SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
BANKUNITED FINANCIAL CORPORATION
(Name of the Issuer)
BANKUNITED FINANCIAL CORPORATION
(Name of Person(s) Filing Statement)
9% NONCUMULATIVE PERPETUAL PREFERRED STOCK
(Title of Class of Securities)
06652B 30 1
(CUSIP Number of Class of Securities)
Samuel A. Milne
Chief Financial Officer
BankUnited Financial Corporation
255 Alhambra Circle
Coral Gables, Florida 33134
(305) 569-2000
(Name, Address, and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
Copy to:
Marsha D. Bilzin, Esq.
Stuzin and Camner, P.A.
550 Biltmore Way, Suite 700
Coral Gables, Florida 33134
(305) 442-4994
July 16, 1997
(Date Tender Offer First Published, Sent or Given to Security Holders)
----------------------
CALCULATION OF FILING FEE
===============================================================================
Transaction valuation Amount of filing fee
- -------------------------------------------------------------------------------
$11,787,500.00 $2,357.50
===============================================================================
[ ] Check box if any part of the fee is offset as provided by Rule 0-11 (a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: $2,357.50
Form or Registration No.: Not applicable
Filing Party: Not applicable
Date Filed: Not applicable
<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer is BankUnited Financial
Corporation, a Florida corporation (the "Company"), and the address of its
principal executive offices is 255 Alhambra Circle, Coral Gables, Florida 33134.
(b) This Schedule relates to the offer by the Company to
purchase any and all of its outstanding shares of 9% Noncumulative Perpetual
Preferred Stock, par value $.01 per share (the "Shares"), at $10.25 per Share,
net to the seller in cash, all upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated July 16, 1997 (the "Offer to Purchase"),
and the related Letter of Transmittal (which together constitute the "Offer"),
copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively.
As of July 14, 1997 the Company had issued and outstanding 1,150,000 Shares.
Officers, directors and affiliates of the Company may participate in the Offer
on the same basis as the Company's other stockholders. The information set forth
on the cover page and under "Introduction" of the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth on the cover page and under
"Introduction" and "The Offer-Price Range of Shares; Dividends; Trading Volume"
in Section 10 of the Offer to Purchase is incorporated herein by reference.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth under "The Offer-Source and
Amount of Funds" in Section 12 of the Offer to Purchase is incorporated herein
by reference.
(b) Not applicable.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE
ISSUER OR AFFILIATE.
The information set forth under "Special Factors-Purpose of
the Offer; Certain Effects of the Offer; Plans of the Company After the Offer"
in Section 1 of the Offer to Purchase is incorporated herein by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
The information set forth under "The Offer-Transactions and
Agreements Concerning the Shares and Other Securities of the Company" in Section
13 of the Offer to Purchase is incorporated herein by reference.
2
<PAGE>
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE ISSUER'S SECURITIES.
The information set forth under "The Offer-Transactions and
Agreements Concerning the Shares and Other Securities of the Company" in Section
13 of the Offer to Purchase is incorporated herein by reference.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth under "Introduction" and "The
Offer-Fees and Expenses" in Section 15 of the Offer to Purchase is incorporated
herein by reference.
ITEM 7. FINANCIAL INFORMATION.
(a) and (b) The information set forth (i) under "The
Offer-Certain Information Concerning the Company-Selected Historical Financial
Information" in Section 11 of the Offer to Purchase; (ii) on pages 53 through 91
of the Company's Annual Report on Form10-K/A for the Year ended September 30,
1996, filed as Exhibit(g)(1) hereto; (iii) on pages 3 through 9 of the Company's
Quarterly Report on Form 10-Q for the Quarter ended March 31, 1997, filed as
Exhibit (g)(2) hereto; (iv) on pages 56 through 85 of the Suncoast Savings and
Loan Association, FSA ("Suncoast," acquired by the Company on November 15, 1996)
Annual Report on Form 10-K for the Year ended June 30, 1996; and (v) on pages 2
through 7 of the Suncoast Quarterly Report on Form 10-Q for the Quarter ended
September 30, 1996, filed as Exhibit (g)(4) hereto; are all incorporated herein
by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) None.
(b) The information set forth under "Special Factors-
Certain Legal Matters; Regulatory and Foreign Approvals; No Appraisal Rights" in
Section 4 of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
(d) None.
(e) The information set forth in the Offer to Purchase
and the Letter of Transmittal is incorporated herein by reference.
3
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Form of Offer to Purchase, dated July 16, 1997.
(a)(2) Form of Letter of Transmittal with Substitute Form
W-9.
(a)(3) Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
(a)(4) Form of Letter to Stockholders of the Company from
Alfred R. Camner, Chairman of the Board, Chief
Executive Officers and President of the
Company, dated July 16, 1997.
(a)(5) Form of Notice of Guaranteed Delivery.
(a)(6) Form of Press Release issued by the Company, dated
July 16, 1997.
(b) None.
(c) None.
(d) None.
(e) Not applicable.
(f) None.
(g)(1) Pages 53 through 91 of the Company's Annual Report on
Form 10-K/A for the Year ended September 30, 1996.
(g)(2) Pages 3 through 9 of the Company's Quarterly Report
on Form 10-Q for the Quarter ended March 31, 1997.
(g)(3) Pages 56 through 85 of the Suncoast Annual Report on
Form 10-K for the Year ended June 30, 1996.
(g)(4) Pages 2 through 7 of the Suncoast Quarterly Report on
Form 10-Q for the Quarter ended September 30, 1996.
4
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Date: July 16, 1997
/s/ SAMUEL A. MILNE
--------------------------------------------
Name: Samuel A. Milne
Title: Executive Vice President and Chief
Financial Officer
5
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
(a)(1) Form of Offer to Purchase, dated July 16, 1997
(a)(2) Form of Letter of Transmittal with Substitute Form W-9.
(a)(3) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(4) Form of Letter to Stockholders of the Company from Alfred R.
Camner, Chairman of the Board, Chief Executive Officer and
President of the Company, dated July 16, 1997.
(a)(5) Form of Notice of Guaranteed Delivery
(a)(6) Form of Press Release issued by the Company, dated July 16,
1997.
(b) None.
(c) None.
(d) None.
(e) Not applicable.
(f) None.
(g)(1) Pages 53 through 91 of the Company's Annual Report on Form
10-K for the Year Ended September 30, 1996.
(g)(2) Pages 3 through 9 of the Company's Quarterly Report for the
Quarter Ended March 31, 1997.
(g)(3) Pages 56 through 85 of the Suncoast Annual Report on Form
10-K for the Year ended June 30, 1996.
(g)(4) Pages 2 through 7 of the Suncoast Quarterly Report on Form
10-Q for the Quarter ended September 30, 1996.
Schedule 13E-4 Exhibit (a)(1)
BANKUNITED FINANCIAL CORPORATION
OFFER TO PURCHASE FOR CASH
ANY AND ALL OF ITS OUTSTANDING SHARES OF
9% NONCUMULATIVE PERPETUAL PREFERRED STOCK
AT $10.25 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON FRIDAY, AUGUST 15, 1997, UNLESS THE OFFER IS
EXTENDED.
BankUnited Financial Corporation, a Florida corporation (the
"Company"), is offering to purchase any and all of its outstanding shares of 9%
Noncumulative Perpetual Preferred Stock (the "Shares"), at $10.25 per Share.
net to the seller in cash, upon the terms and subject to the conditions set
forth herein and in the related Letter of Transmittal (which together constitute
the "Offer").
Shares tendered and purchased by the Company will not be entitled to
the regular quarterly cash dividend in respect of any dividend period after June
30, 1997.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 9.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS OR EXECUTIVE OFFICERS MAKES ANY
RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER ALL OR ANY SHARES.
EACH SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER
SHARES AND, IF SO, HOW MANY SHARES TO TENDER. DIRECTORS AND EXECUTIVE OFFICERS
OF THE COMPANY AND THEIR AFFILIATES OWN AN AGGREGATE OF 14,300 SHARES, AND THE
COMPANY HAS BEEN ADVISED THAT ALL OF THESE PERSONS HAVE INDICATED THEIR
INTENTION TO TENDER THEIR SHARES PURSUANT TO THE OFFER.
The Shares trade on the NASDAQ National Market System ("NASDAQ NMS")
under the symbol "BKUNO." As of the close of business on July 14, 1997, the bid
price of the Shares as reported on the NASDAQ NMS was $10.25 per Share.
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
Questions or requests for assistance or for additional copies of
this Offer to Purchase, the Letter of Transmittal or other tender offer
materials may be directed to the Information Agent at the address and telephone
number set forth on the back cover of this Offer to Purchase.
July 16, 1997
<PAGE>
IMPORTANT
Any shareholder desiring to tender all or any portion of his or her
Shares should either (1) complete and sign the Letter of Transmittal or a
photocopy thereof in accordance with the instructions in the letter of
Transmittal, mail or deliver it and any other required documents to American
Stock Transfer & Trust Company (the "Depositary"), and either deliver the
certificates for Shares to the Depositary along with the Letter of Transmittal
or deliver such Shares pursuant to the procedure for book-entry transfer set
forth under "Book-Entry Transfer' in Section 6 hereof or (2) request his or her
broker, dealer, commercial bank, trust company or nominee to effect the
transaction for him or her. A shareholder whose Shares are registered in the
name of a broker, dealer, commercial bank, trust company or nominee must contact
such broker, dealer, commercial bank, trust company or nominee if he or she
desires to tender such Shares. Any shareholder who desires to tender Shares and
whose certificates for such Shares are not immediately available, or who cannot
comply in a timely manner with the procedure for book-entry transfer, should
tender such Shares by following the procedures for guaranteed delivery set forth
under "Guaranteed Delivery" in Section 6 hereof.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF
OF THE COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER SHARES PURSUANT TO THE
OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
SECTION PAGE
<S> <C>
SUMMARY...............................................................................................................i
INTRODUCTION..........................................................................................................1
SPECIAL FACTORS.......................................................................................................2
I. Purpose of the Offer; Certain Effects of the Offer; Plans of the Company
After the Offer...........................................................................................2
2. Certain Federal Income Tax Consequences...................................................................3
3. Fairness of the Offer; Reports and Opinions...............................................................6
4. Certain Legal Matters; Regulatory and Foreign Approvals; No Appraisal Rights..............................7
THE OFFER.............................................................................................................7
5. Number of Shares; Expiration Date; Extension of the Offer.................................................7
6. Procedure for Tendering Shares............................................................................8
7. Withdrawal Rights.........................................................................................9
8. Acceptance for Payment of Shares and Payment of Purchase Price...........................................10
9. Certain Conditions of the Offer..........................................................................11
10. Price Range of Shares; Dividends; Trading Volume.........................................................13
11. Certain Information Concerning the Company...............................................................13
12. Source and Amount of Funds...............................................................................17
13. Transactions and Agreements Concerning the Shares and Other Securities
of the Company...........................................................................................17
14. Extension of Tender Period; Termination; Amendments......................................................18
15. Fees and Expenses........................................................................................18
16. Miscellaneous............................................................................................19
Directors and Executive Officers of the Company .............................................................Schedule A
</TABLE>
<PAGE>
SUMMARY
This general summary is provided solely for the convenience of
holders of Shares and is qualified in its entirety by reference to the full text
of and the more specific details contained in this Offer to Purchase and the
related Letter of Transmittal and any amendments hereto and thereto. Capitalized
terms used in this summary without definition shall have the meaning ascribed to
such terms in the Offer to Purchase.
<TABLE>
<CAPTION>
<S> <C>
The Company............................................ BankUnited Financial Corporation, a Florida corporation.
The Shares............................................. Shares of the Company's 9% Noncumulative Perpetual Preferred Stock,
par value $.01 per share, liquidation preference $10.00 per share.
Number of Shares Sought................................ 1,150,000 (all of the Shares outstanding).
Purchase Price......................................... $10.25 per Share, net to the seller in cash.
Expiration Date of Offer............................... Friday, August 15, 1997, at 5.00 p.m., New York City time, unless
extended by the Company.
How to Tender Shares................................... See Section 6. For further information, call the Information Agent or
consult your broker for assistance.
Withdrawal Rights...................................... Tendered Shares may be withdrawn at any time until the Expiration Date
of the Offer and, unless previously purchased, after September 10, 1997.
See Section 7.
Market Price of shares................................. On July 14, 1997, the bid price of the Shares on the NASDAQ NMS was
$10.25 per Share. See Section 10.
Dividends.............................................. Shares tendered and purchased by the Company will not be entitled to the
regular quarterly cash dividend in respect of any dividend period after
June 30, 1997. See Section 10.
Purpose of Offer....................................... The Company is making the Offer because it believes that, given the
current market price of the Shares and the opportunity for the Company
to replace the Shares with indebtedness, in the form of trust subsidiary
borrowings, that has a lower after-tax cost, the purchase of the Shares
pursuant to th economically attractive to the Company. In addition, the
Offer gives holders of Shares the opportunity to sell their Shares
without the usual transaction costs associated with a market sale. See
Section 1.
Certain Effects of offer............................... The Company's purchase of Shares pursuant to the Offer will reduce the
number of holders of shares and the number of shares that might
otherwise trade publicly, and depending upon the number of Shares so
purchased, could adversely affect the liquidity and market value of the
remaining Shares held by the public, or result in the Shares no longer
being eligible for listing on the NASDAQ NMS.
Stock Transfer Tax..................................... None, except as provided in Instruction 6 of the Letter of transmittal.
Payment Date........................................... As promptly as practicable after the Expiration Date of the Offer.
Further Information.................................... Any questions, requests for assistance or requests for additional copies
of this Offer to Purchase, the Letter of Transmittal or other tender offer
materials may be directed to Shareholder Communications Corporation,
17 State Street, New York, NY 10004, Tel: (800) 733-8481, Ext. 481
(toll free).
</TABLE>
i
<PAGE>
To the Holders of 9% Noncumulative Perpetual Preferred Stock of BankUnited
Financial Corporation:
INTRODUCTION
BankUnited Financial Corporation, a Florida corporation (the
"Company"), is offering to purchase any and all of its outstanding shares of 9%
Noncumulative Perpetual Preferred Stock, par value $.01 per share, liquidation
preference $10.00 per share (the "Shares"), at $10.25 per Share (the "Purchase
Price"), net to the seller in cash, upon the terms and subject to the conditions
set forth herein and in the related Letter of Transmittal (which together
constitute the "Offer").
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 9.
Tendering shareholders will not be obligated to pay brokerage
commissions, solicitation fees or, subject to Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by the Company. The
Company will pay all charges and expenses of American Stock Transfer & Trust
Company (the "Depositary") and Shareholder Communications Corporation (the
"Information Agent") incurred in connection with the Offer. See Section 15.
HOWEVER, ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE AND SIGN
THE SUBSTITUTE FORM W-9 THAT IS INCLUDED IN THE LETTER OF TRANSMITTAL MAY BE
SUBJECT TO A REQUIRED FEDERAL INCOME TAX BACKUP WITHHOLDING OF 31% OF THE GROSS
PAYMENTS PAYABLE TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE
SECTIONS 2 AND 6.
NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS OR EXECUTIVE OFFICERS
MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER ALL OR ANY
SHARES. EACH SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO WHETHER TO
TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. DIRECTORS AND EXECUTIVE
OFFICERS OF THE COMPANY AND THEIR AFFILIATES OWN AN AGGREGATE OF 14,300 SHARES,
AND THE COMPANY HAS BEEN ADVISED THAT ALL OF THESE PERSONS HAVE INDICATED THEIR
INTENTION TO TENDER THEIR SHARES PURSUANT TO THE OFFER.
As of July 14, 1997, the Company had issued and outstanding
1,150,000 Shares, and there were 444 holders of record of Shares.
The bid price of the Shares is reported on the NASDAQ NMS under the
symbol "BKUNO." See Section 10. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR THE SHARES.
1
<PAGE>
SPECIAL FACTORS
1. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER; PLANS OF THE
COMPANY AFTER THE OFFER.
The Company is making the Offer because it believes that, given the
current market price of the Shares and the opportunity for the Company to
replace the Shares with indebtedness, in the form of trust subsidiary
borrowings, that has a lower after-tax cost, the purchase of the Shares pursuant
to the Offer is economically attractive to the Company. Additionally, the Offer
will enable the Company to reduce its annual administrative expenses in
connection with servicing the accounts of holders of the Shares. The Board of
Directors of the Company has authorized the Offer by a unanimous vote. Twelve of
the sixteen directors are not employees of the Company.
Following the consummation of the Offer, the business and operations
of the Company will be continued by the Company substantially as they are
currently being conducted. The Company has no plans or proposals which relate to
or would result in: (a) the acquisition by any person of additional securities
of the Company or the disposition of securities of the Company; (b) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any of its subsidiaries; (c) a sale or
transfer of a material amount of assets of the Company or any of its
subsidiaries; (d) any change in the present Board of Directors or management of
the Company; (e) any material change in the present dividend rate or policy, or
indebtedness or capitalization of the Company; (f) any other material change in
the Company's corporate structure or business; or (g) any change in the
Company's Articles of Incorporation or Bylaws or any actions which may impede
the acquisition of control of the Company by any person.
The Company's purchase of Shares pursuant to the Offer will reduce
the number of holders of Shares and the number of Shares that might otherwise
trade publicly, and depending upon the number of Shares so purchased, could
adversely affect the liquidity and market value of the remaining Shares held by
the public or result in the Shares no longer being eligible for listing on the
NASDAQ NMS. The extent of the public market for the Shares and the availability
of such quotations would, however, depend upon such factors as the number of
shareholders remaining at such time, the interest in maintaining a market in the
Shares on the part of securities firms, the possible termination of registration
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
described below, and other factors.
The Shares are currently registered under the Exchange Act.
Registration of the Shares under the Exchange Act may be terminated upon
application of the Company to the Securities and Exchange Commission (the
"Commission") if the Shares are held by fewer than 300 holders of record.
Termination of registration of the Shares under the Exchange Act would
substantially reduce the information required to be furnished by the Company to
holders of the Shares (although the Company would, among other things, remain
subject to the reporting obligations under the Exchange Act as a result of other
of its outstanding securities) and would make certain provisions of the Exchange
Act, such as the requirements of Rule 13e-3 thereunder with respect to "going
private" transactions, no longer applicable in respect of the Shares.
The Shares are redeemable by the Company at any time or from time to
time after September 30, 1998 at a price per Share of $10.00, plus all accrued
and unpaid dividends to the date of redemption. The Offer does not constitute a
notice of redemption of the Shares pursuant to the Company's Articles of
Incorporation, as amended, and owners of Shares are not under any obligation to
accept the Offer or to remit their Shares to the Company pursuant to the Offer.
The Company reserves the right to redeem Shares not purchased pursuant to the
Offer at any time after September 30, 1998. The Shares have no preemptive or
conversion rights and are not entitled to any sinking fund or similar fund. In
the event of a voluntary or involuntary liquidation, dissolution or winding up
of the Company, holders of the Shares are entitled to a liquidation preference
of $10.00 per Share, plus
2
<PAGE>
all accrued and unpaid dividends thereon to the date of payment, prior to the
payment of any amounts to any holder of the Company's common stock.
Following the expiration of the Offer, the Company may, in its sole
discretion, determine to purchase any remaining Shares through privately
negotiated transactions, open market purchases or otherwise, on such terms and
at such prices as the Company may determine from time to time, the terms of
which purchases or offers could differ from those of the Offer, except that the
Company will not make any such purchases of Shares until the expiration of ten
business days after the termination of the Offer. Any possible future purchases
of Shares by the Company will depend on many factors, including the market price
of the Shares, the Company's business and financial position, alternative
investment opportunities available to the Company, the results of the Offer and
general economic and market conditions.
All Shares purchased by the Company pursuant to the Offer will be
reclassified to the status of authorized but unissued shares of the Company's
preferred stock.
NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS OR EXECUTIVE OFFICERS
MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER ALL OR ANY
SHARES. EACH SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO WHETHER TO
TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. DIRECTORS AND EXECUTIVE
OFFICERS OF THE COMPANY AND THEIR AFFILIATES OWN AN AGGREGATE OF 14,300 SHARES,
AND THE COMPANY HAS BEEN ADVISED THAT ALL OF THESE PERSONS HAVE INDICATED THEIR
INTENTION TO TENDER THEIR SHARES PURSUANT TO THE OFFER.
2. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
In General. The following summary is a general discussion of certain
United States federal income tax consequences relating to the Offer. This
summary does not discuss any aspects of state, local, foreign or other tax laws.
The summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), and existing final, temporary and proposed Treasury Regulations,
Revenue Rulings and judicial decisions, all of which are subject to prospective
or retroactive change. The summary deals only with Shares held as capital assets
within the meaning of Section 1221 of the Code and does not address tax
consequences that may be relevant to investors in special tax situations, such
as certain financial institutions, tax exempt organizations, insurance
companies, dealers in securities or currencies, or shareholders holding the
Shares as part of a straddle, hedge or conversion transaction for tax purposes.
The Company will not seek a ruling from the Internal Revenue Service (the "IRS")
with regard to the tax matters discussed below. Accordingly, each shareholder
should consult its own tax advisor with regard to the Offer and the application
of United States federal income tax laws, as well as the laws of any state,
local or foreign taxing jurisdiction, to its particular situation.
Characterization of the Sale. A sale of Shares by a shareholder to
the Company pursuant to the Offer will be a taxable transaction for United
States federal income tax purposes and may also be a taxable transaction under
applicable state, local and foreign tax laws. The United States federal income
tax consequences to a shareholder may vary depending upon the shareholder's
particular facts and circumstances. Under Section 302 of the Code, a sale of
Shares by a shareholder to the Company pursuant to the Offer will be treated as
a "sale or exchange" of such Shares for United States federal income tax
purposes (rather than as a distribution by the Company with respect to the
Shares held by the tendering shareholder) if the receipt of cash upon such sale
(i) results in a "complete termination" of the shareholder's interest in the
Company or (ii) is "not essentially equivalent to a dividend" with respect to
the shareholder. These tests (the "Section 302 tests"') are explained more fully
below.
3
<PAGE>
If either of the Section 302 tests is satisfied, and the sale of the
Shares is therefore treated as a "sale or exchange" of such Shares for United
States federal income tax purposes, the tendering shareholder will recognize
capital gain or loss equal to the difference between the amount of cash received
by the shareholder pursuant to the Offer and the shareholder's tax basis in the
Shares sold pursuant to the Offer. Any such gain or loss will be long-term
capital gain or loss if the Shares have been held for more than one year.
If neither of the Section 302 tests is satisfied and the Company has
sufficient current and accumulated earnings and profits, the tendering
shareholder will be treated as having received a dividend includible in gross
income in an amount equal to the entire amount of cash received by the
shareholder pursuant to the Offer (without reduction for the tax basis of the
Shares sold pursuant to the Offer), no loss will be recognized, and (subject to
reduction as described below for corporate shareholders eligible for the
dividends-received deduction) the tendering shareholder's basis in the Shares
sold pursuant to the Offer will be added to such shareholder's basis in its
remaining stock in the Company, if any. No assurance can be given that either of
the Section 302 tests will be satisfied as to any particular shareholder, and
thus no assurance can be given that any particular shareholder will not be
treated as having received a dividend taxable as ordinary income. If the sale of
Shares is not treated as a sale or exchange for federal income tax purposes, any
cash received for Shares pursuant to the Offer in excess of the Company's
allocable earnings and profits will be treated, first, as a nontaxable return of
capital to the extent of the shareholder's basis for such shareholder's Shares,
and, thereafter, as capital gain, to the extent it exceeds such basis.
CONSTRUCTIVE OWNERSHIP OF STOCK. In determining whether either of
the Section 302 tests is satisfied, a shareholder must take into account not
only the stock of the Company that is actually owned by the shareholder, but
also stock of the Company that is constructively owned by the shareholder within
the meaning of Section 318 of the Code. Under Section 318 of the Code, a
shareholder may constructively own stock of the Company actually owned, and in
some cases constructively owned, by certain related individuals or entities in
which the shareholder has an interest, or, in the case of shareholders that are
entities, by certain individuals or entities that have an interest in the
shareholder, and stock of the Company that the shareholder has the right to
acquire by exercise of an option or by conversion. Dispositions or acquisitions
of stock of the Company by a shareholder or related individuals or entities that
are part of the same overall plan may be integrated with the sale of Shares
pursuant to the Offer in determining whether either of the Section 302 tests has
been satisfied.
