least 20 days after the first notice but not less than 30 days
prior to the Redemption Date.
(d) Notice of redemption of shares of the Series 1996 Preferred
Stock having been given as provided in Section 2(c), then unless the
Corporation shall have defaulted in providing for the payment of the
redemption price and all declared and unpaid dividends with respect to
Dividend Periods preceding the Redemption Date, all rights of the holders
thereof (except the right to receive the redemption price and all declared
and unpaid dividends with respect to Dividend Periods preceding the
Redemption Date) shall cease with respect to such shares and such shares
shall not, after the Redemption Date, be deemed to be outstanding and shall
not have the status of Preferred Stock. In case fewer than all the shares
represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares without cost to the holder
thereof.
(e) Any shares of Series 1996 Preferred Stock which shall at any
time have been redeemed or converted shall, after such redemption or
conversion, have the status of authorized but unissued shares of Preferred
Stock, without designation as to series until such shares are once more
designated as part of a particular series by the Board of Directors.
(f) Shares of the Series 1996 Preferred Stock are not subject or
entitled to the benefit of a sinking fund.
3. CONVERSION.
(a) Subject to and upon compliance with the provisions of this
Section 3, the holder of any shares of the Series 1996 Preferred Stock
shall have the right, at his or her option, at any time and from time to
time prior to redemption, to convert the shares into a number of fully paid
and nonassessable shares (calculated as to each conversion to the nearest
1/100th of a share) of the Corporation's Series I Class A Common Stock,
$.01 par value (the "Class A Common Stock"), equal to $15.00 for each share
surrendered for conversion divided by the Conversion Price (as defined in
Section 3(d) below).
(b) (i) In order to exercise the conversion privilege, the holder
of each share of the Series 1996 Preferred Stock to be converted shall
surrender the certificate representing such share to the Corporation's
transfer agent for the Series 1996 Preferred Stock with the Notice of
Election to Convert on the back of said Certificate duly completed and
signed. Unless the shares issuable on conversion are to be issued in the
same name as the name in which the shares of the Series 1996 Preferred
Stock are registered, each share surrendered for conversion shall be
accompanied by instruments of transfer, in form satisfactory to the
Corporation, duly executed by the holder or his or her duly authorized
attorney and by funds in an amount sufficient to pay any transfer or
similar tax. The holders of shares of the Series 1996 Preferred Stock at
the close of business on a Record Date shall be entitled to receive any
dividend declared payable on those shares for the corresponding Dividend
Period on the applicable Dividend Payment Date, notwithstanding the
conversion of the shares after the Record Date.
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<PAGE>
(ii) As promptly as practicable after the surrender by a
holder of the certificates for shares of the Series 1996 Preferred Stock in
accordance with this Section 3, the Corporation shall issue and shall
deliver to the holder at the office of the transfer agent, or otherwise
upon such holder's written order, a certificate or certificates for the
number of full shares of Class A Common Stock issuable upon the conversion
of those shares in accordance with the provisions of this Section 3, and
any fractional interest in respect of a share of Class A Common Stock
arising upon the conversion shall be settled as provided in Section 3(c)
below. In case less than all of the shares of the Series 1996 Preferred
Stock represented by a certificate are to be converted by a holder, upon
such conversion the Corporation shall issue and deliver to the holder at
the office of the transfer agent, or otherwise upon such holder's written
order, a certificate or certificates for the shares of Series 1996
Preferred Stock not converted.
(iii) Each conversion shall be deemed to have been
effected immediately prior to the close of business on the date on which
all of the conditions specified in Section 3(b) hereof shall have been
satisfied, and, the person or persons in whose name or names any
certificate or certificates for shares of Class A Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Class A Common Stock represented by
those certificates at such time on such date and such conversion shall be
at the Conversion Price in effect at such time on such date, unless the
stock transfer books of the Corporation shall be closed on that date, in
which event such person or persons shall be deemed to have become such
holder or holders of record at the close of business on the next succeeding
day on which such stock transfer books are open, but such conversion shall
be at the Conversion Price in effect on the date upon which all of the
conditions specified in Section 3(b) hereof shall have been satisfied. All
shares of Class A Common Stock delivered upon conversion of the Series 1996
Preferred Stock will upon delivery be duly and validly issued and fully
paid and nonassessable, free of all liens and charges and not subject to
any preemptive rights. Upon the surrender of certificates representing
shares of the Series 1996 Preferred Stock to be converted, the shares shall
no longer be deemed to be outstanding and all rights of a holder with
respect to the shares surrendered for conversion shall immediately
terminate except the right to receive the Class A Common Stock or other
securities, cash or other assets as herein provided.
(c) No fractional shares or securities representing fractional
shares of Class A Common Stock shall be issued upon conversion of the
Series 1996 Preferred Stock. Any fractional interest in a share of Class A
Common Stock resulting from conversion of a share of the Series 1996
Preferred Stock shall be paid in cash (computed to the nearest cent) based
on the Current Market Price (as defined in Section 3(d)(iv) below) of the
Class A Common Stock on the Trading Day (as defined in Section 3(d)(iv)
below) next preceding the day of conversion. If more than one share shall
be surrendered for conversion at one time by the same holder, the number of
whole shares of Class A Common Stock issuable upon the conversion shall be
computed on the basis of the aggregate Liquidation Preference (as such term
is defined in Section 6 below) of the shares of the Series 1996 Preferred
Stock so surrendered.
(d) The "Conversion Price" per share of the Series 1996 Preferred
Stock shall be $9.00, subject to adjustment from time to time as follows:
(i) In case the Corporation shall (1) pay a dividend or
make a distribution on its Class A Common Stock in shares of its Class A
Common Stock, (2) subdivide its outstanding Class A Common Stock into a
greater number of shares, or (3) combine its outstanding Class A Common
Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such event shall be proportionately adjusted so that
the holder of any share of the Series 1996 Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number and kind
of shares of capital stock of the Corporation which he would have been
entitled to receive had the share been converted immediately prior to the
record date for such action, or, if no record date has been established in
connection with such event, the effective date for such action. An
adjustment made pursuant to this Section 3(d)(i) shall become effective
immediately after the record date in the case of a dividend or distribution
except as provided in Section 3(d)(vii) below, and shall become effective
immediately after the effective date in the case of a subdivision or
combination. If, as a result of an adjustment made pursuant to this Section
3(d)(i), the holder of any shares of Series 1996 Preferred Stock thereafter
surrendered for conversion shall become entitled to receive shares of two
or more classes of capital stock of the Corporation, the Board of Directors
of the Corporation (whose determination shall be conclusive and shall
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<PAGE>
be described in a resolution adopted thereto) shall determine the
allocation of the adjusted Conversion Price between or among shares of such
classes of capital stock. If any dividend or distribution is not paid or
made, the Conversion Price then in effect shall be appropriately
readjusted.
(ii) In case the Corporation shall issue rights or
warrants to all holders of its Class A Common Stock entitling them (for a
period expiring within 45 days after the record date mentioned below) to
subscribe for or purchase Class A Common Stock at a price per share less
than the Current Market Price (as defined in Section 3(d)(iv) below) of the
Class A Common Stock at the record date for the determination of
stockholders entitled to receive the rights or warrants, the Conversion
Price in effect immediately prior to such record date shall be adjusted so
that it shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the record date by a fraction of which
the numerator shall be the number of shares of Class A Common Stock
outstanding on the record date plus the number of shares of Class A Common
Stock which the aggregate offering price of the total number of shares of
Class A Common Stock so offered for subscription or purchase would purchase
at the Current Market Price at that record date, and of which the
denominator shall be the number of shares of Class A Common Stock
outstanding on the record date plus the number of additional shares of
Class A Common Stock for subscription or purchase. The adjustment provided
for in this Section 3(d)(ii) shall be made successively whenever any such
rights or warrants are issued, and shall become effective immediately,
except as provided in Section 3(d)(vii) below, after such record date. In
determining whether any rights or warrants entitle the holder of the Class
A Common Stock to subscribe for or purchase shares of Class A Common Stock
at less than the Current Market Price, and in determining the aggregate
offering price of the shares of Class A Common Stock so offered, there
shall be taken into account any consideration received by the Corporation
for such rights or warrants, the value of such consideration, if other than
cash, to be determined by the Board (whose determination, if made in good
faith, shall be conclusive). If any or all of such rights or warrants are
not so issued or expire or terminate without having been exercised, the
Conversion Price then in effect shall be appropriately readjusted.
(iii) In case the Corporation shall distribute to all
holders of its Class A Common Stock any shares of capital stock of the
Corporation (other than Class A Common Stock) or evidences of indebtedness
or assets (excluding cash dividends or distributions paid from retained
earnings of the Corporation) or rights or warrants to subscribe for or
purchase any of its securities (excluding those referred to in Section
3(d)(ii) above), then, in each such case, the Conversion Price shall be
adjusted so that it shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of the
distribution by a fraction, the numerator of which shall be the Current
Market Price of the Class A Common Stock on the record date mentioned below
less the then fair market value (as determined by the Board, whose
determination, if made in good faith, shall be conclusive) of that portion
of the capital stock or assets or evidences of indebtedness so distributed,
or of the rights or warrants so distributed, applicable to one share of
Class A Common Stock, and the denominator of which shall be the Current
Market Price of the Class A Common Stock on the record date. Such
adjustment shall become effective immediately, except as provided in
Section 3(d)(vii) below, after the record date for the determination of
stockholders entitled to receive such distribution. If any such
distribution is not made or if any or all of such rights or warrants expire
or terminate without having been exercised, the Conversion Price then in
effect shall be appropriately readjusted.