SECTION 302 TESTS. One of the following tests must be satisfied in
order for the sale of Shares pursuant to the Offer to be treated as a sale or
exchange for federal income tax purposes.
a. COMPLETE TERMINATION TEST. The receipt of cash by a
shareholder will be a "complete termination" of the shareholder's
interest if either (i) the shareholder does not own, actually or
constructively, any stock of the Company other than the Shares sold
pursuant to the Offer, or (ii) the shareholder does not actually own
any stock of the Company other than the Shares sold pursuant to the
Offer and, with respect to stock of the Company constructively owned
by the shareholder that is not sold pursuant to the Offer, the
shareholder is eligible to waive (and effectively waives)
constructive ownership of all such stock under procedures described
in Section 302(c) of the Code. Shareholders considering making such
a waiver should do so in consultation with their tax advisors.
b. NOT ESSENTIALLY EQUIVALENT TO A DIVIDEND TEST. Even
if the receipt of cash by a shareholder fails to satisfy the
"complete termination" test, a shareholder may nevertheless satisfy
the "not essentially equivalent to a dividend" test if the
shareholder's sale of Shares pursuant to the Offer results in a
"meaningful reduction" in the shareholder's proportionate interest
in the Company. The sale of Shares to the Company by a tendering
shareholder should generally qualify as "not essentially equivalent
to a dividend," absent other integrated purchase transactions.
Shareholders expecting to rely on the "not essentially equivalent to
a dividend" test should consult their own tax advisors as to the
application of that test in their particular situation.
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CORPORATE SHAREHOLDER DIVIDEND TREATMENT. If a sale of Shares by a
corporate shareholder is treated as a dividend, the corporate shareholder may be
entitled to claim a deduction equal to 70% of the dividend, subject to
applicable limitations. Corporate shareholders should consider the effect of
Section 246(c) of the Code, which disallows the dividends-received deduction
with respect to stock that is held for 45 days or less (90 days or less in the
case of preferred stock, if the shareholder receives dividends attributable to a
period aggregating in excess of 366 days). For this purpose, the length of time
a taxpayer is deemed to have held stock may be reduced by periods during
which the taxpayer's risk of loss with respect to the stock is diminished by
reason of the existence of certain options or other transactions. Moreover,
under Section 246A of the Code, if a corporate shareholder has incurred
indebtedness directly attributable to an investment in Shares, the
dividends-received deduction may be reduced by a percentage generally computed
based on the amount of such indebtedness and the shareholder's tax basis in the
Shares.
In addition, because it is expected that the redemption of Shares
will not be pro rata with respect to all shareholders, any amount received by a
corporate shareholder pursuant to the Offer that is treated as a dividend will
likely constitute an "extraordinary dividend" under Section 1059 of the Code
(except as may otherwise be provided in regulations yet to be promulgated by the
Treasury Department). A corporate shareholder receiving an "extraordinary
dividend"' would be required under Section 1059(a) of the Code to reduce its
basis (but not below zero) in its Shares by the non-taxed portion of the
extraordinary dividend (i.e., the portion of the dividend for which a deduction
is allowed), and, if such portion exceeds the shareholder's tax basis for its
Shares, to treat the excess as gain from the sale of such Shares in the year in
which a sale or disposition of such Shares occurs. The basis reduction rules of
Section 1059 also generally apply to dividends that exceed a threshold
percentage of a shareholder's basis in its stock, unless the shareholder has
held its stock for more than two years before the announcement date of such
dividend. For purposes of applying Section 1059, all dividends received by a
shareholder and having their ex- dividend dates within an 85-day period
(expanded to a 365-day period in the case of dividends received in such period
that in the aggregate exceed 20% of the shareholder's basis in its stock) are
aggregated. Corporate shareholders should consult their own tax advisors as to
the application of Section 1059 of the Code to the Offer, and to any dividends
that may be paid with respect to the Shares, as well as the effect of pending
legislation discussed below.
FOREIGN SHAREHOLDERS. The Company will withhold United States
federal income tax at a rate of 30% from the gross proceeds paid pursuant to the
Offer to a foreign shareholder or his agent, unless the Company determines that
a reduced rate of withholding is applicable pursuant to a tax treaty or that an
exemption from withholding is applicable because such gross proceeds are
effectively connected with the conduct of a trade or business by the foreign
shareholder within the United States. For this purpose, a foreign shareholder is
any shareholder that is not (i) a citizen or resident or the United States, (ii)
a corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or (iii) any
estate or trust the income of which is subject to United States federal income
taxation regardless of its source.
Generally, the determination of whether a reduced rate of
withholding is applicable is made by reference to a foreign shareholder's
address or to a properly completed Form 1001 furnished by the shareholder, and
the determination of whether an exemption from withholding is available on the
grounds that gross proceeds paid to a foreign shareholder are effectively
connected with a United States trade or business is made on the basis of a
properly completed Form 4224 furnished by the shareholder. The Company will
determine a foreign shareholder's eligibility for a reduced rate of, or
exemption from, withholding by reference to the shareholder's address and any
Forms 1001 or 4224 submitted to the Company by a foreign shareholder unless
facts and circumstances indicate that such reliance is not warranted or unless
applicable law requires some other method for determining whether a reduced rate
of withholding is applicable. These forms can be obtained from the Company.
A foreign shareholder with respect to whom tax has been withheld may
be eligible to obtain a refund of all or a portion of the withheld tax if the
shareholder satisfied one of the Section 302 tests for capital gain treatment or
is otherwise able to establish that no tax or a reduced amount of tax was due.
Foreign shareholders
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are urged to consult their own tax advisors regarding the application of United
States federal income tax withholding, including eligibility for a withholding
tax reduction or exemption and the refund procedure.
BACKUP WITHHOLDING. See Section 6 with respect to the application
of United States federal income tax backup withholding.
PENDING LEGISLATION. Proposed legislation passed by both the House
and the Senate would amend Section 1059 of the Code to require corporate
shareholders to recognize gain immediately whenever the non-taxed portion of an
extraordinary dividend exceeds the basis of stock with respect to which the
dividend is received. Such legislation would also cause any amount characterized
as a dividend due to the Section 318 option attribution rules to be treated as
an extraordinary dividend under Section 1059 (with the legislation's gain
recognition rule applied by taking into account only the basis of the stock
redeemed). In addition, for dividends received or accrued more than 30 days
after the date of enactment, the proposed legislation would require the 46-day
(or 91-day) holding period under Section 246(c) of the Code to be satisfied over
a period immediately before and/or after the ex-dividend date. It is uncertain
whether the proposed legislation will be enacted and, if enacted, what form such
legislation will take.
The impact of pending and future tax legislation on the United
States federal tax system, including possible effects on taxation of the Offer,
is uncertain. Shareholders are advised to consult their own tax advisors as to
these matters.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. THE TAX CONSEQUENCES OF A SALE PURSUANT TO THE OFFER MAY VARY
DEPENDING UPON, AMONG OTHER THINGS, THE PARTICULAR CIRCUMSTANCES OF THE
TENDERING SHAREHOLDER. NO INFORMATION IS PROVIDED HEREIN AS TO THE STATE, LOCAL
OR FOREIGN TAX CONSEQUENCES OF THE TRANSACTION CONTEMPLATED BY THE OFFER.
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF SALES MADE BY
THEM PURSUANT TO THE OFFER, THE EFFECT OF THE STOCK OWNERSHIP ATTRIBUTION RULES
MENTIONED ABOVE AND THE EFFECT OF TAX LEGISLATIVE PROPOSALS.
3. FAIRNESS OF THE OFFER; REPORTS AND OPINIONS.
The Company believes the Offer is fair to holders of Shares. The
Offer gives holders of Shares the opportunity to sell substantial amounts of
Shares without driving down the bid price. The Offer will also provide
shareholders with the opportunity to dispose of Shares without the usual
transaction costs associated with a market sale. The Company also considered the
fact that the Shares are redeemable after September 30, 1998 for $10.00 per
Share, and depending on then current market conditions, the Company presently
anticipates that it would elect to redeem any Shares outstanding at such time.
The Company did not find it practicable to, and did not, quantify or otherwise
assign relative weights to the aforementioned reasons it believes the Offer is
fair to holders of Shares.
Neither the Company nor its Board of Directors received any report,
opinion (other than any opinion of counsel it may have received) or appraisal
which is materially related to the Offer, including, but not limited to, any
such report, opinion or appraisal relating to the consideration or the fairness
of the consideration to he offered to the holders of the Shares or the fairness
of such transaction to the Company. A majority of the directors who are not
employees of the Company have not retained an unaffiliated representative to act
solely on behalf of unaffiliated shareholders for the purposes of negotiating
the terms of the transaction.
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4. CERTAIN LEGAL MATTERS; REGULATORY AND FOREIGN APPROVALS; NO APPRAISAL
RIGHTS.
The Company is not aware of any license or regulatory permit that
appears to be material to its business that might be adversely affected by its
acquisition of Shares as contemplated in the Offer or of any approval or other
action by any government or governmental, administrative or regulatory authority
or agency, domestic or foreign, that would be required for the Company's
acquisition or ownership of Shares pursuant to the Offer. Should any such
approval or other action be required, the Company currently contemplates that it
will seek such approval or other action. The Company cannot predict whether it
may determine that it is required to delay the acceptance for payment of, or
payment for, Shares tendered pursuant to the Offer pending the outcome of any
such matter. There can be no assurance that any such approval or other action,
if needed, would be obtained or would be obtained without substantial conditions
or that the failure to obtain any such approval or other action might not result
in adverse consequences to the Company's business. The Company intends to make
all required filings under the Exchange Act. The Company's obligation under the
Offer to accept for payment, or make payment for, Shares is subject to certain
conditions. See Section 9.
There is no shareholder vote required in connection with the Offer.
There are no appraisal rights available to holders of Shares in
connection with the Offer.
THE OFFER
5. NUMBER OF SHARES; EXPIRATION DATE; EXTENSION OF THE OFFER.
Upon the terms and subject to the conditions described herein and in
the Letter of Transmittal, the Company will purchase any and all Shares that are
validly tendered on or prior to the Expiration Date (and not properly withdrawn
in accordance with Section 7) at the Purchase Price. The later of 5:00 p.m., New
York City time, on Friday, August 15, 1997, or the latest time and date to which
the Offer is extended, is referred to herein as the "Expiration Date." The Offer
is not conditioned on any minimum number of Shares being tendered.
Shares tendered and purchased by the Company will not be entitled to
the regular quarterly cash dividend in respect of any dividend period after June
30, 1997.
If (i) the Company increases or decreases the price to be paid for
Shares or decreases the number of Shares being sought and (ii) the Offer is
scheduled to expire at any time earlier than the expiration of a period ending
on the tenth business day from, and including, the date that notice of such
increase or decrease is first published, sent or given in the manner described
in Section 14, the Offer will be extended until the expiration of ten business
days from the date of publication of such notice.
The Company also expressly reserves the right, in its sole
discretion, at any time or from time to time, to extend the period of time
during which the Offer is open by giving oral or written notice of such
extension to the Depositary and making a public announcement thereof. See
Section 14. There can be no assurance, however, that the Company will exercise
its right to extend the Offer.
For purposes of the Offer, a "business day" means any day other than
a Saturday, Sunday or federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, New York City time.
Copies of this Offer to Purchase and the Letter of Transmittal are
being mailed to record holders of Shares and will be furnished to brokers, banks
and similar persons whose names, or the names of whose nominees, appear on the
Company's shareholder list or, if applicable, who are listed as participants in
a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
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6. PROCEDURE FOR TENDERING SHARES.
PROPER TENDER OF SHARES. To tender Shares validly pursuant to the
Offer, either (a) a properly completed and duty executed Letter of Transmittal
or photocopy thereof, together with any required signature guarantees and any
other documents required by the Letter of Transmittal, must be received by the
Depositary at the address set forth on the back cover of this Offer to Purchase
and either (i) certificates for the Shares to be tendered must be received by
the Depositary at such address or (ii) such Shares must be delivered pursuant to
the procedures for book-entry transfer described below (and a confirmation of
such delivery received by the Depositary), in each case on or prior to the
Expiration Date, or (b) the tendering holder of Shares must comply with the
guaranteed delivery procedure described below.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with
respect to the Shares at The Depository Trust Company ("DTC") for purposes of
the Offer within two business days after the date of this Offer to Purchase, and
any financial institution that is a participant in the book-entry transfer
system of DTC may make delivery of Shares by causing DTC to transfer such Shares
into the Depositary's account in accordance with the procedures of DTC. Although
delivery of Shares may be effected through book-entry transfer, a properly
completed and duly executed Letter of Transmittal or photocopy thereof, together
with any required signature guarantees and any other required documents, must,
in any case, be received by the Depositary at one of its addresses set forth on
the back cover of this Offer to Purchase on or prior to the Expiration Date, or
the tendering holder of Shares must comply with the guaranteed delivery
procedure described below. DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEES. Except as otherwise provided below, all
signatures on a Letter of Transmittal must be guaranteed by a firm that is a
member of a registered national securities exchange or the National Association
of Securities Dealers, Inc., or by a commercial bank or trust company having an
office or correspondent in the United States which is a participant in an
approved Signature Guarantee Medallion Program (each of the foregoing being
referred to as an "Eligible Institution"). Signatures on a Letter of Transmittal
need not be guaranteed if (a) the Letter of Transmittal is signed by the
registered holder of the Shares tendered therewith and such holder has not
completed the box entitled "Special Placement Instructions" or the box entitled
"Special Delivery Instructions" in the Letter of Transmittal or (b) such Shares
are tendered for the account of an Eligible Institution. See Instructions I and
5 of the Letter of Transmittal.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares
pursuant to the Offer and cannot deliver certificates for such Shares and all
other required documents to the Depositary on or prior to the Expiration Date or
the procedure for book-entry transfer cannot be complied with in a timely
manner, such Shares may nevertheless be tendered if all of the following
conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided
by the Company (with any required signature guarantees)
is received by the Depositary as provided below on or
prior to the Expiration Date; and
(iii) the certificates for such Shares (or a confirmation of a
book-entry transfer of such Shares into the Depositary's
account at DTC, together with a properly completed and
duly executed Letter of Transmittal (or photocopy
thereof) and any other documents required by the Letter
of Transmittal, are received by the Depositary no later
than 5:00 p.m., New York City time, on the third
business day after the date of execution of the Notice
of Guaranteed Delivery.
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The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile transmission or mail to the Depositary and must include
a guarantee by an Eligible Institution in the form set forth in such Notice.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS
IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
FEDERAL BACKUP WITHHOLDING. TO AVOID FEDERAL INCOME TAX BACKUP
WITHHOLDING EQUAL TO 31% OF THE GROSS PAYMENTS MADE PURSUANT TO THE OFFER, EACH
SHAREHOLDER MUST NOTIFY THE DEPOSITARY OF SUCH SHAREHOLDER'S CORRECT TAXPAYER
IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER INFORMATION BY PROPERLY
COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL.
FOREIGN SHAREHOLDERS (AS DEFINED IN SECTION 2) MAY BE REQUIRED TO SUBMIT A
PROPERLY COMPLETED FORM W-8, CERTIFYING NON-UNITED STATES STATUS, IN ORDER TO
AVOID BACKUP WITHHOLDING. IN ADDITION, FOREIGN SHAREHOLDERS MAY BE SUBJECT TO
30% (OR LOWER TREATY RATE) WITHHOLDING ON GROSS PAYMENTS RECEIVED PURSUANT TO
THE OFFER (AS DISCUSSED IN SECTION 2). FOR A DISCUSSION OF CERTAIN FEDERAL
INCOME TAX CONSEQUENCES TO TENDERING SHAREHOLDERS, SEE SECTION 2. EACH
SHAREHOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR,
DETERMINATIONS OF VALIDITY. All questions as to the Purchase Price,
the form of documents and the validity, eligibility (including time of receipt)
and acceptance for payment of any tender of Shares will be determined by the
Company, in its sole discretion, and its determination shall be final and
binding. The Company reserves the absolute right to reject any or all tenders of
Shares that it determines are not in proper form or the acceptance for payment
of or payment for Shares that may, in the opinion of the Company's counsel, be
unlawful. The Company also reserves the absolute right to waive any defect or
irregularity in any tender of Shares. None of the Company, the Depositary, the
Information Agent or any other person will be under any duty to give notice of
any defect or irregularity in tenders, nor shall any of them incur any liability
for failure to give any such notice.
RULE 14E-4. It is a violation of Rule 14e-4 promulgated under the
Exchange Act for a person to tender Shares for his or her own account unless the
person so tendering (i) has a net long position equal to or greater than the
amount of (x) Shares tendered or (y) other securities immediately convertible
into, exercisable, or exchangeable for the amount of Shares tendered and will
acquire such Shares for tender by conversion, exercise or exchange of such other
securities and (ii) will cause such Shares to be delivered in accordance with
the terms of the Offer. Rule 14e-4 provides a similar restriction applicable to
the tender or guarantee of a tender on behalf of another person. The tender of
Shares pursuant to any one of the procedures described above will constitute the
tendering shareholder's representation and warranty that (i) such shareholder
has a net long position in the Shares being tendered within the meaning of Rule
14e-4 promulgated under the Exchange Act, and (ii) the tender of such Shares
complies with Rule 14e-4. The Company's acceptance for payment of Shares
tendered pursuant to the Offer will constitute a binding agreement between the
tendering shareholder and the Company upon the terms and subject to the
conditions of the Offer.
7. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer may be withdrawn at any
time prior to the Expiration Date. Thereafter, such tenders are irrevocable,
except that they may be withdrawn after September 10, 1997, unless theretofore
accepted for payment as provided in this Offer to Purchase. If the Company
extends the period of time during which the Offer is open, is delayed in
accepting for payment or paying for Shares or is unable to accept
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for payment or pay for Shares pursuant to the Offer for any reason, then,
without prejudice to the Company's rights under the Offer, the Depositary may,
on behalf of the Company, retain all Shares tendered, and such Shares may not be
withdrawn except as otherwise provided in this Section 7, subject to Rule
13e-4(f)(5) under the Exchange Act, which provides that the issuer making the
tender offer shall either pay the consideration offered, or return the tendered
securities promptly after the termination or withdrawal of the tender offer.
To be effective, a written or facsimile transmission notice of
withdrawal must be timely received by the Depositary at its address set forth on
the back cover of this Offer to Purchase and must specify the name of the person
who tendered the Shares to be withdrawn and the number of Shares to be
withdrawn. If the Shares to be withdrawn have been delivered to the Depositary,
a signed notice of withdrawal with signatures guaranteed by an Eligible
Institution (except in the case of Shares tendered by an Eligible Institution)
must be submitted prior to the release of such Shares. In addition, such notice
must specify, in the case of Shares tendered by delivery of certificates, the
name of the registered holder (if different from that of the tendering
shareholder) and the serial numbers shown on the particular certificates
evidencing the Shares to be withdrawn or, in the case of Shares tendered by
book-entry transfer, the name and number of the account at DTC to be credited
with the withdrawn Shares. Withdrawals may not be rescinded, and Shares
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by again following one of the
procedures described in Section 6 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of
receipt) of any notice of withdrawal will be determined by the Company, in its
sole discretion, which determination shall be final and binding. None of the
Company, the Depositary, the Information Agent or any other person will be under
any duty to give notification of any defect or irregularity in any notice of
withdrawal or incur any liability for failure to give any such notification.
8. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF PURCHASE PRICE.
Upon the terms and subject to the conditions of the Offer and as
promptly as practicable after the Expiration Date, the Company will accept for
payment and pay the Purchase Price for any and all Shares validly tendered.
Thereafter, payment for all Shares accepted for payment pursuant to the Offer
will be made by the Depositary by check as promptly as practicable. In all
cases, payment for Shares accepted for payment pursuant to the Offer will be
made only after timely receipt by the Depositary of certificates for Shares (or
of a confirmation of a book-entry transfer of such Shares into the Depositary's
account at DTC, a properly completed and duly executed Letter of Transmittal or
photocopy thereof, and any other required documents.
For purposes of the Offer, the Company will be deemed to have
accepted for payment (and thereby purchased) Shares that are validly tendered
prior to the applicable Expiration Date and not withdrawn as, if and when it
gives oral or written notice to the Depositary of its acceptance for payment of
such Shares. The Company will pay for Shares that it has purchased pursuant to
the Offer by depositing the Purchase Price therefor with the Depositary. The
Depositary will act as agent for tendering shareholders for the purpose of
receiving payment from the Company and transmitting payment to tendering
shareholders. Under no circumstances will interest be paid on amounts to be paid
to tendering shareholders, regardless of any delay in making such payment.
If certain events occur, the Company may not be obligated to
purchase Shares pursuant to the Offer. See Section 9. Certificates for all
Shares not purchased will be returned (or, in the case of Shares tendered by
book-entry transfer, such Shares will be credited to an account maintained with
DTC) as promptly as practicable without expense to the tendering shareholder.
The Company will pay or cause to be paid any stock transfer taxes
with respect to the sale and transfer of any Shares to it or its order pursuant
to the Offer. If, however, payment of the Purchase Price is to be made to, or
Shares not tendered or not purchased are to be registered in the name of, any
person other than the registered holder, or if tendered Shares are registered in
the name of any person other than the person signing the Letter of
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Transmittal, the amount of any stock transfer taxes (whether imposed on the
registered holder, such other person or otherwise) payable on account of the
transfer to such person will be deducted from the Purchase Price unless
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
submitted. See Instruction 6 of the Letter of Transmittal.
9. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer, the Company will
not be required to accept for payment or pay for any Shares tendered, and may
terminate or amend the Offer or may postpone (subject to the requirements
of the Exchange Act for prompt payment for or return of Shares) the acceptance
for payment of or payment for Shares tendered, if at any time on or after July
16, 1997, and before acceptance for payment of or payment for any such Shares,
any of the following events shall have occurred (or shall have been determined
by the Company in its sole judgment to have occurred) regardless of the
circumstances giving rise thereto (including any action or omission to act by
the Company):
(a) there shall have been threatened, instituted or
pending any action or proceeding by any government or governmental,
regulatory or administrative agency or authority or tribunal or any
other person, domestic or foreign, or before any court, authority,
agency or tribunal that (i) challenges or seeks to challenge the
acquisition of Shares pursuant to the Offer or otherwise in any
manner relates to or affects the Offer or (ii) in the sole judgment
of the Company, could materially and adversely affect the business,
condition (financial or other), income, operations or prospects of
the Company and its subsidiaries, taken as a whole, or otherwise
materially impair in any way the contemplated future conduct of the
business of the Company or any of its subsidiaries or materially
impair the contemplated benefits of the Offer to the Company;
(b) there shall have been any action threatened, pending
or taken, or approval withheld, withdrawn or abrogated or any
statute, rule, regulation, judgment, order or injunction threatened,
proposed, sought, promulgated, enacted, entered, amended, enforced
or deemed to be applicable to the Offer or the Company or any of its
subsidiaries by any legislative body, court, authority, agency or
tribunal which, in the Company's sole judgment, would or might
directly or indirectly (i) make the acceptance for payment of, or
payment for, some or all of the Shares illegal or otherwise restrict
or prohibit consummation of the Offer, (ii) delay or restrict the
ability of the Company, or render the Company unable, to accept for
payment or pay for some or all of the Shares, (iii) impose or seek
to impose limitations on the ability of the Company to acquire or
hold or to exercise full rights of ownership of the Shares, (iv)
materially impair the contemplated benefits of the Offer to the
Company or (v) materially affect the business, condition (financial
or other), income, operations or prospects of the Company and its
subsidiaries, taken as a whole, or otherwise materially impair in
any way the contemplated future conduct of the business of the
Company or any of its subsidiaries;
(c) it shall have been publicly disclosed or the Company
shall have learned that (i) any person or "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) has acquired or
proposes to acquire beneficial ownership of more than 5% of the
outstanding shares of the common stock of the Company, whether
through the acquisition of stock, the formation of a group, the
grant of any option or right, or otherwise (other than as disclosed
in a Schedule 13D or 13G (or an amendment thereto) on file with the
Commission on July 15, 1997), (ii) any such person or group that on
or prior to July 15, 1997, had filed such a Schedule with the
Commission thereafter shall have acquired or shall propose to
acquire whether through the acquisition of stock, the formation of a
group, the grant of any option or right, or otherwise, beneficial
ownership of additional shares of the common stock of the Company
representing 2% or more of the outstanding shares of such common
stock, (iii) any new group shall have been formed which beneficially
owns more than 5% of the outstanding shares of the common stock of
the Company, or (iv) any person, entity or group shall have filed a
Notification and Report Form under the Hart-Scott-
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Rodino Antitrust Improvements Act of 1976 or made a public
announcement reflecting an intent to acquire the Company or any or
its subsidiaries or any of their respective assets or securities;
(d) there shall have occurred (i) any general suspension
of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the-counter market, (ii)
any significant decline in the market price of the Shares or in the
general level of market prices of equity securities in the United
States or abroad, (iii) any change in the general political, market,
economic or financial condition in the United States or abroad that
could have a material adverse effect on the Company's business,
condition (financial or other), income, operations, prospects or
ability to obtain financing generally or the trading in the Shares,
(iv) the declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or any limitation
on, or any event which, in the Company's sole judgment, might
affect, the extension of credit by lending institutions in the
United States, (v) the commencement of a war, armed hostilities or
other international or national crisis directly or indirectly
involving the United States or (vi) in the case of any of the
foregoing existing at the time of the commencement of the Offer, in
the Company's sole judgment, a material acceleration or worsening
thereof;
(e) a tender or exchange offer with respect to some or
all of the Shares (other than the Offer) or other shares of
preferred stock of the Company or some or all of the common stock of
the Company, or a merger, acquisition or other business combination
proposal for the Company or any subsidiary, shall have been
proposed, announced or made by a person other than the Company;
(f) there shall have occurred any event or events that
have resulted, or may in the sole judgment of the Company result, in
an actual or threatened change in the business, condition (financial
or other), income, operations, stock ownership or prospects of the
Company and its subsidiaries, taken as a whole or materially impair
the contemplated benefits of the Offer;
(g) (i) Moody's Investors Service, Inc. ("Moody's") or
Thomson BankWatch, Inc. ("Bankwatch") shall have downgraded or
withdrawn the rating accorded any securities of the Company, or (ii)
Moody's or Bankwatch shall have publicly announced that it has under
surveillance or review, with possible negative implications, its
rating of any securities of the Company; or
(h) there shall have occurred any decline in the S&P
Composite 500 Stock Index by an amount in excess of 15% measured
from the close of business on July 15, 1997 and, in the sole
judgment of the Company, such event or events make it undesirable or
inadvisable to proceed with the Offer or with such acceptance for
payment or payment.
Any of the foregoing conditions may be waived by the Company, in whole or in
part, at any time and from time to time in its sole discretion. The failure by
the Company at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time. Any determination
by the Company concerning the events described above will be final and binding
on all parties.
12
<PAGE>
10. PRICE RANGE OF SHARES; DIVIDENDS; TRADING VOLUME.
The Shares trade on the NASDAQ NMS under the symbol "BKUNO." The
following table sets forth the high and low bid prices of the Shares as reported
on the NASDAQ NMS and the cash dividends per Share for the quarters indicated.
<TABLE>
<CAPTION>
Bid Price Bid Price Cash Dividends
Fiscal Year High Low Per Share
<S> <C> <C> <C>
1995 1st Quarter...................................... $9 $7 1/4 $ .225
2nd Quarter...................................... $9 $7 1/4 $ .225
3rd Quarter...................................... $9 3/4 $8 $ .225
4th Quarter...................................... $10 3/4 $8 3/4 $ .225
1996 1st Quarter...................................... $10 1/2 $9 1/4 $ .225
2nd Quarter...................................... $10 1/4 $9 $ .225
3rd Quarter...................................... $10 1/8 $8 7/8 $ .225
4th Quarter...................................... $10 1/8 $8 1/2 $ .225
1997 1st Quarter...................................... $10 1/4 $9 5/8 $ .225
2nd Quarter...................................... $10 3/4 $9 5/8 $ .225
3rd Quarter...................................... $10 3/8 $9 1/2 $ .225
4th Quarter (through July 14, 1997).............. $10 1/4 $10
Source: Bloomberg LP
</TABLE>
As of the close of business on July 14, 1997, the bid price
of the Shares as reported on the NASDAQ NMS was $10.25 per Share. SHAREHOLDERS
ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
Shares tendered and purchased by the Company will not be
entitled to the regular quarterly cash dividend in respect of any dividend
period after June 30, 1997.
Florida law imposes certain legal restrictions on the
Company's ability to pay dividends. As a general matter, Florida law provides
that a distribution may not be made if after giving effect thereto (1) the
corporation would be unable to pay its debts as they become due in the usual
course of its business, or (2) the total assets of the corporation would be less
than the sum of its total liabilities plus the amount that would be needed, if
the corporation were to be dissolved at the time as of which the dividend is
measured, to satisfy the preferential rights upon dissolution of shareholders
whose preferential rights are superior to those receiving the distribution.
11. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is a Florida corporation organized in December
1992 for the purpose of becoming the savings and loan holding company for
BankUnited, FSB (the "Bank"). This holding company reorganization, together with
the Bank's conversion from a Florida-chartered stock savings bank (which
commenced operations in October 1984) to a federally chartered stock savings
bank, became effective on March 5, 1993. At March 31, 1997, the Company had $1.0
billion in deposits and $98.9 million in stockholders' equity. With over $1.4
billion in assets, the Company is the fourth largest publicly held depository
institution headquartered in South Florida.
The Company currently has fourteen branch offices in Dade,
Broward and Palm Beach Counties, Florida, and anticipates opening six or more
additional branches by June 30, 1998. The Company's business has traditionally
consisted of attracting deposits from the general public and using those
deposits, together with borrowings and other funds, to purchase nationwide and
to originate in its market area single-family residential
13
<PAGE>
mortgage loans, and to a lesser extent, to purchase and originate commercial
real estate, commercial business and consumer loans. The Company's revenues are
derived principally from interest earned on loans, mortgage-backed securities
and investments. The Company's primary expenses arise from interest paid on
savings deposits and borrowings and non-interest expenses incurred in
operations.
The Bank is a member of the Federal Home Loan Bank system and
is subject to comprehensive regulation, examination and supervision by the
Office of Thrift Supervision (the "OTS") and the Federal Deposit Insurance
Corporation (the "FDIC"). Deposits at the Bank are insured by the Savings
Association Insurance Fund of the FDIC to the maximum extent permitted by law.
The Company's executive offices are located at 255 Alhambra
Circle, Coral Gables, Florida 33134, and its telephone number is (305) 569-2000.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Schedule A hereto sets forth the name, business address and
present principal occupation or employment and any other material occupations,
positions, offices or employments during the last five years of each director
and executive officer of the Company. Schedule A also sets forth the citizenship
of each such director and executive officer.
14
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
The information for, and as of the end of, the six months ended March 31,
1997 and 1996 is unaudited, but in the opinion of management reflects all
adjustments (consisting only of normal recurring accruals) necessary for a fair
presentation of the results for such periods. The results for the six months
ended March 31, 1997 are not necessarily indicative of the results that may be
expected for the entire year. The selected historical financial information
should be read in conjunction with and is qualified in its entirety by reference
to (i) the Company's Consolidated Financial Statements and Notes thereto
contained in the Company's Annual Report on Form 10-K/A for the fiscal year
ended September 30, 1996 (the "1996 10-K/A") and in the Company' Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 1997 (the "March
31, 1997 10-Q"); and (ii) the Consolidated Financial Statements and Notes
thereto, contained in the Suncoast Savings and Loan Association, FSA
("Suncoast") Annual Report on Form 10-K for the fiscal year ended June 30, 1996
and the Suncoast Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1996, since the Company acquired Suncoast on November 15, 1996
(subsequent to the Company's last fiscal year end). These reports may be
obtained or inspected in the manner set forth in Section 16.
<TABLE>
<CAPTION>
AT OR FOR THE SIX AT OR FOR
MONTHS ENDED THE FISCAL YEAR
MARCH 31, ENDED SEPTEMBER 30,
------------------------- ---------------------------
1997(1) 1996 1996 1995
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
OPERATIONS DATA:
Interest income ..................................................... $ 43,696 $ 23,326 $ 52,132 $ 39,419
Interest expense .................................................... 27,241 16,030 34,622 26,305
----------- ----------- ----------- -----------
Net interest income before provision (credit) for loan losses ....... 16,455 7,296 17,510 13,114
Provision (credit) for loan losses .................................. 415 (300) (120) 1,221
----------- ----------- ----------- -----------
Net interest income after provision (credit) for loan losses ........ 16,040 7,596 17,630 11,893
----------- ----------- ----------- -----------
Non-interest income:
Service fees ........................................................ 1,449 281 597 423
Gain on sales of loans and mortgage-backed securities, net .......... 2 3 5 239
(Loss) gain on sales of other assets, net(2) ........................ -- (7) (6) 9,569
Other ............................................................... 150 10 53 6
----------- ----------- ----------- -----------
Total non-interest income ......................................... 1,601 287 649 10,237
----------- ----------- ----------- -----------
Non-interest expense:
Employee compensation and benefits .................................. 4,436 2,023 4,275 3,997
Occupancy and equipment ............................................. 1,615 786 1,801 1,727
Insurance (3) ....................................................... 471 469 3,610 1,027
Professional fees ................................................... 542 477 929 1,269
Preferred Dividends of Trust Subsidiary ............................. 1,355 -- -- --
Other ............................................................... 3,515 1,537 3,421 4,129
----------- ----------- ----------- -----------
Total non-interest expense ........................................ 11,934 5,292 14,036 12,149
----------- ----------- ----------- -----------
Income before income taxes and Preferred Stock dividends ............ 5,707 2,591 4,243 9,981
Provision for income taxes .......................................... 2,265 987 1,657 3,741
----------- ----------- ----------- -----------
Net income before Preferred Stock dividends ......................... 3,442 1,604 2,586 6,240
Preferred Stock dividends ........................................... 1,449 1,072 2,145 2,210
----------- ----------- ----------- -----------
Net income after Preferred Stock dividends .......................... $ 1,993 $ 532 $ 441 $ 4,030
=========== =========== =========== ===========
FINANCIAL CONDITION DATA:
Total assets ........................................................ $ 1,453,161 $ 738,491 $ 824,360 $ 608,415
Loans receivable, net, and mortgage-backed securities(4) ............ 1,319,181 630,519 716,550 506,132
Investments, overnight deposits, tax certificates, repurchase
agreements, certificates of deposits and other interest
earning assets .................................................... 55,917 86,336 87,662 88,768
Total liabilities ................................................... 1,284,258 669,023 755,249 562,670
Deposits ............................................................ 1,011,475 423,568 506,106 310,074
Borrowings .......................................................... 252,259 239,775 237,775 241,775
Trust Preferred Securities .......................................... 70,000 -- -- --
Total stockholders' equity .......................................... 98,903 69,468 69,111 45,745
Common stockholders' equity ......................................... 64,799 45,155 44,807 21,096
PER COMMON SHARE DATA:
Primary earnings per common share and common equivalent share ....... $ .25 $ .18 $ .10 $ 1.77
=========== =========== =========== ===========
Earnings per common share assuming full dilution .................... $ .25 $ .18 $ .10 $ 1.26
=========== =========== =========== ===========
Weighted average number of common shares and common equivalent
shares assumed outstanding during the period:
Primary ........................................................... 7,952,197 3,022,388 4,558,521 2,296,021
Fully diluted ..................................................... 8,674,187 3,035,458 4,558,521 4,158,564
Equity per common share ............................................. $ 7.32 $ 7.49 $ 7.85 $ 10.20
Fully converted tangible equity per common share .................... $ 6.50 $ 7.16 $ 7.13 $ 8.15
</TABLE>
(Continued on next page)
15
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE SIX AT OR FOR
MONTHS ENDED THE FISCAL YEAR
MARCH 31, ENDED SEPTEMBER 30,
------------------ ------------------
1997(1) 1996 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS: (Annualized where appropriate)
PERFORMANCE RATIOS:
Return on average assets(5) ....................................................... .58% .50% .36% 1.10%
Return on average common equity ................................................... 8.37 4.10 1.30 22.60
Return on average total equity .................................................... 7.74 6.34 4.30 14.70
Interest rate spread .............................................................. 2.56 1.96 2.10 2.12
Net interest margin ............................................................... 2.91 2.35 2.51 2.39
Dividend payout ratio(6) .......................................................... 42.10 66.83 82.95 35.42
Ratio of earnings to combined fixed charges and preferred stock dividends(7):
Excluding interest on deposits ................................................. 1.37 1.10 1.05 1.52
Including interest on deposits ................................................. 1.11 1.05 1.02 1.21
Total loans, net, and mortgage-backed securities to
total deposits ................................................................. 130.42 148.86 141.58 163.13
Non-interest expenses to average assets ........................................... 1.79 1.65 1.97 2.14
Efficiency ratio(8) ............................................................... 62.80 68.60 76.45 14.58
ASSET QUALITY RATIOS:
Ratio of non-performing loans to total loans ...................................... .82% .95% .99% 1.02%
Ratio of non-performing assets to total loans, real estate
owned and tax certificates ...................................................... .93 1.24 1.14 1.35
Ratio of non-performing assets to total assets .................................... .79 .99 .95 1.10
Ratio of charge-offs to total loans ............................................... .04 .04 .08 .13
Ratio of loan loss allowance to total loans ....................................... .24 .38 .34 .32
Ratio of loan loss allowance to non-performing loans .............................. 28.92 40.24 33.74 31.54
CAPITAL RATIOS:
Ratio of average common equity to average total assets ............................ 4.03% 4.06% 4.78% 3.14%
Ratio of average total equity to average total assets ............................. 7.52 7.91 8.44 7.47
Tangible capital-to-assets ratio(9) ............................................... 8.39 7.10 7.01 7.09
Core capital-to-assets ratio(9) ................................................... 8.39 7.10 7.01 7.09
Risk-based capital-to-assets ratio(9) ............................................. 13.34 14.97 14.19 15.79
</TABLE>
(1) Includes operations of Suncoast from date of acquisition on
November 15, 1996.
(2) In the fourth quarter of 1995, the Company recorded a $9.3 million
gain ($5.8 million after tax) from the sale of its branches on the
west coast of Florida.
(3) In the fourth quarter of 1996, the Company recorded a one time SAIF
special assessment of $2.6 million ($1.6 million after tax).
(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.
16
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of
the Company as of March 31, 1997, and as adjusted to reflect (i) the
consummation of the Offer assuming all of the outstanding Shares are tendered
and purchased; and (ii) the consummation of an offering of 9.60% Cumulative
Trust Preferred Securities of BankUnited Capital II, a subsidiary of the
Company, which occurred on June 5, 1997. The following data should be read in
conjunction with the selected historical financial information set forth above
and the detailed information and financial statements included in the 1996
10-K/A and the March 31, 1997 10-Q and is qualified in its entirety by
reference thereto.
<TABLE>
<CAPTION>
AS
ACTUAL ADJUSTED
------ --------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Deposits......................................................................... $1,011,475 $1,011,475
FHLB advances..................................................................... 251,484 251,484
Subordinated notes................................................................ 775 775
---------- ----------
Total deposits and borrowed funds............................................ 1,263,734 1,263,734
---------- ----------
Company Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trusts Holding Solely Junior Subordinated Deferrable Interest
Debentures of the Company...................................................... 70,000 116,000
---------- ----------
Stockholders' equity:
Preferred Stock, Series B, 8% Convertible and 9% Perpetual, $.01 par value;
authorized--10,000,000 shares; issued and outstanding--
2,998,688 shares(2)............................................................ 30 18
Class A Common Stock, $.01 par value; authorized--30,000,000 shares;
issued and outstanding--8,571,246 shares....................................... 85 85
Class B Common Stock, $.01 par value; authorized--3,000,000 shares,
issued and outstanding--275,938 shares......................................... 3 3
Additional paid-in capital....................................................... 90,608 78,832
Retained earnings................................................................ 9,272 9,272
Net unrealized losses on securities available for sale, net of tax............... (1,095) (1,095)
---------- ----------
Total stockholders' equity.................................................... 98,903 87,115
---------- ----------
Total deposits, borrowed funds and stockholders' equity....................... $1,432,637 $1,466,849
========== ==========
</TABLE>
(1) Such shares had an aggregate liquidation preference of $34.1
million at March 31, 1997.
12. SOURCE AND AMOUNT OF FUNDS.
Assuming that the Company purchases all outstanding Shares pursuant
to the Offer at the Purchase Price, the total amount required by the Company to
purchase such Shares will be approximately $11.79 million, exclusive of fees and
other expenses. The fees and expenses associated with the Offer are expected to
be approximately $60,000.00. The source of funds for the Company's purchase of
the Shares shall be the Company's working capital.
13. TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES.
The Company has been advised by its directors and executive officers
that directors or executive officers of the Company and their affiliates own
14,300 Shares, and that these persons intend to tender their Shares pursuant to
the Offer. Based upon the Company's records and upon information provided to the
Company by its directors and executive officers, to the Company's knowledge,
none of its associates, subsidiaries, directors, executive officers or any
associate of any such director or executive officer, or any director or
executive officer of its subsidiaries, has engaged in any transactions involving
the Shares since October 1, 1994. Neither the Company nor, to the Company's
knowledge, any of its directors or executive officers is a party to any
contract, arrangement, understanding or relationship relating, directly or
indirectly, to the Offer with any other person with respect to any securities of
the Company.
17
<PAGE>
14. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS.
The Company expressly reserves the right, in its sole discretion and
at any time or from time to time, to extend the period of time during which the
Offer is open by giving oral or written notice of such extension to the
Depositary. There can be no assurance, however, that the Company will exercise
its right to extend the Offer. During any such extension, all Shares previously
tendered will remain subject to the Offer, except to the extent that such Shares
may be withdrawn as set forth in Section 7. The Company also expressly reserves
the right, in its sole discretion, (i) to terminate the Offer and not accept for
payment any Shares not theretofore accepted for payment or, subject to Rule 13e-
4(f)(5) under the Exchange Act, which requires the Company either to pay the
consideration offered or to return the Shares tendered promptly after the
termination or withdrawal of the Offer, to postpone payment for Shares upon the
occurrence of any of the conditions specified in Section 9 hereof by giving oral
or written notice of such termination to the Depositary and making a public
announcement thereof and (ii) at any time or from time to time, to amend the
Offer in any respect. Amendments to the Offer may be effected by public
announcement. Without limiting the manner in which the Company may choose to
make public announcement of any termination or amendment, the Company shall have
no obligation (except as otherwise required by applicable law) to publish,
advertise or otherwise communicate any such public announcement, other than by
making a release to the Dow Jones News Service, except in the case of an
announcement of an extension of the Offer, in which case the Company shall have
no obligation to publish, advertise or otherwise communicate such announcement
other than by issuing a notice of such extension by press release or other
public announcement, which notice shall be issued no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date. Material changes to information previously provided to holders
of the Shares in this Offer or in documents furnished subsequent thereto will be
disseminated to holders of Shares in compliance with Rule 13e-4(e)(2)
promulgated under the Exchange Act.
If the Company materially changes the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, the Company will extend the Offer to the extent required by Rules
13e-4(d)(2) and 13e-4(e)(2) under the Exchange Act. Those rules require that the
minimum period during which an offer must remain open following material changes
in the terms of the offer or information concerning the offer (other than a
change in price, change in dealer's soliciting fee or change in percentage of
securities sought) will depend on the facts and circumstances, including the
relative materiality of such terms or information. In a published release, the
Commission has stated that in its view, an offer should remain open for a
minimum of five business days from the date that notice of such a material
change is first published, sent or given. The Offer will continue or be extended
for at least ten business days from the time the Company publishes, sends or
gives to holders of Shares a notice that it will (a) increase or decrease the
price it will pay for Shares or the amount of the dealer's soliciting fee or (b)
decrease the number of Shares it seeks.
15. FEES AND EXPENSES.
The Company has retained American Stock Transfer and Trust Company
as Depositary and Shareholder Communications Corporation as Information Agent in
connection with the Offer. The Information Agent may contact shareholders by
mail, telephone, facsimile transmission and personal interviews, and may request
brokers, dealers and other nominee shareholders to forward materials relating to
the Offer to beneficial owners. The Depositary and the Information Agent will
receive reasonable and customary compensation of their services and will also be
reimbursed for certain out-of-pocket expenses. The Company has agreed to
indemnify the Depositary and the Information Agent against certain liabilities,
including certain liabilities under the federal securities laws, in connection
with the Offer. Neither the Information Agent nor the Depositary has been
retained to make solicitations or recommendations in connection with the Offer.
Certain directors or executive officers of the Company may, from
time to time, contact shareholders to provide them with information regarding
the Offer. Such directors and executive officers will not make any
recommendation to any shareholder as to whether to tender all or any Shares and
will not solicit the tender of any Shares. The Company will not compensate any
director or executive officer for this service.
18
<PAGE>
Other than as described above, the Company will not pay any
solicitation fees to any broker, dealer, bank, trust company or other person for
any Shares purchased in connection with the Offer. The Company will reimburse
such persons for customary handling and mailing expenses incurred in connection
with the Offer.
The Company will pay all stock transfer taxes, if any, payable on
account of the acquisition of the Shares by the Company pursuant to the Offer,
except in certain circumstances where special payment or delivery procedures are
utilized pursuant to Instruction 6 of the Letter of Transmittal.
The expenses incurred, or estimated to be incurred, by the Company
in connection with the Offer are set forth below. The Company will be
responsible for paying all such expenses.
Solicitation Fees................................................... $ 10,000
Printing and Mailing Fees............................................ 15,000
Filing Fees ......................................................... 2,300
Legal, Accounting and Miscellaneous.................................. 30,000
--------
Total.................................................... $ 57,300
========
16. MISCELLANEOUS.
The Company is subject to the informational requirements of the
Exchange Act and in accordance therewith files reports and other information
with the Commission relating to its business, financial condition and other
matters. Certain information as of particular dates concerning the Company's
directors and officers, their remuneration, the principal holders of the
Company's securities and any material interest of such persons in transactions
with the Company is filed with the Commission. The Company has also filed a
Rule 13e-3 Transaction Statement on Schedule 13E-3 and an Issuer Tender Offer
Statement on Schedule 13E-4 with the Commission, which include certain
additional information relating to the Offer. Such reports, as well as such
other material, may be inspected and copies may be obtained at the Commission's
Public Reference Section at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and should also be available for inspection and copying
at the regional offices of the Commission located at 7 World Trade Center, 13th
Floor, New York, New York 10048, and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material may be obtained by
mail, upon payment of the Commission's customary fees, from the Commission's
Public Reference Section at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a Web site that contains
reports, proxy and information statements and other materials that are filed
through the Commission's Electronic Data Gathering, Analysis, and Retrieval
system. This Web site can be accessed at http://www.sec.gov. The Company's
Schedules 13E-3 and 13E-4 may not be available at the Commission's regional
offices. Reports, proxy statements and other information filed by Suncoast
pursuant tot he informational requirements of the Exchange Act, prior to the
acquisition of Suncoast by the Company, can be inspected and copies at the
public reference facilities maintained by the OTS at 1700 G Street, N.W.,
Washington, D.C. 20552 or at the OTS Southeast Regional Office, 1475 Peachtree
Street, N.E., Atlanta, Georgia 30309.
The Offer is being made to all holders of Shares. The Company is not
aware of any state where the making of the Offer is prohibited by administrative
or judicial action pursuant to a valid state statute. If the Company becomes
aware of any valid state statute prohibiting the making of the Offer, the
Company will make a good faith effort to comply with such statute. If, after
such good faith effort, the Company cannot comply with such statute, the Offer
will not be made to, nor will tenders be accepted from or on behalf of, holders
of Shares in such state. In those jurisdictions whose securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of the Company by or one or more
registered brokers or dealers licensed under the laws of such jurisdictions.