(iv) For the purpose of any computation under this Section
3, the "Current Market Price" of the Class A Common Stock at any date shall
be the average of the last reported sale prices per share for the 30
consecutive Trading Days (as defined below) commencing 35 Trading Days
before date of such computation. The last reported sale price for each day
shall be (1) the last reported sale price of the Class A Common Stock on
the Nasdaq National Market, or any similar system of automated
dissemination of quotations of securities prices then in common use, if so
quoted, or (2) if not quoted as described in clause (1), the closing bid
notation for the Class A Common Stock as reported by the National Quotation
Bureau Incorporated if at least two securities dealers have inserted both
bid and asked quotations for the Class A Common Stock on at least five of
the ten preceding days, or (3) if the Class A Common Stock is listed or
admitted for trading on any national securities exchange, the last sale
price, or the closing bid price if no sale occurred, of the Class A Common
Stock on the principal securities exchange on which the Class A Common
Stock is listed. If the Class A Common Stock is quoted on a national
securities or central market system, in lieu of a market or quotation
system described above, the last reported sale price shall be determined in
the manner set forth in clause (2)
H-5
<PAGE>
of the preceding sentence if bid and asked quotations are reported but
actual transactions are not, and in the manner set forth in clause (3) of
the preceding sentence if actual transactions are reported. If none of the
conditions set forth above is met, the last reported sale price of the
Class A Common Stock on any day or the average of such last reported sale
prices for any period shall be the fair market value of such class of stock
as determined by a member firm of the New York Stock Exchange, Inc.
selected by the Corporation. As used herein the term "Trading Days" means
(1) if the Class A Common Stock is quoted on the Nasdaq National Market or
any similar system of automated dissemination of quotations of securities
prices, days on which trades may be made on such system, or (2) if not
quoted as described in clause (1), days on which quotations are reported by
the National Quotation Bureau, Incorporated, or (3) if the Class A Common
Stock is listed or admitted for trading on any national securities
exchange, days on which such national securities exchange is open for
business.
(v) No adjustment in the Conversion Price shall be
required unless such adjustment would require a change of at least one
percent in the Conversion Price; PROVIDED, HOWEVER, that any adjustments
which by reason of this Section 3(d)(v) are not required to be made shall
be carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 3(d) shall be made to the nearest cent or
the nearest one hundredth of a share, as the case may be.
(vi) Whenever the Conversion Price is adjusted, as herein
provided, the Corporation shall promptly file with its transfer agent and
with the principal securities exchange, if any, on which the Series 1996
Preferred Stock is traded or, if traded over-the-counter, with the Nasdaq
National Market System an officers' certificate setting forth the
Conversion Price after the adjustment and setting forth a brief statement
of the facts requiring the adjustment, which certificate shall be
conclusive evidence of the correctness of the adjustment. Promptly after
delivery of the certificate, the Corporation shall prepare a notice of the
adjustment of the Conversion Price setting forth the adjusted Conversion
Price, the number of additional shares of Class A Common Stock issuable
upon conversion and the type and amount, if any, of other property which
would be received upon conversion of the Series 1996 Preferred Stock, the
facts upon which the adjustment is based and the date on which the
adjustment becomes effective and shall mail the notice of such adjustment
of the Conversion Price to the holders of the Series 1996 Preferred Stock
at their addresses as shown on the stock books of the Corporation.
(vii) In any case in which this Section 3(d) provides that
an adjustment shall become effective immediately after a record date for an
event, the Corporation may defer until the occurrence of the event (1)
issuing to the holder of any share of the Series 1996 Preferred Stock
converted after the record date and before the occurrence of the event, the
additional shares of Class A Common Stock issuable upon the conversion by
reason of the adjustment required by the event over and above the Class A
Common Stock issuable upon such conversion before giving effect to the
adjustment and (2) paying to the holder any amount in cash in lieu of any
fractional share pursuant to Section 3(c) above.
(e) (i) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights and all liens and
charges with respect to the issue or delivery thereof, out of the aggregate
of its authorized but unissued shares of Class A Common Stock or its issued
shares of Class A Common Stock held by its treasury, or both, for the
purpose of effective conversions of the Series 1996 Preferred Stock the
full number of shares of Class A Common Stock deliverable upon the
conversion of all outstanding shares of the Series 1996 Preferred Stock not
theretofore converted. For purposes of this Section 3(e), the number of
shares of Class A Common Stock which shall be deliverable upon the
conversion of all outstanding shares of the Series 1996 Preferred Stock
shall be computed as if at the time of computation all of the outstanding
shares were held by a single holder.
(ii) Before taking any action which would cause an
adjustment reducing the Conversion Price below the then par value (if any)
of the shares of Class A Common Stock deliverable upon conversion of the
Series 1996 Preferred Stock, the Corporation will take any corporate action
which may, in the opinion of its counsel, be necessary in order that the
Corporation may validly and legally issue fully paid and nonassessable
shares of Class A Common Stock at the adjusted Conversion Price.
H-6
<PAGE>
(f) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery
of shares of Class A Common Stock or other securities on conversion of the
Series 1996 Preferred Stock pursuant hereto; PROVIDED, HOWEVER, that the
Corporation shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issue or delivery of shares of
Class A Common Stock or other securities in a name other than that of the
holder of the Series 1996 Preferred Stock to be converted and no such issue
or delivery shall be made unless and until the person requesting the issue
or delivery has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that the tax has been
paid.
(g) In case of any reclassification or similar change of
outstanding shares of Class A Common Stock (other than a change in par
value, or as a result of a subdivision or combination), or in case of any
consolidation of the Corporation with, or merger of the Corporation with or
into, any other entity that results in a reclassification, change,
conversion, exchange or cancellation of outstanding shares of Class A
Common Stock or any sale or transfer of all or substantially all of the
assets of the Corporation, each holder of shares of the Series 1996
Preferred Stock then outstanding shall have the right thereafter to convert
the shares of the Series 1996 Preferred Stock held by the holder into the
kind and amount of securities, cash and other property which the holder
would have been entitled to receive upon such reclassification, change,
consolidation, merger, sale or transfer if the holder had held the Class A
Common Stock issuable upon the conversion of the shares of the Series 1996
Preferred Stock immediately prior to the reclassification, change,
consolidation, merger, sale or transfer and had such holder elected to
receive the consideration in the form and manner elected by the plurality
of the persons entitled to vote thereon. These provisions shall apply to
successive reclassifications, changes, consolidations, mergers, sales or
conveyances.
4. PREEMPTIVE RIGHTS. Shares of the Series 1996 Preferred Stock are not
entitled to any preemptive rights to acquire any unissued shares of any
capital stock of the Corporation, now or hereafter authorized, or any other
securities of the Corporation, whether or not convertible into shares of
capital stock of the Corporation or carrying a right to subscribe to or
acquire any such shares of capital stock. To the extent preemptive rights
are granted by the Corporation to the Parity Stock, the Junior Stock or the
Class A Common Stock, the Series 1996 Preferred Stock shall be entitled to
similar rights.
5. VOTING. Except as required by law, the shares of the Series 1996
Preferred Stock shall not have any voting powers, either general or
special, except as follows:
(a) Unless the vote or consent of the holders of a greater number
of shares is required by law, the approval of the holders of at least
66-2/3% of all of the shares of the Series 1996 Preferred Stock at the time
outstanding given in person or by proxy, either in writing or by a vote at
a meeting called for that purpose, on which matter the holders of shares of
the Series 1996 Preferred Stock shall vote together as a separate class,
shall be necessary to (i) authorize, effect or validate any amendment,
alteration or repeal of or otherwise change any of the provisions of the
Articles of Incorporation of the Corporation or of any certificate,
amendatory or supplemental thereto, which amendment, alteration or repeal
would, if effected, materially and adversely affect the powers,
preferences, rights or privileges of the Series 1996 Preferred Stock or
(ii) create, authorize, issue or increase the authorized or issued amount
of any class or series of any equity securities of the Corporation, or any
warrants, options or other rights convertible or exchangeable into any
class or series of any equity securities of the Corporation, ranking senior
to the Series 1996 Preferred Stock either as to payment of dividends or
rights upon liquidation, winding-up or dissolution of the Corporation.