BANKUNITED FINANCIAL CORPORATION
19
<PAGE>
SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the name, business address, present
principal occupation or employment and any other material occupations,
positions, offices or employments during the last five years of the directors
and executive officers of the Company. Unless otherwise indicated, all
occupations, positions, offices or employments listed opposite any individual's
name were held by such individual during the course of the last five years. Each
individual listed below is a citizen of the United States.
POSITIONS WITH COMPANY
NAME AGE AND BUSINESS EXPERIENCE
Alfred R. Camner 52 Director, Chairman of the Board, Chief
255 Alhambra Circle Executive Officer and President of the
Coral Gables, FL 33134 Company (1993 to present); Director,
Chairman of the Board and Chief Executive
Officer (1984 to present) and President
(1984 to 1993, November 1994 to present)
of the Bank; Senior Managing Director
(1996 to present) and Managing Director
of Stuzin and Camner, Professional
Association, attorneys-at-law (1973 to
present); Director and member of the
Executive Committee of the Board of
Directors of Loan America Financial
Corporation, a national mortgage banking
company (1985 to 1994); Director of CSW
Associates, Inc., an asset management
firm (1990 to 1995).
Lawrence H. Blum 53 Director and Vice Chairman of the Board
Rachlin, Cohen & Holtz of the Company (1993 to present) and the
1 S.E. 3rd Ave., 10th Floor Bank (1984 to present); Managing Director
Miami, FL 33131 (1992 to present) and partner (1974 to
present) of Rachlin, Cohen & Holtz,
certified public accountants.
Albert J. Finch(l) 59 Director and Vice Chairman of the Company
15 Dogwood Road and the Bank (November 1996 to present);
Hollywood, FL 33021 President and sole owner of Finch
Financial, Inc., a financial consulting
firm (November 1996 to present);
Director, Chairman of the Board and Chief
Executive Officer of Suncoast Savings and
Loan Association, FSA ("Suncoast") (1985
to November 1996); Chief Operating
Officer and President of Suncoast (1992
to November 1996).
James A. Dougherty 46 Director (December 1995 to present) and
255 Alhambra Circle Executive Vice President of the Company
Coral Gables, FL 33134 (1994 to present); Director, Executive
Vice President and Chief Operating
Officer of the Bank (1994 to present);
Executive Vice President of Retail
Banking, Intercontinental Bank (1989 to
1994).
Earline G. Ford 53 Director, Executive Vice President and
255 Alhambra Circle Treasurer of the Company (1993 to
Coral Gables, FL 33134 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).
A-1
<PAGE>
POSITIONS WITH COMPANY
NAME AGE AND BUSINESS EXPERIENCE
Marc D. Jacobson 54 Director of the Company (1993 to present)
Head-Beckham Ins. Agcy. and the Bank (1984 to present); Vice
3050 Biscayne Blvd. President of Head-Beckham Insurance
Suite 412 Agency, Inc. (1990 to present).
Miami, FL 33137
Allen M. Bernkrant 65 Director of the Company (1993 to present)
Heritage Manufacturing and the Bank (1985 to present); Private
4600 N.W. 135 St. investor in Miami, Florida (1990 to
Opalocka, FL 33054 present).
Irving P. Cohen(l) 55 Director of the Company and the Bank
Thompson, Hine and Flory (1996 to present); Director of Suncoast
1920 N Street, N.W. (1988 to 1996); Partner, Thompson Hine
Suite 800 & Flory, attorneys at law (1995 to
Washington, DC 20036 present); Parter, Semmes Bowen & Semmes,
attorneys at law (1990 to 1995).
Bruce Friesner 53 Director of the Company and the Bank
F&G Associates (1996 to present); Director of Loan
5431 N. 36th Court America Financial Corporation, a
Hollywood, FL 33021 national mortgage banking company
(1990-1994); Partner of F&G Associates,
a commercial real estate development
company (1972 to present).
Patricia L. Frost 58 Director of the Company (1993 to present)
4400 Biscayne Boulevard and the Bank (1990 to present); Private
Miami, FL 33137 investor in Miami, Florida (1993 to
present); Principal, West Laboratory
School, Coral Gables, Florida (1970 to
1993).
Elia J. Giusti(l) 62 Director of the Company and the Bank
Lee Giusti Realty, Inc. (1996 to present); Director of Suncoast
900 E. Broward Blvd. (1990 to 1996); President and principal
Suite A owner of Lee Giusti Realty, Inc. a real
Ft. Lauderdale, FL 33301 estate and mortgage brokerage firm (1982
to present).
Marc Lipsitz 55 Director and Secretary of the Company
550 Biltmore Way (1996 to present); Managing Director
Coral Gables, FL 33134 (1996 to present) of Stuzin & Camner,
P.A.; General Counsel of Jefferson
National Bank (1993-1996); Partner,
Stroock Stroock & Lavan, attorneys at law
(1991-1993).
Norman E. Mains(l) 53 Director of the Company and the Bank
Chicago Mercantile Exchange (1996 to present); Director of Suncoast
10 South Wacker Drive (1985 to 1996); Chief Economist and
North Tower - 6th Floor Director of Research for the Chicago
Chicago, IL 60606 Mercantile Exchange (1994 to present);
President and Chief Operating Officer of
Rodman & Renshaw Capital Group, Inc., a
securities broker/dealer firm (1991 to
1994).
A-2
<PAGE>
POSITIONS WITH COMPANY
NAME AGE AND BUSINESS EXPERIENCE
Neil Messinger 58 Director of the Company and the Bank
Baptist Hospital (1996 to present); Radiologist;
8900 N. Kendall Drive President, Radiological Associates, P.A.
Miami, FL (1986 to present); Chairman of Imaging
Services of Baptist Hospital (1986 to
present).
Christina Cuervo Migoya 31 Director of the Company and the Bank
Beacon Council (1995 to present); Executive Vice
80 S.W. 8th Street President, the Beacon Council (1996 to
Miami, FL 33130 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 (2) 80 Director of the Company (1993 to present)
8124 S.W. 87th Terrace and the Bank (1985 to present); Private
Miami, FL 33143 investor in Miami, Florida.
OFFICERS OF THE COMPANY
AND/OR THE BANK WHO
ARE NOT DIRECTORS:
Charles A. Arnett 48 Executive Vice President of the Bank
255 Alhambra Circle (1995 to present); Executive Vice
Coral Gables, FL 33134 President of Intercontinental Bank
(1991 to 1995); President and Chief
Executive officer of Northridge Bank
(1990-1991).
Samuel A. Milne 46 Executive Vice President (1996 to
255 Alhambra Circle present) and Senior Vice President and
Coral Gables, FL 33134 Chief Financial Officer of the Company
and the Bank (May 1995 to present);
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 Bank
255 Alhambra Circle (1996 to present); Senior Vice President
Coral Gables, FL 33134 and Regional Sales Manager, NationsBank
of Florida, N.A. (1996); Senior Vice
President (1994 to 1996), and First Vice
President (1987-1994), of Citizens
Federal Bank, a Federal Savings Bank.
Nancy L. Ashton 42 Senior Vice President and Assistant
255 Alhambra Circle Secretary of the Company (1993 to
Coral Gables, FL 33134 present); Senior Vice President (1990 to
present), Vice President (1988 to 1990),
and Assistant Vice President (1984 to
1988) of the Bank.
Jessica Atkinson 41 Senior Vice President of the Bank (1995
255 Alhambra Circle to present); Vice President (1991 to
Coral Gables, FL 33134 1995) and Southeast Regional Director
(1989 to 1991) of American Savings of
Florida, F.S.B.
A-3
<PAGE>
POSITIONS WITH COMPANY
NAME AGE AND BUSINESS EXPERIENCE
Pedro J. Gomez 42 Senior Vice President of the Bank (1995
255 Alhambra Circle to present); Vice President, First Union
Coral Gables, FL 33134 National Bank of Florida (1991 to 1995);
Vice President of Southeast Bank, N.A.
(1978 to 1991).
Anne Lehner-Garcia 35 Senior Vice President and Secretary of
255 Alhambra Circle the Bank (1993 to present); Senior Vice
Coral Gables, FL 33134 President (1990 to present), Vice
President (1987 to 1990) and Assistant
Vice President (1986 to 1987) of the
Bank.
Teresa Pacin 42 Senior Vice President of the Bank (1995
255 Alhambra Circle to present); Vice President, NationsBank
Coral Gables, FL 33134 of Florida, N.A. (1994 to 1995); Vice
President, First Union National Bank of
Florida (1985 to 1994).
(1) Under the merger agreement with Suncoast, Messrs. Mains, Guisti, and
Cohen were appointed directors of the Company and the Bank, and Mr.
Finch was appointed as a Director and a Vice Chairman of the Company
and the Bank.
(2) Anne W. Solloway is Alfred R. Camner's mother.
---------------
All executive officers serve at the discretion of the Board of
Directors and are elected annually by the Board.
A-4
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted from
Eligible Institutions. The Letter of Transmittal and certificates for Shares
should be sent or delivered by each shareholder of the Company or his or her
broker, dealer, bank or trust company to the Depositary at its address set forth
below.
The Depositary:
AMERICAN STOCK TRANSFER AND TRUST COMPANY
TO: AMERICAN STOCK TRANSFER & TRUST COMPANY, DEPOSITARY
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Courier:
40 Wall Street (For Eligible Institutions Only) 40 Wall Street
New York, NY 10005 (718) 234-5001 New York, NY 10005
To Confirm Receipt of Facsimile:
(212) 936-5500
</TABLE>
Any questions or requests for assistance may be directed to the
Information Agent at the telephone number and address listed below. Requests for
additional copies of this Offer to Purchase, the Letter of Transmittal or other
tender offer materials may be directed to the Information Agent and such copies
will be furnished promptly at the Company's expense. Stockholders may also
contact their local broker, dealer, commercial bank or trust company for
assistance concerning the Offer.
The Information Agent:
Shareholder Communications Corporation
17 State Street, New York, NY 10004
Tel: (800) 733-8481, Ext. 481 (toll free).
Schedule 13E-4 Exhibit (a)(2)
LETTER OF TRANSMITTAL
TO ACCOMPANY SHARES OF
9% NONCUMULATIVE PERPETUAL PREFERRED STOCK
OF
BANKUNITED FINANCIAL CORPORATION
TENDERED PURSUANT TO THE OFFER TO PURCHASE
DATED JULY 16, 1997
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
AUGUST 15, 1997 UNLESS THE OFFER IS EXTENDED.
To: American Stock Transfer & Trust Company, Depositary
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Courier:
40 Wall Street (718) 234-5001 40 Wall Street
New York, NY 10005 New York, NY 10005
Confirm by Telephone:
(212) 936-5100
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
(SEE Instructions 3 and 4)
- ------------------------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Holders(s): Share(s) Tendered:
(Please fill in, if blank) (Attach additional signed schedule if necessary)
- ------------------------------------------------------------------------------------------------------------------------------
Total Number of
Certificate Shares Represented Number of
Number(s)* By Certificate(s) Shares Tendered **
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Shares
Tendered
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by shareholders who tender Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares
evidenced by any certificates delivered to the Depositary are being tendered.
See Instruction 4.
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THE LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used if certificates are to be
forwarded herewith or if delivery of Shares (as defined below) is to be made by
book-entry transfer to the Depositary's account at The Depository Trust Company
("DTC") or pursuant to the procedures set forth in Section 6 of the Offer to
Purchase (as defined below).
Stockholders who cannot deliver their Shares and all other documents
required hereby to the Depositary by the Expiration Date (as defined in the
Offer to Purchase) must tender their Shares pursuant to the guaranteed delivery
procedure set forth in Section 6 of the Offer to Purchase. See Instruction 2.
Delivery of documents to the Company or to DTC does not constitute a valid
delivery.
(BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution________________________________________
Account No.__________________________
Transaction Code No._________________
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Tendering Stockholder(s)__________________________________
Date of Execution of Notice of Guaranteed Delivery___________________
Name of Institution that Guaranteed Delivery_________________________
If delivery is by book-entry transfer: Name of Tendering Institution
__________________________________________
Account No._________________________________________ at DTC
Transaction Code No.________________________________
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
2
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to BankUnited Financial Corporation, a
Florida corporation (the "Company"), the above-described shares of its 9%
Noncumulative Perpetual Preferred Stock, par value $.01 per share, liquidation
preference $10.00 per share (the "Shares") pursuant to the Company's offer to
purchase any and all of its outstanding Shares at a price per Share of $10.25,
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated July 16, 1997 (the "Offer to Purchase"),
receipt of which is hereby acknowledged, and in this Letter of Transmittal
(which together constitute the "Offer").
Subject to, and effective upon, acceptance for payment of and payment
for the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Company all right,
title and interest in and to all the Shares that are being tendered hereby (and
any and all other Shares or other securities issued or issuable in respect
thereof after June 30, 1997 (collectively, "Distributions")) and constitutes and
appoints the Depositary the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares and all Distributions, with full power
of substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (a) deliver certificates for such Shares and all
Distributions, or transfer ownership of such Shares and all Distributions on the
account books maintained by DTC, together, in any such case, with all
accompanying evidences of transfer and authenticity, to or upon the order of the
Company, (b) present such Shares and all Distributions for registration and
transfer on the books of the Company and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares and all
Distributions, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions and that, when and to the extent the same
are accepted for payment by the Company, the Company will acquire good,
marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges, encumbrances, conditional sales agreements or other
obligations relating to the sale or transfer thereof, and the same will not be
subject to any adverse claims. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Depositary or the Company to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby and all Distributions.
All authority herein conferred or agreed to be conferred shall not be
affected by, and shall survive the death or incapacity of the undersigned, and
any obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned. Except as
stated in the Offer, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one
of the procedures described in Section 6 of the Offer to Purchase and in the
instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer, including the undersigned's representation and
warranty that (i) the undersigned has a net long position in the Shares being
tendered within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended, and (ii) the tender of such Shares complies
with Rule 14e-4. The Company's acceptance for payment of Shares tendered
pursuant to the Offer will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Offer.
The undersigned understands that tenders of Shares pursuant to any one
of the procedures described in Section 6 of the Offer to Purchase and in the
instructions hereto will constitute an agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Offer. Unless
otherwise indicated under "Special Payment Instructions," please issue the check
for the Purchase Price of any Shares purchased, and/or return any Shares not
tendered or not purchased, in the name(s) of the undersigned (and, in the case
of Shares tendered by book-entry transfer, by credit to the account at DTC.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the Purchase Price of any Shares purchased and/or any
certificates for Shares not tendered or not purchased (and accompanying
documents, as appropriate) to the
3
<PAGE>
undersigned at the address shown below the undersigned's signature(s). In the
event that both "Special Payment Instructions" and "Special Delivery
Instructions" are completed, please issue the check for the Purchase Price of
any Shares purchased and/or return any Shares not tendered or not purchased in
the name(s) of, and mail said check and/or any certificates to, the person(s) so
indicated. The undersigned recognizes that the Company has no obligation,
pursuant to the "Special Payment Instructions," to transfer any Shares from the
name of the registered holder(s) thereof if the Company does not accept for
payment any of the Shares so tendered.
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if the check for the Purchase Price of Shares purchased
and/or certificates for Shares not tendered or not purchased are to be issued in
the name of someone other than the undersigned.
Issue [ ] check and/or [ ] certificate(s) to:
Name____________________________________________
(Please Print)
Address_________________________________________
________________________________________________
(Include Zip Code)
Complete Payor Substitute Form W-9
________________________________________________
(Taxpayer Identification or Social Security No.)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if the check for the Purchase Price of Shares purchased
and/or certificates for Shares not tendered or not purchased are to be issued in
the name of the undersigned, but sent to someone other than the undersigned, or
to the undersigned at an address other than that shown below the undersigned's
signature(s).
Mail [ ] check and/or [ ] certificate(s) to:
Name____________________________________________
(Please Print)
Address_________________________________________
________________________________________________
(Include Zip Code)
4
<PAGE>
SIGN HERE
IMPORTANT: COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 HEREIN.
__________________________________
__________________________________
(SIGNATURES OF SHAREHOLDER(S)) Dated: ___________________________, 1997
(Must be signed by registered holder(s) exactly as name(s)
appear(s) on certificate(s) for the Shares or on a security position listing or
by person(s) authorized to become registered holder(s) by certificate(s) and
documents transmitted herewith. If signature is by attorney-in-fact, executor,
administrator, trustee, guardian, agent, officer of a corporation or another
person acting in a fiduciary or representative capacity, please provide the
following information. See Instruction 5.)
Name(s)_______________________________________________________________________
______________________________________________________________________________
(Please Print)
Capacity (Full Title)_________________________________________________________
Address_______________________________________________________________________
______________________________________________________________________________
City State Zip Code
Area Code and Telephone Number________________________________________________
Employer Identification or Social Security Number_____________________________
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature(s)
______________________________________________________________________________
Name__________________________________________________________________________
(Please Print)
Name of Firm__________________________________________________________________
Address_______________________________________________________________________
City State Zip Code
Dated: __________________________, 1997
5
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided
below, all signatures on this Letter of Transmittal must be guaranteed by a firm
that is a member of a registered national securities exchange or the National
Association of Securities Dealers, Inc., or by a commercial bank or trust
company having an office or correspondent in the United States which is a
participant in an approved Signature Guarantee Medallion Program (an "Eligible
Institution"). Signatures on this Letter of Transmittal need not be guaranteed
(a) if this Letter of Transmittal is signed by the registered holder(s) of the
Shares (which term, for purposes of this document, shall include any participant
in DTC whose name appears on a security position listing as the owner of Shares)
tendered herewith and such holder(s) have not completed the box entitled
"Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (b) if such Shares arc tendered
for the account of an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES. This Letter
of Transmittal is to be used either if certificates are to be forwarded herewith
or if delivery of Shares is to be made by book-entry transfer pursuant to the
procedures set forth in Section 6 of the Offer to Purchase. Certificates for all
physically delivered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at DTC of all Shares delivered electronically, as well as a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required by this Letter of Transmittal, must be
received by the Depositary at its address set forth on the front page of this
Letter of Transmittal on or prior to the Expiration Date (as defined in the
Offer to Purchase). Stockholders who cannot deliver their Shares and all other
required documents to the Depositary on or prior to the Expiration Date must
tender their Shares pursuant to the guaranteed delivery procedure set forth in
Section 6 of the Offer to Purchase. Pursuant to such procedure: (a) such tender
must be made by or through an Eligible Institution, (b) a properly completed and
duly executed Notice of Guaranteed Delivery substantially in the form provided
by the Company (with any required signature guarantees) must be received by the
Depositary on or prior to the Expiration Date and (c) the certificates for all
physically delivered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at DTC of all Shares delivered electronically, as well as a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required by this Letter of Transmittal must be
received by the Depositary within three business days after the date of
execution of such Notice of Guaranteed Delivery, all as provided in Section 6 of
the Offer to Purchase.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF
CERTIFICATES FOR SHARES ARE SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
No alternative, conditional or contingent tenders will be
accepted. By executing this Letter of Transmittal (or a facsimile thereof), the
tendering stockholder waives any right to receive any notice of the acceptance
for payment of the Shares.
3. INADEQUATE SPACE. If the space provided herein is
inadequate, the certificate numbers and/or the number of Shares should be listed
on a separate schedule attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER
BY BOOK- ENTRY TRANSFER). If fewer than all the Shares represented by any
certificate delivered to the Depositary are to be tendered, fill in the number
of Shares that are to be tendered in the box entitled "Number of Shares
Tendered." In such case, a new certificate for the remainder of the Shares
represented by the old certificate will be sent to the person(s) signing this
Letter of Transmittal, unless otherwise provided in the "Special Payment
Instructions" or "Special Delivery Instructions" boxes on this Letter of
Transmittal, as promptly as practicable following the expiration or termination
of the Offer. All Shares represented by certificates delivered to the Depositary
will be deemed to have been tendered unless otherwise indicated.
6
<PAGE>
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
holder(s) of the Shares hereby, the signature(s) must correspond with the
name(s) as written on the face of the certificates without alteration,
enlargement or any change whatsoever.
If any of the Shares hereby is held of record by two or more
persons, all such persons must sign this Letter of Transmittal,
If any of the Shares tendered hereby are registered in
different names on different certificates, it will be necessary to complete,
sign and submit as many separate Letters of Transmittal as there are different
registrations of certificates.
If this Letter of Transmittal is signed by the registered
holder(s) of the Shares tendered hereby, no endorsements of certificates or
separate stock powers are required unless payment of the Purchase Price is to be
made to, or Shares not tendered or not purchased are to be registered in the
name of, any person other than the registered holder(s). Signatures on any such
certificates or stock powers must be guaranteed by an Eligible Institution. See
Instruction 1.
If this Letter of Transmittal is signed by a person other than
the registered holder(s) of the Shares tendered hereby, certificates must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear(s) on the certificates
for such Shares. Signature(s) on any such certificates or stock powers must be
guaranteed by an Eligible Institution. See Instruction 1.
If this Letter of Transmittal or any certificate or stock
power is signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to the Company of the authority of such person so
to act must be submitted.
6. STOCK TRANSFER TAXES. The Company will pay or cause to be
paid any stock transfer taxes with respect to the sale and transfer of any
Shares to it or its order pursuant to the Offer. If, however, payment of the
Purchase Price is to be made to, or Shares not tendered or not purchased are to
be registered in the name of, any person other than the registered holder(s), or
if tendered Shares are registered in the name of any person other than the
person(s) signing this Letter of Transmittal, the amount of any stock transfer
taxes (whether imposed on the registered holder(s), such other person or
otherwise) payable on account of the transfer to such person will be deducted
from the Purchase Price unless satisfactory evidence of the payment of such
taxes, or exemption therefrom, is submitted. See Section 8 of the Offer to
Purchase.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for
the Purchase Price of any Shares purchased is to be issued in the name of,
and/or any Shares not tendered or not purchased are to be returned to, a person
other than the person(s) signing this Letter of Transmittal or if the check
and/or any certificates for Shares not tendered or not purchased are to be
mailed to someone other than the person(s) signing this Letter of Transmittal or
to an address other than that shown below the signature of the person(s) signing
this Letter of Transmittal, then the boxes captioned "Special Payment
Instructions" and/or "Special Delivery Instructions" on this Letter of
Transmittal should be completed. Stockholders tendering Shares by book-entry
transfer will have any Shares not accepted for payment returned by crediting the
account maintained by such stockholder at DTC.
8. SUBSTITUTE FORM W-9 AND FORM W-8. The tendering stockholder
is required to provide the Depositary with either a correct Taxpayer
Identification Number ("TIN") on Substitute Form W-9, which is provided under
"Important Tax Information" below, or, in the case of certain foreign
stockholders, a properly completed Form W-8. Failure to provide the information
on either Substitute Form W-9 or Form W-8 may subject the tendering stockholder
to 31% federal income tax backup withholding on the payment of the Purchase
Price. The box in Part 2 of Substitute Form W-9 may be checked if the tendering
stockholder has not been issued a TIN and has applied for a number or intends to
apply for a number in the near future. If the box in Part 2 is checked and
7
<PAGE>
the Depositary is not provided with a TIN by the time of payment, the Depositary
will withhold 31% on all payments of the Purchase Price thereafter until a TIN
is provided to the Depositary
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any
questions or requests for assistance may be directed to the Information Agent at
the telephone number and address listed below. Requests for additional copies of
the Offer to Purchase, this Letter of Transmittal or other tender offer
materials may be directed to the Information Agent and such copies will be
furnished promptly at the Company's expense. Stockholders may also contact their
local broker, dealer, commercial bank or trust company for assistance concerning
the Offer.