(b) Notwithstanding anything to the contrary set forth herein, the
creation or issuance of Parity Stock or Junior Stock with respect to the
payment of dividends or distribution of assets upon liquidation or an
amendment that increases the number of authorized shares of Series 1996
Preferred Stock or increases the number of authorized shares of a series of
Preferred Stock constituting Junior Stock or Parity Stock shall not be
considered to be a material and adverse change to the terms of the Series
1996 Preferred Stock and shall not require a vote or the consent of the
holders of the Series 1996 Preferred Stock pursuant to Section 5(a) above.
Amendments considered to be an adverse change requiring a vote of the
holders of Series 1996 Preferred Stock pursuant to Section 5(a) above shall
include, but not be limited to, those: which reduce the dividend rate on
the Series 1996 Preferred Stock, cancel declared and unpaid dividends or
change the relative
H-7
<PAGE>
seniority rights of the holders of the Series 1996 Preferred Stock as to
the payment of dividends in relation to the holders of any other capital
stock of the Corporation; which reduce the amount payable to the holders of
Series 1996 Preferred Stock upon liquidation or change the relative
seniority of the liquidation preferences of the holders of the Series 1996
Preferred Stock to the rights upon liquidation of the holders of any other
capital stock of the Corporation; or which cancel or modify the conversion
rights of the Series 1996 Preferred Stock.
(c) The holders of Series 1996 Preferred Stock, if any Series 1996
Preferred Stock shall be outstanding, shall be entitled to vote with the
holders of the shares of Class A Common Stock, and not as a separate class,
to the same extent as the holders of the shares of Class A Common Stock on
any consolidation, merger, sale of all or substantially all of the assets
of the Corporation, reclassification, capital reorganization or
liquidation; PROVIDED that each share of Series 1996 Preferred Stock shall
be entitled to the same number of votes that the holder would have had if
such holder had converted his shares of Series 1996 Preferred Stock into
shares of Class A Common Stock as of the record date for such meeting or
solicitation of consents in lieu of a meeting.
6. LIQUIDATION RIGHTS.
(a) Upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the holders of the shares of the Series 1996
Preferred Stock shall be entitled to receive out of the assets of the
Corporation available for distribution to stockholders under applicable
law, before any payment or distribution of assets shall be made on the
Class A Common Stock or on any other class or series of capital stock of
the Corporation ranking junior to the Series 1996 Preferred Stock upon
liquidation and subject to the rights of the holders of any class or series
of stock having preference with respect to distributions upon liquidation
(created pursuant to Section 5(a) above) and the Corporation's general
creditors, the amount of $15.00 per share (the "Liquidation Preference"),
plus an amount equal to all dividends declared and unpaid, without
interest. The sale, conveyance, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all of
the property and assets of the Corporation shall not be deemed a
dissolution, liquidation or winding up of the Corporation for the purposes
of this Section 6, nor shall the merger or consolidation of the Corporation
into or with any other corporation or association or the merger or
consolidation of any other corporation or association into or with the
Corporation, be deemed to be a dissolution, liquidation or winding up of
the Corporation for the purposes of this Section 6; PROVIDED, HOWEVER, that
if the aggregate amount of cash that may be received in exchange for or
upon conversion of the Series 1996 Preferred Stock in connection with a
cash merger or other cash transaction would be less than the aggregate
liquidation preference of the Series 1996 Preferred Stock, then the holders
of the Series 1996 Preferred Stock shall be entitled to the Liquidation
Preference in place of the aggregate amount of cash that may be received in
exchange for or upon conversion of the Series 1996 Preferred Stock in
connection with the cash merger or other cash transaction; and PROVIDED
FURTHER, that such cash merger or transaction shall not be considered a
liquidation, dissolution or winding up of the Corporation subject otherwise
to this Section 6(a).
(b) After the payment in cash (in New York Clearing House funds or
its equivalent) to the holders of the shares of the Series 1996 Preferred
Stock of the full preferential amounts for the shares of the Series 1996
Preferred Stock, as set forth in Section 6(a) above, the holders of the
Series 1996 Preferred Stock as such shall have no further right or claim to
any of the remaining assets of the Corporation.
(c) In the event the assets of the Corporation available for
distribution to the holders of shares of the Series 1996 Preferred Stock
upon any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation shall be insufficient to pay in full all amounts to which
such holders are entitled pursuant to Section 6(a) above, no distribution
shall be made on account of any shares of any other series of Preferred
Stock or any other class of capital stock of the Corporation ranking on a
parity with the shares of the Series 1996 Preferred Stock upon such
liquidation, dissolution or winding up unless proportionate amounts shall
be paid on account of the shares of the Series 1996 Preferred Stock,
ratably, in proportion to the full amounts to which holders of all such
shares which are on a parity with the shares of the Series 1996 Preferred
Stock are respectively entitled upon such dissolution, liquidation or
winding up.
H-8
<PAGE>
(d) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the Corporation shall, within
10 days after the date the Board of Directors approves such action, at
least 20 days prior to any shareholders' meeting called to approve such
action or within 20 days after the commencement of any involuntary
proceeding, whichever is earliest, give each holder of the Series 1996
Preferred Stock written notice of the proposed action. Such written notice
shall describe the material terms and conditions of the proposed action.
The Corporation shall not consummate any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation before the
expiration of 30 days after the mailing of such written notice; PROVIDED,
that any such 30 day period may be shortened upon the written consent of
the holders of all of the outstanding shares of the Series 1996 Preferred
Stock.
(e) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation that will involve the
distribution of assets other than cash, the Corporation shall promptly
engage competent independent appraisers to determine the value of the
assets to be distributed to the holders of shares of the Series 1996
Preferred Stock and the holders of Class A Common Stock. The Corporation
shall, upon receipt of such appraiser's valuation, give prompt written
notice to each holder of shares of the Series 1996 Preferred Stock of the
appraiser's valuation.
7. RANK. The Series 1996 Preferred Stock shall rank, with respect to
classes and series of capital stock of the Corporation outstanding as of
the date of the filing of this resolution with the Florida Department of
State, on a parity with the 8% Noncumulative Convertible Preferred Stock,
Series 1993 and the 9% Noncumulative Perpetual Preferred Stock and senior
to the Class A Common Stock, the Class B Common Stock, the Noncumulative
Convertible Preferred Stock, Series B, the Noncumulative Convertible
Preferred Stock, Series C and the Noncumulative Convertible Preferred
Stock, Series C-II of the Corporation as to payment of dividends and rights
upon liquidation, dissolution or winding up of the Corporation. Unless the
Corporation shall have obtained the consent of the holders as provided in
Section 5 above, the Corporation shall not issue any other series of
Preferred Stock ranking senior to the Series 1996 Preferred Stock as to the
payment of dividends or rights upon liquidation, dissolution or winding up
of the Corporation or any other series of any equity securities ranking
senior to the Series 1996 Preferred Stock as to the payment of dividends or
rights upon liquidation, dissolution or winding up of the Corporation. The
Corporation may issue shares of Preferred Stock or other capital stock
ranking junior to or on a parity with the Series 1996 Preferred Stock as to
the payment of dividends or rights upon liquidation, dissolution or winding
up of the Corporation. For purposes of this statement of designation, any
capital stock of any series or class of the Corporation shall be deemed to
rank:
(a) senior to the shares of the Series 1996 Preferred Stock, as to
dividends or upon liquidation, if the holders of such series or class shall
be entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may
be, in preference or priority to the holders of the shares of the Series
1996 Preferred Stock;
(b) on a parity with shares of the Series 1996 Preferred Stock, as
to dividends or upon liquidation, whether or not the dividend rates,
dividend payment dates or redemption or liquidation prices per share or
sinking fund provisions, if any, be different from those of the Series 1996
Preferred Stock, if the holders of such stock shall be entitled to the
receipt of dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, as the case may be, in
proportion to their respective dividend rates or liquidation prices,
without preferences or priority, one over the other, as between the holders
of such stock and the holders of shares of the Series 1996 Preferred Stock;
and
(c) junior to shares of the Series 1996 Preferred Stock, as to
dividends or upon liquidation, if the holders of shares of the Series 1996
Preferred Stock shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the holders
of shares of such series or class.
H-9
<PAGE>
8. NOTICE OF CERTAIN EVENTS. If:
(a) the Corporation shall declare a dividend (other than a cash
dividend) or distribution on its Class A Common Stock or any Junior Stock;
or
(b) the Corporation shall authorize the issuance to the holders of
the Class A Common Stock or any Junior Stock of rights or warrants to
subscribe for or purchase any shares of Class A Common Stock or of any
other subscription rights or warrants; or
(c) there shall be any reclassification of the Class A Common
Stock or any consolidation or merger, to which the Corporation is a party,
or any sale or transfer of all or substantially all the assets of the
Corporation; or
(d) there shall be a voluntary or an involuntary dissolution,
liquidation or winding up of the Corporation; or
(e) there shall be a redemption of the Series 1996 Preferred
Stock, in whole or in part, pursuant to Section 2 above;
then the Corporation shall cause to be filed with the transfer agent, if
any, and shall cause to be mailed to the holders of shares of the Series
1996 Preferred Stock at their addresses as shown on the stock books of the
Corporation, except as otherwise provided in Section 2(c) above or Section
6(d) above, at least 10 days prior to the applicable date hereinafter
specified, a notice stating (1) the date on which a record is to be taken
for the purpose of the dividend, distribution or rights or warrants, or, if
a record is not to be taken, the date as of which the holders of Class A
Common Stock of record to be entitled to the dividend, distribution or
rights or warrants are to be determined, (2) the date on which the
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as
of which it is expected that holders of Class A Common Stock of record
shall be entitled to exchange their shares of Class A Common Stock for
cash, securities or other property deliverable upon the reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding
up or (iii) the Redemption Date and redemption price pursuant to Section 2
above. Failure to give any such notice or any defect in the notice shall
not affect the legality or validity of the proceedings described in this
Section 8.