10. IRREGULARITIES. All questions as to the Purchase Price,
the form of documents and the validity, eligibility (including time of receipt)
and acceptance of any tender of Shares will be determined by the Company, in its
sole discretion, and its determination shall be final and binding. The Company
reserves the absolute right to reject any or all tenders of Shares that it
determines are not in proper form or the acceptance for payment of or payment
for Shares that may, in the opinion of the Company's counsel, be unlawful. The
Company also reserves the absolute right to waive any of the conditions to the
Offer or any defect or irregularity in any tender of Shares and the Company's
interpretation of the terms and conditions of the Offer (including these
instructions) shall be final and binding. Unless waived, any defects or
irregularities in connection with tenders must be cured within such time as the
Company shall determine. None of the Company, the Depositary, the Information
Agent or any other person shall be under any duty to give notice of any defect
or irregularity in tenders, nor shall any of them incur any liability for
failure to give any such notice. Tenders will not be deemed to have been made
until all defects and irregularities have been cured or waived.
8
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax law, a stockholder whose tendered
Shares are accepted for payment is required to provide the Depositary (as payer)
with either such stockholder's correct TIN on Substitute Form W-9 below or in
the case of certain foreign stockholders, a properly completed Form W-8. If such
stockholder is an individual, the TIN is his or her social security number. For
businesses and other entities, the number is the employer identification number.
If the Depositary is not provided with the correct TIN or properly completed
Form W-8, the stockholder may be subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, payments that are made to such
stockholder with respect to Shares purchased pursuant to the Offer may be
subject to backup withholding. The Form W-8 can be obtained from the Depositary.
See the enclosed Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9 for additional instructions.
If federal income tax backup withholding applies, the
Depositary is required to withhold 31% of any payments made to the stockholder.
Backup withholding is not an additional tax. Rather, the federal income tax
liability of persons subject to federal income tax backup withholding will be
reduced by the amount of the tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9 AND FORM W-8
To avoid backup withholding on payments that are made to a
stockholder with respect to Shares purchased pursuant to the Offer, the
stockholder is required to notify the Depositary of his or her correct TIN by
completing the Substitute Form W-9 attached hereto certifying that the TIN
provided on Substitute Form W-9 is correct and that (1) the stockholder has not
been notified by the Internal Revenue Service that he or she is subject to
federal income tax backup withholding as a result of failure to report all
interest or dividends or (2) the Internal Revenue Service has notified the
stockholder that he or she is no longer subject to federal income tax backup
withholding. Foreign stockholders must submit a properly completed Form W-8 in
order to avoid the applicable backup withholding; provided, however, that backup
withholding will not apply to foreign stockholders subject to 30% (or lower
treaty rate) withholding on gross payments received pursuant to the Offer.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social
security number or employer identification number of the registered owner of the
Shares. If the Shares are in more than one name or are not in the name of the
actual owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY THEREOF) TOGETHER
WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE
(AS DEFINED IN THE OFFER TO PURCHASE).
9
<PAGE>
PAYER'S NAME: AMERICAN STOCK TRANSFER & TRUST COMPANY
SUBSTITUTE
FORM W-9
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER ("TIN")
AND CERTIFICATION
Name: _________________________
Address: ______________________
_______________________________
ACCOUNT NUMBER(S) (OPTIONAL)
PART 1 - PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT
AND CERTIFY BY SIGNING AND DATING BELOW.
Social Security Number or
Employer Identification Number
______________________________
PART 2 - For Payees Exempt from Backup Withholding: See enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9," page 2.
[ ]
Awaiting TIN [ ]
PART 3 - CERTIFICATION. Under penalties of perjury, I certify that:
1. The number shown on this form is my correct TIN (or I am waiting for a TIN
to be issued to me), AND
2. I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service
("IRS") that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or the IRS has notified me that I am no
longer subject to backup withholding, and (c) all other information
provided on this form is true, correct and complete.
CERTIFICATION INSTRUCTION. - You must cross out item 2 above if you have been
notified by the IRS that you are currently subject to backup withholding because
of underreporting interest or dividends on your tax return.
Signature__________________________________________ Date______________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING
CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF THE SUBSTITUTE FORM W-9
INDICATING YOU ARE AWAITING A TIN.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all payments of the Purchase Price made to me thereafter will be withheld
until I provide a number.
SIGNATURE_________________________________________ Date:__________________, 1997
10
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED
FACSIMILE THEREOF (TOGETHER WITH CERTIFICATES FOR SHARES AND ALL OTHER REQUIRED
DOCUMENTS) OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO 4:00 P.M., NEW YORK CITY TIME, ON AUGUST 15, 1997, AT THE
APPROPRIATE ADDRESS SET FORTH BELOW
To: American Stock Transfer & Trust Company, Depositary
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Courier:
40 Wall Street (718) 234-5001 40 Wall Street
New York, NY 10005 New York, NY 10005
</TABLE>
Confirm by Telephone:
(212) 936-5100
Any questions or requests for assistance or additional copies
of this Letter of Transmittal, the Offer to Purchase, the Notice of Guaranteed
Delivery and other documents may be directed to the Information Agent at its
telephone number and location listed below. Shareholders may also contact their
broker, dealer, commercial bank or trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
SHAREHOLDER COMMUNICATIONS CORPORATION
17 State Street, New York, NY 10004
Tel: (800) 733-8481, Ex. 481 (toll free)
11
Schedule 13E-4 Exhibit (a)(3)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9
SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
Purpose of Form. -- A person who is required to file an
information return with the IRS must get your correct taxpayer identification
number (TIN) to report, for example, income paid to you, real estate
transactions, mortgage interest you paid, acquisition or abandonment of secured
property, cancellation of debt, or contributions you made to an IRA.
Use Form W-9 to give your correct TIN to the person requesting
it (the requester) and, when applicable, to:
1. Certify the TIN you are giving is correct
(or you are waiting for a number to be
issued),
2. Certify you are not subject to backup
withholding,
3. Claim exemption from backup withholding if
you are an exempt payee.
Note: If a requester gives you a form other than a W-9 to
request your TIN, you must use the requester's form if it is substantially
similar to this Form W-9.
What is Backup Withholding? -- Persons making certain payments
to you must withhold and pay to the IRS 31% of such payments under certain
conditions. This is called "backup withholding." Payments that may be subject to
backup withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee pay, and certain payments from
fishing boat operators. Real estate transactions are not subject to backup
withholding.
If you give the requester your correct TIN, make the proper
certifications, and report all your taxable interest and dividends on your tax
return, payments you receive will not be subject to backup withholding. Payments
you receive will be subject to backup withholding if:
1. You do not furnish your TIN to the
requester, or
2. The IRS tells the requester that you
furnished an incorrect TIN, or
3. The IRS tells you that you are subject to
backup withholding because you did not
report all your interest and dividends on
your tax return (for reportable interest
and dividends only), or
4. You do not certify to the requester that
you are not subject to backup withholding
under 3 above (for reportable interest and
dividend accounts opened after 1983 only),
or
5. You do not certify your TIN when required.
See the Part 3 instructions on page 3 for
details.
Certain payees and payments are exempt from backup
withholding. See the Part 2 instructions on page 3 for details.
PENALTIES
Failure to Furnish TIN. -- If you fail to furnish Your correct
TIN to a requester, you are subject to a penalty of $50 for each such failure
unless your failure is due to reasonable cause and not to willful neglect.
Civil Penalty for False Information With Respect to
Withholding. -- If you make a false statement with no reasonable basis that
results in no backup withholding, you are subject to a $500 penalty.
<PAGE>
Criminal Penalty for Falsifying Information. -- Willfully
falsifying certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
Misuse of TINS. -- If the requester discloses or uses TINs in
violation of Federal law, the requester may be subject to civil and criminal
penalties.
SPECIFIC INSTRUCTIONS
Name. -- If you are an individual, you must generally enter
the name shown on your social security card. However, if you have changed your
last name, for instance, due to marriage, without informing the Social Security
Administration of the name change, enter your first name, the last name shown on
your social security card, and your new last name.
If the account is in joint names, list first and then circle
the name of the person or entity whose number you enter in Part 1 of the form.
Sole Proprietor. -- You must enter your individual name as
shown on your social security card.
Other Entities. -- Enter the business name as shown on
required Federal tax documents. This name should match the name shown on the
charter or other legal document creating the entity.
PART 1 -- TAXPAYER IDENTIFICATION NUMBER
You must enter your TIN in the appropriate box. If you are a
resident alien and you do not have and are not eligible to get an SSN, your TIN
is your IRS individual taxpayer identification number (ITIN). Enter it in the
social security number box. If you do not have an ITIN, see How To Get a TIN
below.
If you are a sole proprietor and you have an EIN, you may
enter either your SSN or EIN. However, using your EIN may result in unnecessary
notices to the requester.
Note: See the chart on pages 4 and 5 for further clarification
of name and TIN combinations.
How to Obtain a TIN. -- If you do not have a TIN, apply for
one immediately. To apply for an SSN, get Form SS-5 from your local Social
Security Administration office. Get Form W-7 to apply for an ITIN or Form SS-4
to apply for an EIN. You can get Forms W-7 and SS-4 from the IRS by calling
1-800-TAX-FORM (1-800-829- 3676).
If you do not have a TIN, check the box in Part 2 indicating
you are awaiting a TIN, sign and date the form, and give it to the requester.
For interest and dividend payments, and certain payments made with respect to
readily tradable instruments, you will generally have 60 days to get a TIN and
give it to the requester. Other payments are subject to backup withholding.
Note: Checking the box marked "Awaiting TIN" means that you
have already applied for a TIN or that you intend to apply for one soon.
PART 2 -- FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING
Individuals (including sole proprietors) are not exempt from
backup withholding. Corporations are exempt from backup withholding for certain
payments, such as interest and dividends.
<PAGE>
If you are exempt from backup withholding, you should still
complete this form to avoid possible erroneous backup withholding. Enter your
correct TIN in Part 1, check the box indicating you are an exempt payee in
Part 2, and sign and date the form.
If you are a nonresident alien or a foreign entity not subject
to backup withholding, give the requester a completed Form W-8, Certificate of
Foreign Status.
PART 3 -- CERTIFICATION
For a joint account, only the person whose TIN is shown in
Part 1 should sign (when required).
1. Interest, Dividend, and Barter Exchange
Accounts Opened Before 1984 and Broker
Accounts Considered Active During 1983. You
give your correct TIN, but you do not have
to sign the certification.
2. Interest, Dividend, Broker and Barter
Exchange Accounts Opened After 1983 and
Broker Accounts Considered Inactive During
1983. You must sign the certification or
backup withholding will apply. If you are
subject to backup withholding and you are
merely providing your correct TIN to the
requester, you must cross out item 2 in the
certification before signing the form.
3. Real Estate Transactions. You must sign the
certification. You may cross out item 2 of
the certification.
4. Other Payments. You must give your correct
TIN, but you do not have to sign the
certification unless you have been notified
that you have previously given an incorrect
TIN. "Other payments" include payments made
in the course of the requester's trade or
business for rents, royalties, goods (other
than bills for merchandise), medical and
health care services (including payments to
corporations), payments to a nonemployee for
services (including attorney and accounting
fees), and payments to certain fishing boat
crew members.
5. Mortgage Interest Paid by You, Acquisition
or Abandonment of Secured Property,
Cancellation of Debt, or IRA Contributions.
You must give your correct TIN, but you do
not have to sign the certification.
PRIVACY ACT NOTICE
Section 6109 of the Internal Revenue Code requires you to give
your correct TIN to persons who must file information returns with the IRS to
report interest, dividends, and certain other income paid to you, mortgage
interest you paid, the acquisition or abandonment of secured property,
cancellation of debt, or contributions you made to an IRA. The IRS uses the
numbers for identification purposes and to help verify the accuracy of your tax
return. The IRS may also provide this information to the Department of Justice
for civil and criminal litigation and to cities, states, and the District of
Columbia to carry out their tax laws.
You must provide your TIN whether or not you are required to
file a tax return. Payers must generally withhold 31% of taxable interest,
dividend, and certain other payments to a payee who does not give a TIN to a
payer. Certain penalties may also apply.
<PAGE>
NAME AND NUMBER TO GIVE THE REQUESTER
<TABLE>
<CAPTION>
For this type of account: Give name and SSN of:
<S> <C>
1. Individual The individual
2. Two or more individuals joint account) The actual owner of the account or, if combined
funds, the first individual on the account(l)
3. Custodian account of a minor (Uniform Gift The minor(2)
to Minors Act)
4. a. The usual revocable savings trust The grantor-trustee
(grantor is also trustee)
b. So-called trust account that is not a The actual owner(l)
legal or valid trust under state law
5. Sole proprietorship The owner(3)
For this type of account: Give name and EIN of:
6. Sole proprietorship The owner(3)
7. A valid trust, estate, or pension trust The legal entity(4)
8. Corporate The corporation
9. Association, club, religious, charitable, The organization
educational, or other tax-exempt organization
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of Agriculture in The public entity
the name of a public entity (such as a state or local
government, school district or prison) that receives
agricultural program payments
</TABLE>
1. List first and circle the name of the person whose
number you furnish. If only one person on a joint
account has an SSN, that person's number must be
furnished.
2. Circle the minor's name and furnish the minor's SSN.
3. You must show your individual name, but you
may also enter your business or "doing
business as" name. You may use either your
SSN or EIN (if you have one).
4. List first and circle the name of the legal
trust, estate, or pension trust. (Do not
furnish the TIN of the personal
representative or trustee unless the legal
entity itself is not designated in the
account title.)
Note: If no name is circled when more than one name listed,
the number will be considered to be that of the first name listed.
Schedule 13E-4 Exhibit (a)(4)
[LOGO]
July 16, 1997
Dear Stockholder:
BankUnited Financial Corporation is offering to purchase any and all of
its outstanding shares of 9% Noncumulative Perpetual Preferred Stock (the
"Shares"), at a price of $10.25 per Share.
All of the Shares that are properly tendered (and are not withdrawn)
will, subject to the terms and conditions set forth in the enclosed Offer to
Purchase, be purchased at that purchase price, net to the selling stockholder in
cash.
The Company is making the offer because it believes that, given the
current market price of the Shares and the opportunity for the Company to
replace the Shares with indebtedness, in the form of trust subsidiary
borrowings, that has a lower after-tax cost, the purchase of the Shares pursuant
to the offer is economically attractive to the Company. The offer gives holders
of Shares the opportunity to sell their Shares at a premium over the redemption
price of the Shares (which redemption is permitted after September 30, 1998),
and without the usual transaction costs associated with a market sale.
You should be advised that the Company's purchase of Shares will reduce
the number of holders of Shares and the number of Shares that might otherwise
trade publicly, and depending on the number of Shares so purchased, could
adversely affect the liquidity and market value of the remaining Shares held by
the public or result in the Shares no longer being eligible for listing on the
NASDAQ NMS.
The offer is explained in detail in the enclosed Offer to Purchase and
Letter of Transmittal. If you want to tender your Shares, the instructions on
how to do so are also explained in detail in the enclosed materials. I encourage
you to read these materials carefully before making any decision with respect to
the offer. If you do not wish to participate in the offer, you do not need to
take any action.
Very truly yours,
/s/ Alfred R. Camner
____________________________________________________
Chairman of the Board, President and Chief Executive
Officer
Schedule 13E-4 Exhibit (a)(5)
BANKUNITED FINANCIAL CORPORATION
NOTICE OF GUARANTEED DELIVERY
OF SHARES OF 9% NONCUMULATIVE PERPETUAL PREFERRED STOCK
This form, or a form substantially equivalent to this form, must be
used to accept the Offer (as defined below) if certificates for the shares of 9%
Noncumulative Perpetual Preferred Stock of BankUnited Financial Corporation are
not immediately available, if the procedure for book-entry transfer cannot be
completed on a timely basis, or if time will not permit all other documents
required by the Letter of Transmittal to be delivered to the Depositary on or
prior to the Expiration Date (as defined in Section 5 of the Offer to Purchase
defined below). Such form may be delivered by hand or transmitted by mail, or
(for Eligible Institutions only) by facsimile transmission, to the Depositary.
See Section 6 of the Offer to Purchase. THE ELIGIBLE INSTITUTION WHICH COMPLETES
THIS FORM MUST COMMUNICATE THE GUARANTEE TO THE DEPOSITARY AND MUST DELIVER THE
LETTER OF TRANSMITTAL AND CERTIFICATES FOR SHARES TO THE DEPOSITARY WITHIN THE
TIME SHOWN HEREIN. FAILURE TO DO SO COULD RESULT IN A FINANCIAL LOSS TO SUCH
ELIGIBLE INSTITUTION
To: American Stock Transfer & Trust Company, Depositary
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Courier
40 Wall Street (718) 234-5001 40 Wall Street
New York, NY 10005 New York, NY 10005
</TABLE>
Confirm by Telephone:
(212) 936-5100
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON
A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN ELIGIBLE INSTITUTION
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to BankUnited Financial Corporation, a
Florida corporation (the "Company"), upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated July 16, 1997 (the "Offer
to Purchase"), and the related Letter of Transmittal (which together constitute
the "Offer"), receipt of which is hereby acknowledged, the number of shares of
9% Noncumulative Perpetual Preferred Stock, par value $.01 per share,
liquidation preference $10.00 per share (the "Shares"), of the Company listed
below, pursuant to the guaranteed delivery procedure set forth in Section 6 of
the Offer to Purchase.
<TABLE>
<CAPTION>
<S> <C>
Number of Shares:______________________
Certificate Nos.: (if available) Name(s) of Record Holder(s)(Please Print):
____________________________________ _________________________________________
____________________________________ _________________________________________
Address:
_________________________________________
If Shares will be tendered by
book-entry transfer:
Account No.______________________ at
The Depository Trust Company Area Code and Telephone Number:
_________________________________________
Taxpayer Identification (Social Security) No.:
_________________________________________
Dated:______________________, 1997 Signature(s)_____________________________
_________________________________________
</TABLE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national
securities exchange or the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States, guarantees (a) that the above-named person(s) has a net long position in
the Shares being tendered within the meaning of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended, (b) that such tender of Shares
complies with Rule 14e-4 and (c) delivery to the Depositary at its address set
forth above certificate(s) for the Shares tendered hereby, in proper form for
transfer, or a confirmation of the book-entry transfer of the Shares tendered
hereby into the Depositary's account at The Depository Trust Company in each
case together with a properly completed and duly executed Letter(s) of
Transmittal (or facsimile(s) thereof), with any required signature guarantee(s)
and any other required documents, all within three business days after the date
hereof
Name of Firm:___________________ Authorized Signature_________________________
Address:________________________ Name:________________________________________
________________________________ Title:_______________________________________
City, State, Zip Code
________________________________ Dated:__________________________________, 1997
Area Code and Telephone Number
DO NOT SEND STOCK CERTIFICATES WITH THIS FORM.
YOUR STOCK CERTIFICATES MUST BE SENT WITH
THE LETTER OF TRANSMITTAL.
Schedule 13E-4 Exhibit (a)(6)
BANKUNITED FINANCIAL CORPORATION OFFERS
TO REPURCHASE ITS 9% NONCUMULATIVE PERPETUAL PREFERRED STOCK
CORAL GABLES, FLA. July 16, 1997 -- Alfred R. Camner, Chairman of the Board and
Chief Executive Officer of BankUnited Financial Corporation, Coral Gables,
Florida, the holding company of BankUnited, FSB, announced today that the
Company has offered to purchase any and all of its outstanding shares of 9%
Noncumulative Preferred Stock at a price of $10.25 per share.
The stock is listed on the NASDAQ National Market System under the symbol
"BKUNO." BankUnited currently reports 1,150,000 shares outstanding.
"The Company is making the offer because management believes that given the
current market price, purchase of the shares is very economically attractive
from a tax perspective," Camner stated. "At the same time, we are offering
shareholders the opportunity to sell their shares at a premium over the future
redemption price, and without the usual transaction costs associated with a
market sale."
Camner also said, "Once this offer expires on August 15, the liquidity and
market value of the remaining shares which are not tendered may be adversely
affected. Particularly since we anticipate that the shares will no longer be
eligible for listing on the NASDAQ, the marketability of the stock could
decrease accordingly."
BankUnited Financial is a Florida corporation that currently has fourteen branch
offices in Dade, Broward and Palm Beach counties, Florida. At June 30, 1997, the
Company had assets of $1.8 billion, deposits of $1.1 billion and shareholders'
equity of $101 million.
BankUnited Financial Corporation trades on the Nasdaq National Market. Its
common stock trades under the symbol BKUNA, and its preferred stock trade under
the symbols, BKUNP, BKUNO, BKUNN and BKONZ.
CONTACT: Samuel Milne, CFO, BankUnited, (305) 569-2000
Distributed by: Boardroom Communications, (954) 321-6334
Contact: Linda Greck or Julie Silver
Schedule 13E-4 Exhibit (g)(1)
BANKUNITED FINANCIAL CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
---------
Report of Independent Certified Public Accountants ........................ 54
Consolidated Statements of Financial Condition as of September 30, 1996
and September 30, 1995 .................................................... 55
Consolidated Statements of Operations for the Years Ended
September 30, 1996, 1995 and 1994 ......................................... 56
Consolidated Statements of Stockholders' Equity for the Years Ended
September 30, 1996, 1995 and 1994 ......................................... 57
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1996, 1995 and 1994 ......................................... 59
Notes to Consolidated Financial Statements ................................ 61
Unaudited Pro Forma Condensed Combined Financial Statements .............. 88
</TABLE>
53
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
BankUnited Financial Corporation:
In our opinion, the accompanying consolidated statements of financial
condition and the related consolidated statements of operations, of
stockholders' equity, and of cash flows present fairly, in all material
respects, the financial position of BankUnited Financial Corporation and its
subsidiaries at September 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended September 30, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.
As discussed in Notes 1 and 15 to the consolidated financial statements,
the Company changed its method of accounting for income taxes as of October
1, 1993.
PRICE WATERHOUSE LLP
Miami, Florida
November 4, 1996, except as to Note 18,
which is as of November 15, 1996
54
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash ........................................................................ $ 5,483 $ 2,517
Federal Home Loan Bank overnight deposits ................................... 28,253 31,813
Federal funds sold .......................................................... 400 400
Tax certificates, (net of reserves of $614 and $569 at September 30, 1996
and 1995, respectively) ................................................... 40,088 39,544
Investments held to maturity, (market value of approximately $11 and $4,686
at September 30, 1996 and 1995, respectively) ............................. 11 4,686
Investments available for sale, at market ................................... 6,685 --
Mortgage-backed securities held to maturity, (market value of approximately
$14,274 and $50,670 at September 30, 1996 and 1995, respectively) ......... 14,698 50,934
Mortgage-backed securities available for sale, at market .................... 55,467 2,064
Loans receivable, net ....................................................... 646,385 453,134
Mortgage loans held for sale (market value of approximately $217 at
September 30, 1995) ....................................................... -- 216
Other interest earning assets ............................................... 12,225 12,325
Office properties and equipment, net ........................................ 2,608 2,119
Real estate owned, net ...................................................... 632 1,453
Accrued interest receivable ................................................. 7,023 5,573
Prepaid expenses and other assets ........................................... 4,402 1,637
---------- -----------
Total assets .............................................................. $824,360 $608,415
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits ................................................................... $506,106 $310,074
Advances from Federal Home Loan Bank ....................................... 237,000 241,000
Subordinated notes ......................................................... 775 775
Interest payable (primarily on deposits and advances from Federal Home Loan
Bank) .................................................................... 1,244 1,169
Advance payments by borrowers for taxes and insurance ...................... 4,292 3,732
Accrued expenses and other liabilities ..................................... 5,832 5,920
---------- -----------
Total liabilities ......................................................... 755,249 562,670
---------- -----------
Commitments and contingencies (Notes 6 and 16)
Stockholders' equity:
Preferred stock, Series B, C, C-II, 1993 and 9%, $0.01 par value.
Authorized shares--10,000,000; issued and outstanding shares--2,664,547
and 2,679,107 at September 30, 1996 and 1995, respectively ............... 27 27
Class A Common Stock, $.01 par value. Authorized shares--15,000,000; issued
and outstanding shares--5,454,201 and 1,835,170 at September 30, 1996 and
1995, respectively ....................................................... 54 18
Class B Common Stock, $.01 par value. Authorized shares--3,000,000; issued
and outstanding shares--251,515 and 232,324 at September 30, 1996 and
1995, respectively ....................................................... 3 2
Additional paid-in capital .................................................. 62,055 38,835
Retained earnings ........................................................... 7,279 6,838
Net unrealized (losses) gains on securities available for sale, net of tax . (307) 25
---------- -----------
Total stockholders' equity ................................................ 69,111 45,745
---------- -----------
Total liabilities and stockholders' equity ................................ $824,360 $608,415
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
55
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
----------------------------------
1996 1995 1994
---------- ---------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C>
Interest income:
Interest and fees on loans ........................................... $41,313 $30,171 $23,513
Interest on mortgage-backed securities ............................... 4,250 4,093 2,308
Interest on short-term investments ................................... 2,359 1,491 803
Interest and dividends on long-term investments and other
interest-earning assets ............................................ 4,210 3,664 3,797
---------- ---------- ----------
Total interest income ............................................... 52,132 39,419 30,421
---------- ---------- ----------
Interest expense:
Interest on deposits ................................................. 20,791 17,849 11,344
Interest on borrowings ............................................... 13,831 8,456 4,951
---------- ---------- ----------
Total interest expense .............................................. 34,622 26,305 16,295
---------- ---------- ----------
Net interest income before provision (credit) for loan losses ....... 17,510 13,114 14,126
Provision (credit) for loan losses .................................... (120) 1,221 1,187
---------- ---------- ----------
Net interest income after provision (credit) for loan losses ........ 17,630 11,893 12,939
---------- ---------- ----------
Non-interest income:
Service fees ......................................................... 597 423 358
Gain on sale of loans and mortgage-backed securities ................. 5 239 150
Gain (loss) on sale of other assets .................................. (6) 9,569 --
Other ................................................................ 53 6 46
---------- ---------- ----------
Total non-interest income ........................................... 649 10,237 554
---------- ---------- ----------
Non-interest expenses:
Employee compensation and benefits ................................... 4,275 3,997 3,372
Occupancy and equipment .............................................. 1,801 1,727 1,258
Insurance ............................................................ 3,610 1,027 844
Professional fees--legal and accounting .............................. 929 1,269 833
Data processing ...................................................... 340 356 335
Loan servicing expense ............................................... 979 765 672
Real estate owned operations ......................................... 73 559 230
Other operating expenses ............................................. 2,029 2,449 2,342
---------- ---------- ----------
Total non-interest expenses ......................................... 14,036 12,149 9,886
---------- ---------- ----------
Income before income taxes and cumulative effect of change in
accounting principle .............................................. 4,243 9,981 3,607
Income taxes .......................................................... 1,657 3,741 1,133
---------- ---------- ----------
Income before cumulative effect of change in accounting principle
and preferred stock dividends ..................................... 2,586 6,240 2,474
Cumulative effect of change in accounting principle ................... -- -- 195
---------- ---------- ----------
Net income before preferred stock dividends ......................... 2,586 6,240 2,279
Preferred stock dividends of BankUnited, FSB .......................... -- -- 198
Preferred stock dividends of the Company .............................. 2,145 2,210 1,871
---------- ---------- ----------
Net income after preferred stock dividends .......................... $ 441 $ 4,030 $ 210
========== ========== ==========
Primary earnings per share before cumulative effect of change in
accounting principle ................................................ $ 0.10 $ 1.77 $ 0.19
Expense from change in accounting principle ........................... -- -- 0.09
---------- ---------- ----------
Primary earnings per share ............................................ $ 0.10 $ 1.77 $ 0.10
========== ========== ==========
Fully diluted earnings per share before cumulative effect of change in
accounting principle ................................................ $ 0.10 $ 01.26 $ 0.19
Expense from change in accounting principle ........................... -- -- 0.09
---------- ---------- ----------
Fully diluted earnings per share ...................................... $ 0.10 $ 1.26 $ 0.10
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
56
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A
COMMON
PREFERRED STOCK STOCK
----------------------- ------------
SHARES AMOUNT SHARES
------------ --------- -------------
<S> <C> <C> <C>
Balance at September 30, 1993 .. 1,529,107 $16 1,721,325
Underwritten public offering of
the Company's preferred stock
Series 9% .................... 1,150,000 11 --
Issuance costs of the Company's
preferred stock, Series 9% ... -- -- --
Issuance of Class A and Class B
Common Stock ................. -- -- 57,179
Conversion of Class B
Common Stock to Class A Common
Stock ........................ -- -- 8,514
Payment of dividends on
Company's preferred stock .... -- -- --
Payment of dividends on
BankUnited, FSB's
noncumulative
preferred stock .............. -- -- --
Dividend payment of $.075 per
Class A Common Stock and $.03
per Class B Common Stock ..... -- -- --
Net income for the year ended
September 30, 1994 ........... -- -- --
------------ --------- ------------
Balance at September 30, 1994 .. 2,679,107 27 1,787,018
Issuance of Class A and Class B
Common Stock ................. -- -- 22,418
Conversion of Class B
Common Stock to Class A Common
Stock ........................ -- -- 742
Payment of dividends on
Company's preferred stock .... -- -- 24,992
Net unrealized gain on
investments available
for sale ..................... -- -- --
Net income for the year ended
September 30, 1995 ........... -- -- --
------------ --------- ------------
Balance at September 30, 1995 .. 2,679,107 27 1,835,170
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
CLASS B SECURITIES
COMMON STOCK AVAILABLE TOTAL
------------------------------- PAID-IN RETAINED FOR SALE, STOCKHOLDERS'
AMOUNT SHARES AMOUNT CAPITAL EARNINGS NET OF TAX EQUITY
--------- ---------- --------- ----------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1993 .. $17 215,765 $ 2 $27,503 $ 2,735 $-- $30,273
Underwritten public offering of
the Company's preferred stock
Series 9% .................... -- -- -- 11,489 -- -- 11,500
Issuance costs of the Company's
preferred stock, Series 9% ... -- -- -- (876) -- -- (876)
Issuance of Class A and Class B
Common Stock ................. 1 7,583 -- 297 -- -- 298
Conversion of Class B
Common Stock to Class A Common
Stock ........................ -- (8,514) -- -- -- -- --
Payment of dividends on
Company's preferred stock .... -- -- -- -- (1,871) -- (1,871)
Payment of dividends on
BankUnited, FSB's
noncumulative
preferred stock .............. -- -- -- -- (198) -- (198)
Dividend payment of $.075 per
Class A Common Stock and $.03
per Class B Common Stock ..... -- -- -- -- (137) -- (137)
Net income for the year ended
September 30, 1994 ........... -- -- -- -- 2,279 -- 2,279
------ ---------- -------- --------- ----------- --------- --------------
Balance at September 30, 1994 .. 18 214,834 2 38,413 2,808 -- 41,268
Issuance of Class A and Class B
Common Stock ................. -- 18,232 -- 222 -- -- 222
Conversion of Class B
Common Stock to Class A Common
Stock ........................ -- (742) -- -- -- -- --
57
<PAGE>
UNREALIZED
GAIN ON
CLASS B SECURITIES
COMMON STOCK AVAILABLE TOTAL
------------------------------- PAID-IN RETAINED FOR SALE, STOCKHOLDERS'
AMOUNT SHARES AMOUNT CAPITAL EARNINGS NET OF TAX EQUITY
--------- ---------- --------- ----------- ----------- ------------- ------------
Payment of dividends on
Company's preferred stock .... -- -- -- 200 (2,210) -- (2,010)
Net unrealized gain on
investments available
for sale ..................... -- -- -- -- -- 25 25
Net income for the year ended
September 30, 1995 ........... -- -- -- -- 6,240 -- 6,240
------ --------- ----- ------- ------- ------- ---------
Balance at September 30, 1995 .. 18 232,324 2 38,835 6,838 25 45,745
</TABLE>
(TABLE CONTINUED ON NEXT PAGE)
57
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY--(CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A
COMMON
PREFERRED STOCK STOCK
----------------------- ------------
SHARES AMOUNT SHARES
------------ --------- ------------
<S> <C> <C> <C>
Conversion of Preferred Stock
to Common Stock Class A .... (14,560) -- 21,340
Issuance of Class A and Class
B Common Stock ............. -- -- 25,210
Underwritten public offering
of the Company's Common
Class A, net ............... -- -- 3,565,000
Payment of dividends on the
Company's Preferred Stock .. -- -- 7,481
Net change in unrealized loss
on investments available
for sale ................... -- -- --
Net income for the year ended
September 30, 1996 ......... -- -- --
----------- ------- ---------
Balance at September 30, 1996 2,664,547 $27 5,454,201
=========== ======= =========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
CLASS B SECURITIES
COMMON STOCK AVAILABLE TOTAL
------------------------------- PAID-IN RETAINED FOR SALE, STOCKHOLDERS'
AMOUNT SHARES AMOUNT CAPITAL EARNINGS NET OF TAX EQUITY
--------- ---------- --------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Conversion of Preferred Stock
to Common Stock Class A .... -- -- -- -- -- -- --
Issuance of Class A and Class
B Common Stock ............. -- 19,191 1 330 -- -- 331
Underwritten public offering
of the Company's Common
Class A, net ............... 36 -- -- 22,831 -- -- 22,867
Payment of dividends on the
Company's Preferred Stock .. -- -- -- 59 (2,145) -- (2,086)
Net change in unrealized loss
on investments available
for sale ................... -- -- -- -- -- (332) (332)
Net income for the year ended
September 30, 1996 ......... -- -- -- -- 2,586 -- 2,586
------ --------- ------ --------- --------- --------- -----------
Balance at September 30, 1996 $54 251,515 $ 3 $62,055 $ 7,279 $(307) $69,111
====== ========= ====== ========= ========= ========= ===========
</TABLE>
The beginning balance at September 30, 1993 of each series of the
Company's preferred stock were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
------------ ---------
<S> <C> <C>
Series A ..... 55,000 $ 1
Series B ..... 142,378 2
Series C ..... 363,636 4
Series C-II . 222,223 2
Series 1993 . 745,870 7
----------- -------
Total ...... 1,529,107 $16
=========== =======
</TABLE>
The ending balance at September 30, 1996 of Preferred Stock were as
follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
------------ ---------
<S> <C> <C>
Series B ..... 183,818 $ 2
Series C ..... 363,636 4
Series C-II . 222,223 2
Series 1993 . 744,870 7
Series 9% .... 1,150,000 12
----------- -------
Total ...... 2,664,547 $27
=========== =======
</TABLE>
Effective September 30, 1995, the Series A Preferred Stock was exchanged
for Series B Preferred Stock.
See accompanying notes to consolidated financial statements.
58
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ................................................... $ 2,586 $ 6,240 $ 2,279
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Provision (credit) for loan losses ........................ (120) 1,221 1,187
Provision for losses on tax certificates .................... 76 484 85
Depreciation and amortization ............................... 674 526 308
Amortization of discounts and premiums on investments ...... 20 3 32
Amortization of discounts and premiums on
mortgage-backed securities ................................ 144 84 92
Amortization of discounts and premiums on loans ............ (2,332) (784) 138
Loans originated for sale ................................... (4,141) (2,376) (12,387)
Increase in accrued interest receivable ..................... (1,239) (320) (859)
Increase in interest payable on deposits and FHLB advances . 31 685 61
Increase (decrease) in accrued expenses ..................... 213 (68) 121
Increase (decrease) in accrued taxes ........................ (2,960) 3,065 (547)
Increase (decrease) in deferred taxes ....................... (469) 33 (174)
Increase (decrease) in other liabilities .................... 2,841 1,763 (800)
(Increase) decrease in prepaid expenses and other assets ... (224) 566 (962)
Gain on sales of mortgage-backed securities ................. -- (231) (221)
Proceeds from sale of loans ................................. 4,362 2,456 21,797
Recovery on loans ........................................... 1,119 1 52
(Gain) loss on sales of loans ............................... (5) (8) 71
(Gain) loss on real estate owned operations ................. (185) 94 63
(Gain) on sales of tax certificates ......................... -- (3) (1)
(Gain) loss on sale of other assets ......................... 7 -- --
Gain on sale of loan servicing rights ....................... -- (265) --
Gain on sale of branches .................................... -- (9,304) --
----------- ---------- -----------
Net cash provided by (used in) operating activities ....... (398) 3,862 10,335
----------- ---------- -----------
Cash flows from investing activities:
Net increase in loans ....................................... (185,457) (44,744) (117,689)
Proceeds from sale of real estate owned ..................... 2,661 4,607 3,522
Purchase of investment securities ........................... (3,510) (4,675) (4,180)
Purchase of mortgage-backed securities ...................... (19,228) (11,931) (57,188)
Purchases of other earning assets ........................... (650) (9,580) --
Proceeds from sale of loan servicing rights ................. -- 265 --
Proceeds from repayments of investment securities .......... 5,675 2,000 7,150
Proceeds from repayments of mortgage-backed securities ..... 10,523 6,326 7,021
Proceeds from repayments of other earning assets ........... 750 5,125 --
Proceeds from sales of investment securities ................ 2,097 -- --
Proceeds from sale of mortgage-backed securities ........... -- 9,947 6,297
Purchases of office properties and equipment ................ (1,170) (742) (1,109)
Net decrease (increase) in tax certificates ................. (620) 2,587 1,682
Purchase of Bank of Florida, net of acquired cash
equivalents ............................................... 1,521 -- --
----------- ---------- -----------
Net cash used in investing activities ...................... (187,408) (40,815) (154,494)
----------- ---------- -----------
</TABLE>
(CONTINUED ON NEXT PAGE)
59
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
--------------------------------------
1996 1995 1994
----------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase in deposits ...................................... $168,744 $ 92,555 $ 52,687
Net (decrease) in deposits from sale of branches .............. -- (130,276) --
Net (decrease) increase in Federal Home Loan Bank advances ... (4,000) 105,000 39,000
Net (decrease) increase in other borrowings ................... -- (21,400) 21,400
Premium on sale of branches ................................... -- 9,304 --
Underwritten public offering of Company's 9%
Preferred Stock ............................................. -- -- 5,873
Redemption of preferred stock--minority interests ............ -- -- (2,496)
Net proceeds from issuance of common stock .................... 23,198 222 298
Cash dividends paid on the Bank's noncumulative
preferred stock ............................................. -- -- (198)
Dividends paid on the Company's preferred stock ............... (2,086) (2,010) (1,871)
Cash dividends on common stock ................................ -- -- (137)
Increase in advances from borrowers for taxes and insurance .. 560 1,526 200
---------- ---------- --------
Net cash provided by financing activities .................... 186,416 54,921 114,756
---------- ---------- --------
Increase (decrease) in cash and cash equivalents .............. (594) 17,968 (29,403)
Cash and cash equivalents at beginning of year ................ 34,730 16,762 46,165
---------- ---------- --------
Cash and cash equivalents at end of year ...................... $ 34,136 $ 34,730 $ 16,762
========== ========== ========
Supplemental Disclosures:
Interest paid on deposits and borrowings ...................... $ 34,547 $ 25,617 $ 16,235
========== ========== ========
Income taxes paid ............................................. $ 4,626 $ 676 $ 1,888
========== ========== ========
Transfers from loans to real estate owned ..................... $ 1,154 $ 1,182 $ 3,986
========== ========== ========
Transfer of mortgage-backed securities from held for sale to
held to maturity at the lower of cost or market ............. $ -- $ -- $ 3,627
========== ========== ========
Transfer of mortgage-backed securities from held to maturity
to available for sale ....................................... $ 31,780 $ -- $ --
========== ========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
60
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of BankUnited Financial Corporation
(the "Company") and subsidiaries conform to generally accepted accounting
principles and to general practices within the savings and loan industry.
Presented below is a description of the Company and its principal accounting
policies.
(A) BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, BankUnited, FSB ("the Bank"), a federally chartered
savings bank and BU Ventures, Inc. and the Bank's wholly-owned subsidiaries,
T&D Properties of South Florida, Inc. ("T&D") and Bay Holdings Company, Inc.,
("Bay Holdings"). The Bank provides a full range of banking services to
individual and corporate customers through its branches in South Florida. The
Bank is subject to the regulations of certain federal agencies and undergoes
periodic examinations by those regulatory authorities. T&D invests in tax
certificates and holds title to, maintains, manages and supervises the
disposition of real property acquired through tax deeds. Bay Holdings holds
title to, maintains, manages and supervises the disposition of real estate
acquired through foreclosure. All significant intercompany transactions and
balances have been eliminated.
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the consolidated
financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of
the date of the consolidated statements of financial condition and operations
for the period.
Material estimates that are particularly susceptible to significant change
in the near term relate to the determination of the allowances for loan
losses and the allowance for losses on tax certificates and the valuation of
real estate acquired in connection with foreclosures or in satisfaction of
loans. In connection with the determination of the allowances for loan losses
and real estate owned, management obtains independent appraisals for all
properties.
(B) MORTGAGE-BACKED SECURITIES AND INVESTMENTS
The Company adopted Statement of Financial Accounting Standards No. 115
("SFAS No. 115"), "Accounting for Certain Investments in Debt and Equity
Securities," effective October 1, 1994. In accordance with SFAS No. 115,
mortgage-backed securities and other investments available for sale are
carried at fair value (market value), inclusive of unrealized gains and/or
losses, and net of discount accretion and premium amortization computed using
the level yield method. Net unrealized gains and losses are reflected as a
separate component of stockholders' equity, net of applicable deferred taxes.
Prior to adoption of SFAS No. 115, mortgage-backed securities and other
securities designated as held for sale were carried at the lower of cost or
market value, determined in the aggregate. Net unrealized losses were
recognized in a valuation allowance by charges to income.
Mortgage-backed securities and investments held to maturity are carried at
amortized cost. Under the guidance of SFAS No. 115, mortgage-backed
securities and investment securities that the Company has the positive intent
and ability to hold to maturity are designated as held-to-maturity
securities.
Gain or losses on sales of mortgage securities and investments are
recognized on the specific identification basis.
61
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Tax certificates are considered investments held to maturity and,
accordingly, are carried at cost less a valuation allowance. Interest is
accrued on tax certificates until payoff or until it appears uncollectible.
When deemed uncollectible, accrued but uncollected interest is reversed.
Applicable law permits application for tax deeds to be applied for two years
after the effective date of the acquisition of the tax certificate. Tax deeds
applied for are carried at the cost adjusted for accrued interest. Tax deeds
applied for carry an annual interest rate of 18%.
(C) ALLOWANCE FOR LOAN LOSSES
A provision for losses on loans is charged to operations when, in
management's opinion, the collectibility of the balances is doubtful and the
carrying value is greater than the estimated net realizable value of the
collateral. The provision is based upon a review of the nature, volume,
delinquency status and inherent risk of the loan portfolio in relation to the
allowance for loan losses.
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the allowance for loan losses.
Such agencies may require additions to the allowance based on their judgments
about information available to them at the time of their examination.
The Company's non-accrual policy provides that all loans are placed on
non-accrual status when they are 90 days past due as to either principal or
interest, unless the loan is fully secured and in the process of collection.
Loans are returned to accrual status when they become less than 90 days
delinquent.
Payments received on impaired loans are generally applied to principal and
interest based on contractual terms.
See Note 5 for information regarding the Company's adoption of Statement
of Financial Accounting Standards No. 114 "Accounting by Creditors for
Impairment of a Loan".
(D) LOANS RECEIVABLE
Loans receivable are considered long-term investments and, accordingly,
are carried at historical cost. Loans held for sale are recorded at the lower
of cost or market, determined in the aggregate. In determining cost, deferred
loan origination fees are deducted from principal balances of the related
loans.
(E) LOAN-ORIGINATION FEES, COMMITMENT FEES AND RELATED COSTS
Loan origination fees are accounted for in accordance with SFAS No. 91,
"Accounting for Non-refundable Fees and Costs Associated with Originating or
Acquiring Loans and Initial Direct Costs of Leases." Loan origination fees
and certain direct loan origination costs are deferred, and the net fee or
cost is recognized as an adjustment to interest income using the interest
method over the contractual life of the loans, adjusted for estimated
prepayments based on the Company's historical prepayment
62
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
experience. Commitment fees and costs relating to commitments, of which the
likelihood of exercise is remote, are recognized over the commitment period
on a straight-line basis. If the commitment is subsequently exercised during
the commitment period, the remaining unamortized commitment fee at the time
of exercise is recognized over the life of the loan as an adjustment of
yield.
(F) OTHER INTEREST EARNING ASSETS
Other interest earning assets include Federal Home Loan Bank of Atlanta
stock and an equity investment in the Community Reinvestment Group. The fair
value is estimated to be the carrying value which is par.
(G) OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are carried at cost less accumulated
depreciation and amortization. Depreciation is provided using the estimated
service lives of the assets for furniture, fixtures and equipment (7 to 10
years), and computer equipment and software (3 to 5 years), or with leases,
the term of the lease or the useful life (10 years), whichever is shorter.
Repair and maintenance costs are charged to operations as incurred, and
improvements are capitalized.
(H) ACCRUED INTEREST RECEIVABLE
Recognition of interest on the accrual method is generally discontinued
when interest or principal payments are greater than 90 days in arrears,
unless the loan is well secured and in the process of collection. At the time
a loan is placed on nonaccrual status, previously accrued and uncollected
interest is reversed against interest income in the current period.
(I) INCOME TAXES
The Company and its subsidiaries file consolidated income tax returns.
Deferred income taxes have been provided for elements of income and expense
which are recognized for financial reporting purposes in periods different
than such items are recognized for income tax purposes. Effective October 1,
1993, the Company implemented Statement of Financial Accounting Standards No.
109 ("SFAS No. 109"), "Accounting for Income Taxes." SFAS No. 109 requires
accounting for deferred taxes utilizing the liability method, which applies
the enacted statutory rates in effect at the statement of financial condition
date to differences between the book and tax bases of assets and liabilities.
The resulting deferred tax liabilities and assets are adjusted to reflect
changes in tax laws. Prior to implementing SFAS No. 109, the Company
accounted for income taxes in accordance with Accounting Principles Board
Opinion No. 11, which provided for deferred taxes based on differences
between taxable income and book income.
The implementation of SFAS No. 109 on October 1, 1993 resulted in an
increase of the net deferred tax liability of $195,000. This amount was
reported separately as a cumulative effect of a change in the method of
accounting for income taxes in the Consolidated Statement of Operations.
(J) EARNINGS PER SHARE
Primary earnings per common and common equivalent share is computed on a
weighted average number of common shares and common share equivalents
outstanding during the year. Common share
63
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
equivalents include the dilutive effect of stock options using the treasury
stock method. The weighted average number of common share equivalents assumed
outstanding for the years ended September 30, 1996, 1995 and 1994 were
4,559,000, 2,296,000, and 2,175,000, respectively. Earnings per common share,
assuming full dilution, assume the maximum dilutive effect of the average
number of shares from stock options and the conversion equivalents of
preferred stocks. The weighted average number of fully diluted common shares
outstanding during the years ended September 30, 1996, 1995 and 1994 were
4,559,000, 4,159,000, and 2,175,000, respectively. Stock dividends have been
included in the calculation of earnings per share for all years presented.
(K) REAL ESTATE OWNED
Property acquired through foreclosure, deeds in lieu of foreclosures, or
loans judged to be in-substance foreclosures are recorded at the lower of the
related principal balance at foreclosure or estimated fair value less
estimated costs to sell the property. Any excess of the loan balance over the
net realizable value is charged to the allowance for loan losses when the
property is classified as real estate owned. The net realizable value is
reviewed periodically and, when necessary, any decline in the value of the
real estate is charged to expense. Significant property improvements which
enhance the salability of the property are capitalized to the extent that the
carrying values do not exceed their estimated realizable values. Maintenance
and carrying costs on the property are charged to operations as incurred.
(L) STOCK OPTIONS
At the time stock options are granted to employees and directors, no
accounting entries are made, as the options are granted at the fair market
value of the Company's common stock. The proceeds from the exercise of
options are credited to common stock for the par value of the shares issued,
and the excess, net of any tax benefit is credited to paid-in capital.
(M) IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In May 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 122 ("SFAS No. 122")
"Accounting for Mortgage Servicing Rights" an amendment of FASB Statement No.