9. REPORTS AND NOTICES. So long as any shares of the Series 1996 Preferred
Stock shall be outstanding, the Corporation shall provide to the holder or
holders of such shares copies of all annual, quarterly and other reports of
the Corporation and copies of all stockholder notices of the Corporation
when and as furnished to the holders of the Class A Common Stock.
H-10
EXHIBIT 3.8
October 1, 1997
Dear _______:
By this letter agreement (this "Agreement"), BankUnited Financial
Corporation (the "Company") and _________, a holder of ________ shares of the
Company's Noncumulative Convertible Preferred Stock, Series B (the "Series B
Preferred Stock"), agree as follows effective as of the date set forth above:
1. Notwithstanding the annual dividend rate of $0.7375 stated in
Section 2 of the Statement of Designation for the Series B
Preferred Stock (the "Statement of Designation"), Appendix C
to the Company's Articles of Incorporation, the holders of the
Series B Preferred Stock agree that they shall accept, when,
as, and if declared by the Board of Directors and out of the
assets of the Corporation which are by law available for the
payment of dividends, preferential cash dividends payable
quarterly on the last day of February, May, August and
November of each year (unless such day is a non-business day,
in which event on the next business day), at the fixed annual
rate of $0.6750 per share and no more.
2. In consideration for the decrease in the annual dividend rate,
and notwithstanding the provisions of Section 4 of the
Statement of Designation, the Company agrees it shall not
redeem any of the shares of the Series B Preferred Stock prior
to October 1, 2007, unless such redemption is approved by at
least 50% of the outstanding shares of the Series B Preferred
Stock.
3. This Agreement shall not be deemed to modify or cancel any
other rights of the holders of the Series B Preferred Stock,
not expressly changed herein.
<PAGE>
IN WITNESS WHEREOF, each party has executed this Agreement, or caused
this Agreement to be executed by its duly authorized representative, as of the
date first written above.
BANKUNITED FINANCIAL CORPORATION
By:
-----------------------------
Name:
Title:
[Name of Shareholder]
By:
-----------------------------
<TABLE>
<CAPTION>
BANKUNITED FINANCIAL CORPORATION
Calculation of Earnings Per Share
FOR THE YEAR
ENDED SEPTEMBER 30,
---------------------------------------------
1997 1996 1995
---------- ---------- ---------
<S> <C> <C> <C>
CALCULATION OF PRIMARY EARNINGS PER COMMON SHARE
Net income ...................................................... $ 7,599 $ 2,586 $ 6,240
Preferred stock dividends........................................ (2,890) (2,145) (2,210)
Reduction of interest expense due to assumed exercise of
stock options, net of taxes................................... -- 3 44
---------- ---------- ---------
Net income available to common shares............................ $ 4,709 $ 444 $ 4,074
========== ========== =========
Weighted average number of common shares outstanding
during the period............................................ 8,211 4,306 2,022
Assumed exercise of stock options (Modified Treasury Stock Method) 469 252 274
---------- ---------- ---------
Weighted average number of common share equivalents
assumed outstanding during the period ........................ 8,680 4,558 2,296
========== ========== =========
Primary earnings per shares...................................... $ .54 $ .10 $ 1.77
========== ========== =========
<CAPTION>
FOR THE YEAR
ENDED SEPTEMBER 30,
---------------------------------------------
1997 1996 1995
---------- ---------- ---------
<S> <C> <C> <C>
CALCULATION OF FULLY DILUTED EARNINGS PER COMMON SHARE
Net income ...................................................... $ 7,599 $ 2,586 $ 6,240
Preferred stock dividends........................................ (2,763) (2,145) (1,035)
Reduction of interest expense due to assumed exercise of stock
options, net of taxes........................................ -- 3 40
---------- ---------- ---------
Net income available to common shares............................ $ 4,836 $ 444 $ 5,245
========== ========== =========
Weighted average number of common shares outstanding
during the period............................................. 8,211 4,306 2,022
Assumed exercise of stock options (Modified Treasury Stock Method) 544 252 274