65. SFAS No. 122 requires that the Company recognize rights to service
mortgage loans for others as a separate asset, regardless of how those
servicing rights were acquired. The value of the mortgage servicing rights
should be recorded at their relative fair values. SFAS No. 122 was adopted
prospectively beginning October 1, 1995. The impact of adopting SFAS No. 122
was not material.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123 ("SFAS No. 123"), "Accounting for Stock-Based
Compensation." SFAS No. 123 establishes financial accounting and reporting
standards for stock based employee compensation plans. The statement defines
a "fair value based method" of accounting for employee stock options or
similar equity instruments and encourages all entities to adopt that method
of accounting for all of their employee stock compensation plans. However,
SFAS No. 123 also allows an entity to continue to measure compensation costs
for those plans using the "intrinsic value based method" of accounting, which
the Company currently uses. The Company currently intends to continue to use
the "intrinsic value based method" and disclose in the notes to the
consolidated financial statements, the required information using the "fair
value based method."
64
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
In June 1996, the FASB issued Statement of Financial Accounting Standards
No. 125 ("SFAS 125"), "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities." SFAS 125 provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishment of liabilities based on a financial-components approach that
focuses on control. SFAS 125 is effective for transfers and servicing of
financial assets and extinguishment of liabilities occurring after December
31, 1996 and is to be prospectively applied. Management is currently
evaluating the impact of adoption of SFAS 125 on its financial position and
results of operations.
(N) FINANCIAL STATEMENT RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the
September 30, 1996 consolidated financial statements.
(2) TAX CERTIFICATES
Tax certificates are certificates representing delinquent real estate
taxes owed to the respective counties. A substantial percentage of tax
certificates are for properties located in southeast Florida. The Company's
policy is to purchase tax certificates only for properties located in
Florida.
The net carrying value of tax certificates was $40.0 million and $39.5
million at September 30, 1996 and 1995, respectively. Included in these
amounts at September 30, 1996 and 1995 were $1.9 million and $3.9 million,
respectively of tax certificates for which the Company had made application
for the tax deeds. The Company maintains loss reserves for tax certificates
which were $614,000 and $569,000 at September 30, 1996 and 1995,
respectively.
The estimated market values of the Company's tax certificates are the same
as the carrying values, since historically the tax certificates have had
relatively short lives and their yields approximate market rates.
(3) SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
Interest income from securities purchased under agreements to resell
aggregated approximately $1.2 million and $701,000 for the years ended
September 30, 1995 and 1994, respectively.
65
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
The following sets forth information concerning the Company's securities
purchased under agreements to resell for the periods indicated:
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEAR ENDED SEPTEMBER 30,
-------------------------------------
1996 1995 1994
------- ---------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Maximum amount of outstanding agreements at
any month end during the period ............ -- $ 700 $ 6,800
Average amount outstanding during the period -- $20,262 $18,283
Weighted average interest rate for the period -- 6.10% 3.83%
Maturity ..................................... -- -- Oct. 1, 1994
</TABLE>
(4) INVESTMENTS AND MORTGAGE-BACKED SECURITIES
Pursuant to the provisions of SFAS No. 115, securities designated as
available for sale are carried at market value with the resultant after-tax
appreciation or depreciation from amortized cost reflected as an addition to,
or deduction from, stockholders' equity. In December of 1995 the Company
reclassified $31.8 million of held-to-maturity mortgage-backed securities to
available-for-sale in accordance with "A Guide to Implementation of Statement
115 on Accounting for Certain Investments in Debt and Equity Securities"
issued by the Financial Accounting Standard Board. The reclassified
securities had a market value of $916,000 in excess of their book value at
the time of transfer.
INVESTMENTS
Presented below is an analysis of the carrying values and approximate
market values of investments held to maturity.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
----------- ------------- ------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
State of Israel
bonds ............... $11 $-- $-- $11
----------- ------------ ------------- ---------
Total .............. $11 $-- $-- $11
=========== ============= ============= =========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
----------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
----------- ------------- ------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. government agency securities $4,675 $-- $-- $4,675
State of Israel bonds ............ 11 -- -- 11
----------- ------------- ------------- ---------
Total ........................... $4,686 $-- $-- $4,686
=========== ============= ============= =========
</TABLE>
All investments held to maturity at September 30, 1996 and 1995 had
maturities between one and five years.
66
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(4) INVESTMENTS AND MORTGAGE-BACKED SECURITIES--(CONTINUED)
Presented below is an analysis of the investments designated as available
for sale.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------------------------------
GROSS GROSS
HISTORICAL UNREALIZED UNREALIZED CARRYING
COST GAINS LOSSES VALUE
------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury notes .............. $2,005 $-- $ (1) $2,004
U.S. government agency securities 2,999 -- (18) 2,981
Other ............................ 1,702 -- (2) 1,700
------------- ------------- ------------- -----------
Total ........................... $6,706 $-- $(21) $6,685
============= ============= ============= ===========
</TABLE>
The Company had no investments classified as available for sale in 1995.
MORTGAGE-BACKED SECURITIES
The carrying value and historical cost of mortgage-backed securities
available for sale are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------------------------------
GROSS GROSS
HISTORICAL UNREALIZED UNREALIZED CARRYING
COST GAINS LOSSES VALUE
------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
GNMA mortgage-backed securities $24,943 $207 $(338) $24,812
FNMA mortgage-backed securities 6,055 61 (2) 6,114
FHLMC mortgage-backed
securities ..................... 22,172 33 (432) 21,773
Other .......................... 2,772 6 (10) 2,768
------------- ------------- ------------- -----------
Total ......................... $55,942 $307 $(782) $55,467
============= ============= ============= ===========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
--------------------------------------------------------
GROSS GROSS
HISTORICAL UNREALIZED UNREALIZED CARRYING
COST GAINS LOSSES VALUE
------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
FHLMC mortgage-backed securities $2,025 $39 $-- $2,064
------------- ------------- ------------- -----------
Total .......................... $2,025 $39 $-- $2,064
============= ============= ============= ===========
</TABLE>
67
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(4) INVESTMENTS AND MORTGAGE-BACKED SECURITIES--(CONTINUED)
The market value and historical cost of mortgage-backed securities held to
maturity are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
----------- ------------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
GNMA ............................... $ 83 $ 5 $ -- $ 88
FHLMC .............................. 4,144 -- (118) 4,026
Collateralized mortgage obligations 8,802 -- (289) 8,513
Mortgage pass-through certificates 1,669 -- (22) 1,647
----------- ------------- ------------- ---------
Total ............................. $14,698 $ 5 $(429) $14,274
=========== ============= ============= =========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
-----------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
----------- ------------- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
GNMA ............................... $25,644 $453 $(143) $25,954
FNMA ............................... 4,761 126 -- 4,887
FHLMC .............................. 7,406 -- (231) 7,175
Collateralized mortgage obligations 3,580 -- (84) 3,496
Mortgage pass-through certificates 9,543 -- (385) 9,158
----------- ------------- ------------- ----------
Total ............................. $50,934 $579 $(843) $50,670
=========== ============= ============= ==========
</TABLE>
The mortgage-backed securities have contractual maturities which range
from the years 1996 to 2026, however, expected maturities will differ from
contractual maturities as borrowers have the right to prepay obligations with
or without prepayment penalties.
There were no sales of mortgage-backed securities and collateralized
mortgage obligations in 1996, however, gross proceeds on sales of
mortgage-backed securities and collateralized mortgage obligations were $10.0
million and $6.3 million during the years ended September 30, 1995 and 1994,
respectively. Gross realized gains were $231,000 and $221,000 on sales of
mortgage-backed securities during the years ended September 30, 1995 and
1994, respectively. There were no realized losses during the years ended
September 30, 1995 and 1994.
At September 30, 1995 and 1994, GNMA, FHLMC and FNMA mortgage-backed
securities with carrying values of approximately $3.0 million and $5.4
million, respectively, were pledged as collateral for public funds on
deposit. There were none pledged in 1996. At September 30, 1994, FNMA and
GNMA mortgage-backed securities with a carrying value of approximately $25.0
million and a market value of approximately $23.7 million were pledged as
collateral for a $21.4 million reverse repurchase agreement. The securities
underlying the agreement were held in safekeeping by a trustee.
68
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(5) LOANS RECEIVABLE
Loans receivable consist of the following:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
------------------------
1996 1995
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Mortgage loans--conventional .................... $263,757 $224,160
Mortgage loans--conventional serviced by others 317,103 209,339
Mortgage loans--other ........................... 53,817 12,381
Commercial loans:
Secured ........................................ 5,618 3,372
Unsecured ...................................... 787 260
Line of credit loans ............................ 1,254 892
Share loans ..................................... 648 218
Installment loans ............................... 1,001 595
----------- -----------
Total .......................................... 643,985 451,217
Less allowance for loan losses .................. (2,158) (1,469)
Deferred loan fees, discounts and premiums ..... 4,558 3,386
----------- -----------
Loans receivable, net .......................... $646,385 $453,134
=========== ===========
</TABLE>
Of the total gross loans receivable of $644.0 million at September 30,
1996, approximately $262.7 million, or 40.8%, represents residential loans
secured by properties in Florida, $125.8 million, or 19.5% represents loans
in California and $255.5 million, or 39.7% represents loans in other states.
See Note 8 for loans collateralized for Federal Home Loan Bank Advances.
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------
1996 1995 1994
--------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of the period $1,469 $ 841 $ 1,184
Provision (credit) ................ (120) 1,221 1,187
Allowance from Bank of Florida ... 183 -- --
Loans charged-off ................. (493) (594) (1,582)
Recoveries ........................ 1,119 1 52
--------- --------- ----------
Balance at end of the period ..... $2,158 $1,469 $ 841
========= ========= ==========
</TABLE>
Effective October 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan" as amended by SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan Income Recognition and Disclosures" ("SFAS No.
114"). There was no impact on the consolidated statement of operations upon
implementation due to the composition of the Company's loan portfolio
(primarily residential or collateral dependent loans) and the Company's
policy for establishing the allowance for loan losses. The only impact to the
consolidated statement of financial condition and to non-performing assets
was to reclassify three loans totaling $522,000 previously classified as
insubstance foreclosures in real estate owned to non-accrual
69
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(5) LOANS RECEIVABLE--(CONTINUED)
loans. These loans were reclassified because the Company did not have
possession of the collateral which, under SFAS No. 114, is required for a
loan to be classified as real estate owned.
As of September 30, 1996 and 1995, the Company had impaired or non-accrual
loans of $4.9 million and $3.5 million, respectively, and had recorded
specific reserves on these loans of $801,000 and $802,000, respectively. For
the years ended September 30, 1996, 1995 and 1994 the average amounts of
impaired loans were $4,808,000, $2,251,000 and $2,576,000, respectively. No
income is recognized on loans during the period for which the loan is deemed
impaired.
(6) OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are summarized as follows:
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
----------------------
1996 1995
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Leasehold improvements .............. $ 1,640 $ 1,068
Furniture, fixtures and equipment .. 1,881 1,409
Computer equipment and software .... 1,124 1,016
--------- ----------
Total ............................... 4,645 3,493
Less: accumulated depreciation ..... (2,037) (1,374)
--------- ----------
Office properties and equipment, net $ 2,608 $ 2,119
========= ==========
</TABLE>
Depreciation expense was $674,000, $526,000, and $308,000 for the years
ended September 30, 1996, 1995, and 1994, respectively.
The Company has entered into non-cancelable leases with approximate
minimum future rentals as follows:
<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30, AMOUNT
- --------------------------- ---------------------
(DOLLARS IN THOUSANDS)
<S> <C>
1997 ..................... $1,002
1998 ..................... 917
1999 ..................... 837
2000 ..................... 809
2001 ..................... 754
Thereafter ............... 1,538
---------------------
Total ................... $5,857
=====================
</TABLE>
Rent expense for the years ended September 30, 1996, 1995, and 1994 was
$905,000, $959,000, and $768,000, respectively.
70
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(7) DEPOSITS
The weighted average nominal interest rate payable on all deposit accounts
at September 30, 1996 and 1995 was 5.11% and 5.14%, respectively.
Types of deposits and related range of interest rates were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------------------------------------------------------
1996 1995
------------------------------------- -------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest-bearing deposits .......... --% - --% $ 7,301 --% - --% $ 2,804
Passbook and statement savings deposits 2.00% - 4.97% 73,780 2.00% - 4.97% 50,373
Super NOW deposits ..................... .00% - 3.00% 17,265 0.00% - 3.00% 15,353
Money market deposits .................. .00% - 4.65% 16,556 0.00% - 3.10% 7,733
Certificates of deposit ................ 3.92% - 6.16% 391,204 2.71% - 6.65% 233,811
--------- ----------
Total ................................. $506,106 $310,074
========= ==========
</TABLE>
Deposit accounts with balances of $100,000 or more totaled approximately
$69.4 million and $33.4 million at September 30, 1996 and 1995, respectively.
Interest expense on deposits for the years ended September 30, 1996, 1995
and 1994 was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Super NOW and money market deposits ... $ 775 $ 875 $ 1,102
Passbook and statement savings deposits 2,627 2,420 1,716
Certificates of deposit ................ 17,389 14,554 8,526
--------- ---------- ---------
Total ................................. $20,791 $17,849 $11,344
========= ========== =========
</TABLE>
Early withdrawal penalties on deposits are recognized as a reduction of
interest on deposits. For the years ended September 30, 1996, 1995 and 1994,
early withdrawal penalties totaled $42,000, $110,000, and $27,000,
respectively.
The amounts of scheduled maturities of certificate accounts at September
30, 1996 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30, AMOUNT
- --------------------------- -------------------------
(DOLLARS IN THOUSANDS)
<S> <C>
1997 ..................... $316,562
1998 ..................... 58,053
1999 ..................... 7,532
Thereafter ............... 9,057
---------------------
Total: .................. $391,204
=====================
</TABLE>
71
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(8) ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank of Atlanta (FHLB) incur interest
and are repayable as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
REPAYABLE DURING YEAR ENDING SEPTEMBER 30, INTEREST RATE 1996 1995
- ------------------------------------------- ---------------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
1996 ..................................... 4.27% -6.80% $ -- $179,000
1997 ..................................... 4.56% -6.07% 192,000 57,000
1998 ..................................... 6.13% 5,000 5,000
2001(1) .................................. 5.33% -5.61% 40,000 --
---------- --------
$237,000 $241,000
========== ========
</TABLE>
- ------------------
(1) Advances for $15 million are callable by the FHLB in 1997 and $25 million
are callable in 1998.
The terms of a security agreement with the FHLB of Atlanta include a
blanket floating lien that requires the maintenance of qualifying first
mortgage loans as pledged collateral with unpaid principal amounts at least
equal to 100% of the FHLB advances, when discounted at 65% of the unpaid
principal balance. The FHLB of Atlanta stock, which is recorded at cost, is
also pledged as collateral for these advances.
(9) SECURITIES SOLD UNDER AN AGREEMENT TO REPURCHASE
Interest expense on securities sold under an agreement to repurchase
aggregated $367,000 and $183,000 for the years ended September 30, 1995 and
1994, respectively.
The following sets forth information concerning repurchase agreements for
the periods indicated:
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEARS ENDED SEPTEMBER 30,
------------------------------------
1996 1995 1994
-------- ---------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Maximum amount of outstanding agreements at
any
month-end during the period ................. $ -- $33,600 $21,400
Average amount outstanding during the period . $-- $ 6,572 $ 3,856
Weighted average interest rate for the period $-- 5.59% 4.49%
Maturity ...................................... $-- -- Dec. 19, 1994
</TABLE>
At September 30, 1996 and 1995, the Company had no pledged securities
under repurchase agreements. At September 30, 1994, the Company had pledged
$25.0 million of FNMA and GNMA mortgage-backed securities as collateral for
the above repurchase agreements.
(10) SUBORDINATED NOTES
At September 30, 1996 and 1995, the Bank had outstanding $775,000, of
subordinated notes which, pursuant to the regulations of the Office of Thrift
Supervision (the "OTS"), are included in the Bank's risk-based capital. The
subordinated notes bear interest at 9% and mature from August 31, 2003 to
June 10, 2009.
72
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(11) REGULATORY CAPITAL
The Bank is required by federal regulations to maintain minimum levels of
capital as follows:
<TABLE>
<CAPTION>
REGULATORY CAPITAL
REQUIREMENT ACTUAL CAPITAL EXCESS CAPITAL
---------------------- ---------------------- ----------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Tangible capital ... $12,196 $ 9,101 $56,967 $43,010 $44,771 $33,909
1.5% 1.5% 7.0% 7.1% 5.5% 5.6%
Core Capital ........ $24,392 $18,201 $56,967 $43,010 $32,575 $24,809
3.0% 3.0% 7.0% 7.1% 4.0% 4.1%
Risked-based capital $33,927 $23,008 $60,164 $45,426 $26,237 $22,418
8.0% 8.0% 14.2% 15.8% 6.2% 7.8%
</TABLE>
Under the OTS regulations adopted to implement the "prompt corrective
action" provisions of the Federal Deposit Insurance Corporation Improvement
Act of 1991 (the "FDICIA"), a "well capitalized" institution must have a
risk-based capital ratio of 10%, a core capital ratio of 5% and a Tier 1
risk-based capital ratio of 6%. (The "Tier 1 risk-based capital" ratio is the
ratio of core capital to risk-weighted assets.) The Bank is a well
capitalized institution under the definitions as adopted. Regulatory capital
and net income amounts as of and for the years ended September 30, 1996, 1995
and 1994 did not differ from regulatory capital and net income amounts
reported to the OTS.
On August 31, 1993, the OTS adopted an amendment to its regulatory capital
regulations to take into account a savings institution's exposure to the risk
of loss from changing interest rates. Under the regulation as amended, a
savings institution with an above normal level of interest rate risk exposure
will be required to deduct an interest rate risk ("IRR") component from its
total capital when determining its compliance with the risk-based capital
requirements. An "above normal" level of interest rate risk exposure is a
projected decline of 2% in the net present value of an institution's assets
and liabilities resulting from a 2% swing in interest rates. The IRR
component will equal one-half of the difference between the institution's
measured interest rate exposure and the "normal" level of exposure. Savings
institutions will be required to file data with the OTS that the OTS will use
to calculate, on a quarterly basis (but with a two-quarter lag),
institutions' measured interest rate risk and IRR components. Implementation
of the IRR requirements have been delayed pending the testing of the OTS
appeals process. If the IRR component had been required as of September 30,
1996, the Bank would have been required to deduct an IRR component from its
total capital when determining its compliance with its risk based capital
requirements, however the Bank would continue to be well capitalized.
Payment of dividends by the Bank is limited by federal regulations, which
provide for certain levels of permissible dividend payments depending on the
Bank's regulatory capital and other relevant factors.
(12) MINORITY INTERESTS--PREFERRED STOCK OF BANKUNITED, FSB
As part of a plan to simplify the Company's capital structure, the Company
commenced an offer in November 1993 to exchange 2.5 shares of its 9%
Noncumulative Perpetual Preferred Stock for each share of the Bank's
Noncumulative Preferred Stock, Series D, E, F and G ("BankUnited Preferred
Stock"). Upon the closing of the exchange offer, all shares of BankUnited
Preferred Stock that remained outstanding were redeemed at $25.00 per share
plus declared but unpaid dividends. The exchange closed on December 28, 1993.
73
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(12) MINORITY INTERESTS--PREFERRED STOCK OF BANKUNITED, FSB--(CONTINUED)
(13) STOCKHOLDERS' EQUITY
The Company has the following capital structure:
PREFERRED STOCK--issuable in series with rights and preferences to be
designated by the Board of Directors. As of September 30, 1996, 7,259,141
shares were authorized but not designated to a particular series.
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES A:
Effective September 30, 1995, pursuant to an Offer to Exchange Preferred
Stock, the holders of the Non-cumulative Convertible Preferred Stock, Series
A, agreed to exchange each of the 55,000 shares of the Series A Preferred
stock for one share of the Company's Non-cumulative Convertible Preferred
Stock, Series B. Because the dividend rate, redemption price, and the
liquidation preference for the Series B Preferred Stock are lower than those
for the Series A Preferred Stock, the Company agreed not to redeem the shares
of Series B Preferred Stock issued pursuant to the exchange offer for a
period of three years and for three years thereafter, such Series B Preferred
Stock shall only be redeemed at a 50% premium or $11.0625 per share.
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES B:
Authorized shares--200,000 shares.
Issued and outstanding shares--183,818 shares as of September 30, 1996 and
197,378 shares as of September 30, 1995.
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $0.7375 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $7.375 per share.
Redemption--except for the shares converted from Series A discussed above,
at the option of the Company at $7.59625 per share at September 30, 1994,
declining thereafter at $.07375 per share during each year through January
31, 1998, and thereafter the redemption price remains at $7.375 per share.
Voting rights--two-and-one-half votes per share. If the Company fails to
pay dividends for six quarters, whether or not consecutive, the holders shall
have the right to elect two additional directors until dividends have been
paid for four consecutive quarters.
Convertibility--convertible into 1.50 shares (adjusted for all stock
dividends) of Class B Common Stock for each share of Noncumulative
Convertible Preferred Stock, Series B, surrendered for conversion, subject to
adjustment on the occurrence of certain events.
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES C:
Authorized shares--363,636 shares.
Issued and outstanding shares--363,636 shares.
74
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(13) STOCKHOLDERS' EQUITY--(CONTINUED)
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $0.550 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $5.50 per share.
Redemption--at the option of the Company, at $5.50 per share.
Voting rights--nonvoting.
Convertibility--convertible into 1.45 shares (adjusted for all stock
dividends) of Class A Common Stock for each share of Noncumulative Preferred
Stock, Series C, surrendered for conversion, subject to adjustment on the
occurrence of certain events.
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES C-II:
Authorized shares--222,223 shares.
Issued and outstanding shares--222,223 shares.
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $0.80 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $9.00 per share.
Redemption--at the option of the Company, at $9.00 per share.
Voting rights--nonvoting.
Convertibility--convertible into 1.32 shares (adjusted for all stock
dividends) of Class A Common Stock for each share of Noncumulative Preferred
Stock, Series C-II, surrendered for conversion, subject to adjustment on the
occurrence of certain events.
8% NONCUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES 1993:
Authorized shares--805,000 shares.
Issued and outstanding--744,870 shares as of September 30, 1996 and
745,870 shares as of September 30, 1995.
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $.80 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $10.00 per share.
75
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(13) STOCKHOLDERS' EQUITY--(CONTINUED)
Redemption--not redeemable prior to July 1, 1998, unless certain criteria
are met, in which case the redemption price would be $10.00 per share;
subsequent to June 30, 1998, redemption is at the option of the Company at a
redemption price of $10.40 per share, declining thereafter at $0.08 per share
during each year through July 1, 2003, and thereafter the redemption price
remains $10.00 per share.
Voting rights--nonvoting. However, if the Company fails to pay dividends
for six quarters, whether or not consecutive, the holders shall have the
right to elect two additional directors until dividends have been paid for
four consecutive quarters.
Convertibility--convertible into one share of Class A Common Stock for
each share of non-cumulative Convertible Preferred Stock, Series 1993,
surrendered for conversion, subject to adjustment on the occurrence of
certain events.
9% NONCUMULATIVE PERPETUAL PREFERRED STOCK:
Authorized shares--1,150,000 shares.
Issued and outstanding--1,150,000 shares.
Dividends--noncumulative cash dividends payable quarterly at the fixed
annual rate of $0.90 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $10.00 per share.
Redemption--not redeemable prior to October 1, 1998; subsequent to
September 30, 1998, redemption is at the option of the Company at a
redemption price of $10.00 per share.
Voting rights--nonvoting. However, if the Company fails to pay dividends
for six quarters, whether or not consecutive, the holders shall have the
right to elect two additional directors until dividends have been paid for
four consecutive quarters.
Convertibility--none.
CLASS A COMMON STOCK:
Issuable in series with rights and preferences to be designated by the
Board of Directors:
As of September 30, 1996, 5,000,000 shares of Class A Common Stock were
authorized but not designated to a series.
SERIES I CLASS A COMMON STOCK:
Authorized shares--10,000,000.
Issued and outstanding--5,454,201 shares as of September 30, 1996 and
1,835,170 shares as of September 30, 1995.