Assumed conversion of preferred stock............................ 276 -- 1,863
---------- ---------- ---------
Weighted average number of fully diluted common shares
assumed outstanding during the period......................... 9,031 4,558 4,159
========== ========== =========
Fully diluted earnings per share................................. $ .54 $ .10 $ 1.26
========== ========== =========
</TABLE>
EXHIBIT 12.1
<TABLE>
<CAPTION>
BANKUNITED FINANCIAL CORPORATION
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
FOR THE YEAR ENDED SEPTEMBER 30,
----------------------------------------------
1997 1996 1995 1994 1993
----------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Fixed charges (excluding interest on deposits):
Interest on Borrowings 25,824 13,832 8,456 4,951 1,949
Rent (33%) 542 302 320 256 202
----------------------------------------------
Total fixed charges 26,366 14,134 8,776 5,207 2,151
Income before income taxes and
extraordinary items 12,632 4,243 9,981 3,607 6,356
----------------------------------------------
Earnings 38,998 18,377 18,757 8,814 8,507
==============================================
Total fixed charges 26,366 14,134 8,776 5,207 2,151
Preferred stock dividends on a pretax basis 4,661 3,460 3,536 3,016 2,386
----------------------------------------------
Combined fixed charges and
preferred stock dividends 31,027 17,594 12,312 8,223 4,537
==============================================
Ratio of earnings to combined fixed charges
and preferred stock dividends 1:26:1 1.05:1 1.52:1 1.07:1 1.87:1
==============================================
Fixed charges (including interest on deposits):
Interest on Deposits 50,136 20,791 17,849 11,344 10,261
Interest on Borrowings 25,824 13,832 8,456 4,951 1,949
Rent (33%) 542 302 320 256 202
----------------------------------------------
Total fixed charges 76,502 34,925 26,625 16,551 12,412
Income before income taxes and
extraordinary items 12,632 4,243 9,981 3,697 6,356
----------------------------------------------
Earnings 89,134 39,468 36,606 20,158 18,768
==============================================
Total fixed charges 76,502 34,925 26,625 16,551 12,412
Preferred stock dividends on a pretax basis 4,661 3,460 3,536 3,016 2,386
----------------------------------------------
Combined fixed charges and
preferred stock dividends 81,163 38,384 30,161 19,567 14,798
==============================================
Ratio of earnings to combined fixed charges
and preferred stock dividends 1:10:1 1.02:1 1.21:1 1.03:1 1.27:1
==============================================
</TABLE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-76878, No. 33-76884, No. 33-76882 and No.
333-25595), to the incorporation by reference in the Prospectus constituting
part of the Post-Effective Amendment No. 2 to the Registration Statement on Form
S-3 (No. 333-13211) and to the incorporation by reference in the Prospectus
constituting part of the Amendment No. 1 to the Registration Statement on Form
S-4 (No. 333-39921) of BankUnited Financial Corporation of our report dated
November 12, 1997 appearing on page 55 of this Form 10-K.
/s/ PRICE WATERHOUSE LLP
- ------------------------
Price Waterhouse LLP
Miami, Florida
December 26, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BANKUNITED, FSB FOR THE TWELVE MONTHS ENDED JUNE
30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 10,571
<INT-BEARING-DEPOSITS> 79,413
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 119,085
<INVESTMENTS-CARRYING> 75,129
<INVESTMENTS-MARKET> 0
<LOANS> 1,769,416
<ALLOWANCE> 3,693
<TOTAL-ASSETS> 2,145,406
<DEPOSITS> 1,195,892
<SHORT-TERM> 701,484
<LIABILITIES-OTHER> 32,385
<LONG-TERM> 116,000
0
22
<COMMON> 95
<OTHER-SE> 99,528
<TOTAL-LIABILITIES-AND-EQUITY> 2,145,406
<INTEREST-LOAN> 94,655
<INTEREST-INVEST> 14,119
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 108,774
<INTEREST-DEPOSIT> 50,136
<INTEREST-EXPENSE> 75,960
<INTEREST-INCOME-NET> 32,814
<LOAN-LOSSES> 1,295
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 22,947
<INCOME-PRETAX> 12,632
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,632
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
<YIELD-ACTUAL> 2.31
<LOANS-NON> 10,866
<LOANS-PAST> 0
<LOANS-TROUBLED> 1,888
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,121
<CHARGE-OFFS> 34
<RECOVERIES> 6
<ALLOWANCE-CLOSE> 3,693
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