76
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(13) STOCKHOLDERS' EQUITY--(CONTINUED)
Dividends--as declared by the Board in the case of a dividend on the Class
A Common Stock alone or not less than 110% of the amount per share of any
dividend declared on the Class B Common Stock.
Voting rights--one tenth of one vote per share.
CLASS B COMMON STOCK:
Authorized shares--3,000,000.
Issued and outstanding--251,515 shares as of September 30, 1996 and
232,324 shares as of September 30, 1995.
Dividends--as declared by the Board of Directors.
Voting rights--one vote per share.
Convertibility--convertible into one share of Class A Common Stock for
each share of Class B Common Stock surrendered for conversion, subject to
adjustment on the occurrence of certain events.
(14) STOCK BONUS PLAN, OPTION AGREEMENTS AND OTHER BENEFIT PLANS
Pursuant to stockholder approval in 1992, the Company maintains the 1992
Stock Bonus Plan. In January 1994, stockholders approved an amendment of this
plan to increase the amount of stock issuable under the plan to 125,000
shares and to allow directors of the Company who are not employees to
participate in the plan and receive stock in partial payment of their
director's fees. As of September 30, 1996, 22,252 shares of Class A Common
Stock and 54,779 shares of Class B Common Stock have been issued under the
1992 Stock Bonus Plan. As of September 30, 1996, there were 47,969 shares
available for grant under the 1992 Stock Bonus Plan.
Pursuant to stockholder approval in 1987, the Company maintains a
non-statutory stock option plan for certain officers, directors and employees
to receive options to purchase shares of Class A and Class B Common Stock.
The stockholders approved an increase in the total number of shares for which
options may be granted under the plan to 750,000 in January 1994. The Board
of Directors approved an increase in the total number of shares for which
options may be granted under the plan to 825,000 (a non-material increase) in
1996. The options are for a period of 10 years and are exercisable at the
fair market value of the stock at the grant date. As of September 30, 1996,
758,718 options have been granted under this plan and 66,412 options have
been exercised.
Pursuant to stockholder approval in January 1994, the Company also
maintains an incentive stock option plan under which options for up to
250,000 shares of Class A and Class B Common Stock may be granted. As of
September 30, 1996, 92,500 options have been granted under this plan.
During October 1984, BankUnited's Board of Directors approved several
non-qualified stock option agreements (the "Agreements") under which options
to purchase shares of Class B Common Stock were granted at the fair market
price of the Class B Common Stock on the date of the grant. The Agreements,
which originally expired on October 23, 1994, have been extended pursuant to
Stockholders' approval to October 23, 1999. As of September 30, 1996, the
Agreements are exercisable for a total of 155,367 shares at the exercise
price of $4.64 per share; none have been exercised.
77
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(14) STOCK BONUS PLAN, OPTION AGREEMENTS AND OTHER BENEFIT PLANS--(CONTINUED)
The following table presents additional data concerning the Company's
outstanding stock options:
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OPTION PRICE OPTION
OF SHARES PER SHARE PRICE
------------ --------------- -------------
<S> <C> <C> <C>
Options outstanding, September 30, 1993 549,174 $3.11 -$10.98 $2,669,272
Options granted ........................ 113,088 7.00 -8.10 846,671
Options exercised ...................... (45,675) 3.21 -3.78 (154,371)
---------- -------------- ------------
Options outstanding, September 30, 1994 616,587 3.11 -10.98 3,361,572
Options granted ........................ 208,671 4.95 -7.95 1,139,902
Options exercised ...................... (6,695) 3.21 -5.73 (23,958)
---------- -------------- ------------
Options outstanding, September 30, 1995 818,563 3.11 -10.98 4,477,516
Options granted ........................ 121,610 7.24 -8.26 926,638
---------- -------------- ------------
Options outstanding, September 30, 1996 940,173 $3.11 -$10.98 $5,404,154
========== ============
</TABLE>
In 1992, the Company adopted a 401(k) savings plan pursuant to which
eligible employees are permitted to contribute up to 15% of their annual
salary to the savings plan. The Company will provide matching contributions
at a rate of 33% of such contributions, up to a maximum of 2% of an
employee's salary. The amount of such matching by the Company for the years
ended September 30, 1996, 1995 and 1994 totaled approximately $7,000,
$30,000, and $29,000, respectively. Employees are eligible to participate in
the plan after one year of service and become vested in the Company's
contribution after two years participation in the plan at the rate of 25% per
year up to 100%.
In September 1995, the Company's Board of Directors adopted a Profit
Sharing Plan. Under the terms of the plan, the Company, at the discretion of
the Board of Directors, may contribute Class A Common Stock to the plan. The
contributions are allocated to the account of eigible employees based upon
their salaries. Employees become eligible for the plan after one year of
service and become vested at the rate of 20% per year up to 100%. The Board
of Directors authorized a contribution of $100,000 and $75,000 in 1996 and
1995, respectively.
(15) INCOME TAXES
As discussed in Note 1, the Company adopted SFAS No. 109 as of October 1,
1993 resulting in a cumulative adjustment of $195,000 to 1994 earnings and
stockholders' equity.
78
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(15) INCOME TAXES--(CONTINUED)
The Company's effective tax rate differs from the statutory federal income
tax rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------------------------
1996 1995 1994
------------------- ------------------- ---------------------
AMOUNT % AMOUNT % AMOUNT %
--------- -------- --------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Tax at federal income tax rate ... $1,443 34.0% $3,394 34.0% $1,262 35.0%
Increase (decrease) resulting
from:
State tax ....................... 154 3.6 362 3.6 (46) (1.3)
Other, net ...................... 60 1.5 (15) (0.1) (83) (2.3)
-------- -------- --------- -------- --------- --------
Total .......................... $1,657 39.1% $3,741 37.5% $1,133 31.4%
======== ======== ========= ======== ========= ========
</TABLE>
The components of the provision for income taxes for the years ended
September 30, 1996, 1995 and 1994 as computed in accordance with SFAS No.
109, are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
-------------------------------
1996 1995 1994
--------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current--federal . $1,324 $3,590 $1,354
Current--state ... 227 620 (53)
Deferred--federal 90 (400) (151)
Deferred--state .. 16 (69) (17)
--------- --------- ---------
Total ............ $1,657 $3,741 $1,133
========= ========= =========
</TABLE>
The tax effects of significant temporary differences included in the net
deferred tax asset as of September 30, 1996 and 1995 were:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996 1995
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Deferred tax asset:
Non-accrual interest ......... $185 $178
Loan loss and other reserves 431 587
Fixed assets ................. 5 --
Deferrals and amortization .. 19 --
------ -------
Gross deferred tax asset ... 640 765
------ -------
Deferred tax liability:
FHLB Atlanta stock dividends 167 167
Fixed assets ................. -- 5
Deferrals and amortization .. -- 14
Other ........................ 13 13
------ -------
Gross deferred tax liability 180 199
------ -------
Net deferred tax asset ..... $460 $566
====== =======
</TABLE>
79
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(15) INCOME TAXES--(CONTINUED)
The components of deferred income tax provision (benefit) relate to the
following:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------
1996 1995 1994
-------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Differences in book/tax depreciation $(10) $ (21) $ (10)
Delinquent interest .................. (7) (80) --
FHLB Stock dividends ................. -- (144) 23
Loan fees ............................ -- -- 169
Loan loss and other reserves ......... 156 (164) (363)
Deferrals and amortization ........... (33) (60) 13
------ --------- --------
Total deferred taxes ................ $106 $(469) $(168)
====== ========= ========
</TABLE>
(16) COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company enters into instruments that
are not recorded in the consolidated financial statements, but are required
to meet the financing needs of its customers and to reduce its own exposure
to fluctuations in interest rates. These financial instruments include
commitments to extend credit and standby letters of credit. Those instruments
involve, to varying degrees, elements of credit and interest rate risk in
excess of the amount recognized in the consolidated statements of financial
condition. The contract or notional amounts of those instruments reflect the
extent of involvement the Company has in particular classes of financial
instruments.
The Company's exposure to credit loss in the event of nonperformance by
the other party on the financial instrument for commitments to extend credit
and standby letters of credit by the other party is represented by the
contractual amount of those instruments. The Company uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Total commitments to extend credit
at September 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------------------------------------------------------
1996 1995
---------------------------------- -----------------------------------
FIXED VARIABLE FIXED VARIABLE
RATE RATE TOTAL RATE RATE TOTAL
--------- ----------- ---------- --------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commitments to fund loans ... $2,575 $ 7,057 $ 9,632 $3,801 $ 7,140 $10,941
Loans in process ............. 607 1,033 1,640 1,795 6,707 8,502
Letters of credit ............ 518 -- 518 45 -- 45
Commitments to purchase loans -- 12,260 12,260 -- -- --
-------- --------- --------- -------- --------- --------
Total ....................... $3,700 $20,350 $24,050 $5,641 $13,847 $19,488
======== ========= ========= ======== ========= ========
</TABLE>
The Company evaluates each customer's credit worthiness on a case-by-case
basis. The amount of collateral obtained, if deemed necessary by the Company,
upon extension of credit is based on
80
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(16) COMMITMENTS AND CONTINGENCIESS--(CONTINUED)
management's credit evaluation of the customer. Collateral varies but may
include accounts receivable, property, plant and equipment, residential real
estate, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. The Company requires collateral to support those commitments.
The Company is a party to certain other claims and litigation arising in
the ordinary course of business. In the opinion of management, the resolution
of such claims and litigation will not materially affect the Company's
consolidated financial position or results of operations.
(17) RELATED PARTY TRANSACTIONS
The Company employs the services of a law firm, of which the Company's
Chairman of the Board and President is senior managing director and of which
another director of the Company is managing director; and the services of an
insurance company, of which a member of the Board of Directors is a vice
president. For the years ended September 30, 1996, 1995 and 1994, total fees
(a portion of which were capitalized) paid to this law firm totaled
approximately $986,000, $1.1 million, and $803,000, respectively, and amounts
paid to this insurance company totaled approximately $147,000, $129,000, and
$151,000, respectively.
(18) SUBSEQUENT EVENT
On November 15, 1996, the Company acquired Suncoast Savings & Loan
Association, FSA ("Suncoast"). The Company issued one share of its Class A
Common Stock for each share of Suncoast common stock of which 2,199,930 were
outstanding and one share of newly created 8% non-cumulative convertible
preferred stock, Series 1996 for each share of Suncoast preferred stock of
which 920,000 shares were outstanding. The newly created 8% non-cumulative
convertible preferred stock, Series 1996 has substantially the same terms and
conditions as the Suncoast preferred stock. The cost of the acquisition,
which will be accounted for as a purchase was $27.8 million, representing the
fair value of the consideration given to the Suncoast common and preferred
stockholders as well as the option and warrant holders. In addition, the
Company incurred approximately $925,000 of costs directly related to the
merger. The balance sheet and results of operations of Suncoast will be
included with those of BankUnited as of and for periods subsequent to
November 15, 1996.
81
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(18) SUBSEQUENT EVENTS--(CONTINUED)
The unaudited proforma combined condensed statements of financial
condition and operations as of and for the year ended September 30, 1996
after giving effect to certain proforma adjustments are as follows:
Proforma combined condensed Statement of Financial Condition as of
September 30, 1996 (in thousands):
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Loans receivable ................... $ 980,444
Other interest earning assets ..... 195,528
Goodwill and other intangibles .... 9,657
Other assets ....................... 53,282
-------------
$1,238,911
=============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Deposits ........................... $ 804,567
Other liabilities .................. 337,420
Stockholders' equity ............... 96,924
-------------
$1,238,911
=============
</TABLE>
Proforma combined condensed Statement of Operations for the year ended
September 30, 1996 (in thousands except per share data):
Interest income ........................... $81,752
Interest expense .......................... 52,423
Provision for loan losses ................. 45
Non-interest income ....................... 9,193
Non-interest expense ...................... 31,885
Income tax expense ........................ 2,654
----------
Net income before preferred stock
dividends .............................. 3,938
Preferred stock dividends ................. 3,249
----------
Net income after preferred stock
dividends .............................. $ 689
==========
Earnings per share
Primary .................................. $ .10
Fully-diluted ............................ $ .10
The proforma combined condensed statement of operations assumes the
acquisition occurred as of October 1, 1995.
A summary of the terms of the newly created 8% non-cumulative convertible
preferred stock, Series 1996 are as follows:
Authorized shares --1,000,000.
Issued and outstanding shares--920,000 shares as of November 15, 1996.
82
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(18) SUBSEQUENT EVENT--(CONTINUED)
Dividends--non-cumulative cash dividends payable quarterly at the fixed
annual rate of $1.20 per share.
Preference on liquidation--voluntary liquidation at the applicable
redemption price per share and involuntary liquidation at $15.00 per share.
Redemption--not redeemable prior to July, 1998, unless certain criteria
are met, in which case the redemption price would be $15.00 per share,
subsequent to June 30, 1998, redemption is at the option of the Company at a
redemption price of $16.20 per share, declining thereafter at $0.20 per share
during each year through July 1, 2003, and thereafter the redemption price
remains at $15.00 per share.
Voting rights--nonvoting except under certain circumstances.
Convertibility--convertible into 1.67 shares of Class A Common Stock for
each share of 8% non-cumulative convertible preferred stock, Series 1996,
surrendered for conversion, subject to adjustment on the occurrence of
certain events.
As part of the purchase of Suncoast, the Company issued warrants to
Suncoast's warrant holders to purchase 80,000 shares of the newly created 8%
non-cumulative convertible preferred stock, Series 1996, and assumed
Suncoast's outstanding stock options. The warrants are exercisable at a price
of $18.00 for each share of the 8% non-cumulative convertible preferred
stock, Series 1996 or each warrant could be exercised to purchase 1.67
shares, subject to adjustment, of Class A Common Stock at a per share price
of $10.80, also subject to adjustment under certain conditions. The warrants
expire on July 8, 1998. The Company assumed 119,000 of Suncoast's options
with option prices ranging from $3.00 to $7.38 per share of Class A Common
Stock with an aggregate exercise price of $610,000.
83
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(19) BANKUNITED FINANCIAL CORPORATION
The following summarizes the major categories of the Company's (parent
company only) financial statements:
CONDENSED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
----------------------
1996 1995
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Assets:
Cash ............................................................... $ 88 $ 48
FHLB overnight deposits ............................................ 7,889 37
Tax certificates ................................................... 312 457
Investments, net (market value of approximately $10 and $10 at
September 30, 1996 and 1995, respectively) ....................... 10 10
Investments available for sale ..................................... 155 --
Mortgage-backed securities, held to maturity (market value of
approximately $1,727 at September 30, 1995) ...................... -- 1,676
Mortgage-backed securities, available for sale ..................... 1,309 --
Accrued interest receivable ........................................ 132 252
Investment in the Bank ............................................. 59,443 43,062
Other assets ....................................................... 248 236
--------- ----------
Total ............................................................. $69,586 $45,778
========= ==========
Liabilities ......................................................... $ 475 $ 33
--------- ----------
Stockholders' equity:
Preferred stock ................................................... 27 27
Common stock ...................................................... 57 20
Paid-in capital ................................................... 62,055 38,835
Retained earnings ................................................. 7,279 6,838
Net unrealized gains on securities available for sale, net of
taxes ........................................................... (307) 25
--------- ----------
Total stockholders' equity ...................................... 69,111 45,745
--------- ----------
Total liabilities and stockholders' equity ...................... $69,586 $45,778
========= ==========
</TABLE>
84
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(19) BANKUNITED FINANCIAL CORPORATION--(CONTINUED)
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER
30,
------------------------------
1996 1995 1994
--------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest income .............. $ 803 $ 307 $ 296
Interest expense ............. 17 36 24
Equity income of the Bank ... 2,406 6,587 2,443
Operating expenses ........... 491 818 529
-------- --------- --------
Income before income taxes .. 2,701 6,040 2,186
Income tax expense
(benefit) .................... 115 (200) (93)
-------- --------- --------
Net income ................. $2,586 $6,240 $2,279
======== ========= ========
</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
------------------------------------
1996 1995 1994
----------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flow from operating activities:
Net income ........................................... $ 2,586 $ 6,240 $ 2,279
Less: Undistributed income of the Bank ............... (406) (6,587) (901)
Other ................................................ 242 156 (1,682)
---------- ---------- -----------
Net cash provided by (used in) in operating
activities ............................................ 2,422 (191) (304)
---------- ---------- -----------
Cash from investing activities:
Equity contributions to the Bank ..................... (16,000) -- (10,447)
Purchase of investment securities .................... (155) -- (10)
Purchase of mortgage-backed securities ............... -- -- (1,960)
Proceeds from repayments of mortgage-backed
securities ......................................... 368 181 103
Net decrease (increase) in tax certificates ......... 145 732 (379)
---------- ---------- -----------
Net cash provided by (used in) investing activities . (15,642) 913 (12,693)
---------- ---------- -----------
Cash flow from financing activities:
Public offering of Company's 9% Preferred Stock ..... -- -- 10,625
Public offering of Company's Class A Common Stock ... 22,867 -- --
Net proceeds from issuance of common stock .......... 331 222 298
Dividends paid on preferred stock .................... (2,086) (2,010) (1,871)
Dividends paid on common stock ....................... -- -- (137)
---------- ---------- -----------
Net cash provided by (used in) financing activities . 21,112 (1,788) 8,915
Decrease (increase) in cash and cash equivalents .... 7,892 (1,066) (4,082)
Cash and cash equivalents at beginning of year ...... 85 1,151 5,233
---------- ---------- -----------
Cash and cash equivalents at end of year ............. $ 7,977 $ 85 $ 1,151
========== ========== ===========
</TABLE>
85
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(20) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The information set forth below provides disclosure of the estimated fair
value of the Company's financial instruments presented in accordance with the
requirements of SFAS No. 107 (and as amended by SFAS No. 119) issued by the
Financial Accounting Standards Board. Management has made estimates of fair
value discount rates that it believes to be reasonable. However, because
there is no market for many of these financial instruments, management has no
basis to determine whether the fair value presented would be indicative of
the value negotiated in an actual sale. The fair value estimates do not
consider the tax effect that would be associated with the disposition of the
assets or liabilities at their fair value estimates.
Fair values are estimated for loan portfolios with similar financial
characteristics. Loans are segregated by category, such as commercial,
commercial real estate, residential mortgage, second mortgages, and other
installment. Each loan category is further segmented into fixed and
adjustable rate interest terms and by performing and non-performing status.
The fair value of loans, except residential mortgage and adjustable rate
loans, is calculated by discounting scheduled cash flows through the
estimated maturity using estimated market discount rates that reflect the
credit and interest rate risk inherent in the loan. The estimate of average
maturity is based on historical experience with prepayments for each loan
classification, modified, as required, by an estimate of the effect of
current economic and lending conditions.
For residential mortgage loans, fair value is estimated by discounting
contractual cash flows adjusted for national historical prepayment estimates
using discount rates based on secondary market sources adjusted to reflect
differences in servicing and credit costs.
For adjustable-rate loans, the fair value is estimated at book value after
adjusting for credit risk inherent in the loan. The Company's interest rate
risk is considered insignificant since the majority of the Company's
adjustable rate loans are based on the average cost of funds for the Eleventh
District of the Federal Home Loan Bank System ("COFI") or one-year Constant
Maturity Treasuries ("CMT") rates and adjust monthly or at intervals
generally over a period not exceeding one year.
The fair value of the tax certificates is estimated at book value as these
investments historically have had relatively short lives and their yields
approximate market rates. The fair value of mortgage-backed securities and
investment securities is estimated based on bid prices available from
securities dealers.
Under SFAS No. 107, the fair value of deposits with no stated maturity,
such as non-interest-bearing demand deposits, savings and NOW accounts, and
money market accounts, is equal to the amount payable on demand. The fair
value of certificates of deposit is based on the discounted value of
contractual cash flows. The discount rate is estimated using the Company's
current rates for deposits of similar maturities adjusted for insurance
costs.
The fair value of subordinated notes is estimated by discounting
contractual cash flows using estimated market rates. The contract amounts and
related fees of the Company's commitments to extend credit approximate the
fair value of these commitments.
86
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1996
(20) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENT--(CONTINUED)
The following table presents information for the Company's financial
instruments at September 30, 1996 and 1995:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
-------------------------------
CARRYING VALUE FAIR VALUE
---------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Financial assets:
Cash and overnight investments ...... $ 34,136 $ 34,136
Tax certificates and other
investments ............................ 46,784 46,784
Mortgage-backed securities ........... 70,165 69,741
Loans receivable ..................... 646,385 646,507
Other interest-earning assets ....... 12,225 12,225
Financial liabilities:
Deposits ............................. $506,106 $506,025
Advances from the FHLB ............... 237,000 237,218
Subordinated notes ................... 775 859
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1995
------------------------------
CARRYING VALUE FAIR VALUE
--------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Financial assets:
Cash and overnight investments ....... $ 34,730 $ 34,730
Tax certificates and other investments 44,230 44,230
Mortgage-backed securities ............ 52,998 52,734
Loans receivable ...................... 453,350 458,681
Other interest-earning assets ........ 12,325 12,325
Financial liabilities:
Deposits .............................. $310,074 $311,424
Advances from the FHLB ................ 241,000 240,675
Subordinated notes .................... 775 899
</TABLE>
87
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Statement of
Financial Condition as of September 30, 1996, and the Unaudited Pro Forma
Condensed Combined Statement of Operations for the year ended September 30,
1996 give effect to the Merger accounted for as a purchase of Suncoast by the
Company. Under the purchase method of accounting, all assets and liabilities
of Suncoast at September 30, 1996 have been adjusted to their current
estimated fair values and combined with the asset and liability book values
of the Company. The Unaudited Pro Forma Condensed Combined Statement of
Financial Condition assumes the Merger was effective on September 30, 1996.
The Unaudited Pro Forma Condensed Combined Statement of Operations give
effect to the Merger as if the Merger had occurred at the beginning of the
period presented.
The pro forma information is based on the historical consolidated
financial statements of the Company and of Suncoast, as adjusted, as set
forth in the accompanying Notes to the Unaudited Pro Forma Condensed Combined
Financial Statements. Suncoast's fiscal year-end is June 30, and thus
Suncoast's financial statements have been adjusted to reflect an unaudited
fiscal year ending September 30, 1996. The Unaudited Pro Forma Condensed
Combined Financial Statements do not give effect to any anticipated cost
savings or potential revenue enhancements in connection with the Merger.
The information shown below should be read in conjunction with the
consolidated historical financial statements of the Company and of Suncoast,
including the respective notes thereto, which are included or incorporated by
reference in this Annual Report on Form 10-K. The pro forma data is presented
for comparative purposes only and is not necessarily indicative of the
combined financial position or results of operations in the future or of the
combined financial position or results of operations which would have been
realized had the Merger been consummated during the periods or as of the
dates for which the pro forma data is presented.
Pro forma per share amounts for the Company giving effect to the Merger
are based on the exchange ratio of one share of the Company Class A Common
Stock for each share of the Suncoast common stock and the issuance of New
Company Preferred Stock having substantially similar terms as the Suncoast
preferred stock.
88
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
COMBINED
BANKUNITED SUNCOAST ADJUSTMENTS PRO FORMA
------------- ----------- -------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks .......................... $ 5,483 $ 4,588 $ -- $ 10,071
FHLB overnight deposits and federal funds sold .. 28,653 1,430 -- 30,083
Repurchase Agreements ............................ -- 15,000 -- 15,000
Tax certificates, net ............................ 40,088 -- -- 40,088
Investments, available for sale, at market ...... 6,696 -- -- 6,696
Mortgage-backed securities, held to maturity .... 14,698 -- -- 14,698
Mortgage-backed securities, available for sale,
at market ...................................... 55,467 18,196 -- 73,663
Loans receivable, net ............................ 646,385 330,781 (930)(1) 976,236
Mortgage loans held for sale ..................... -- 4,208 -- 4,208
Other interest earning assets .................... 12,225 3,075 -- 15,300
Loan servicing assets ............................ -- 11,454 (1,822)(1) 9,632
Office properties and equipment, net ............. 2,608 6,787 700 (1) 10,095
Real estate owned, net ........................... 632 245 -- 877
Accrued interest receivable ...................... 7,023 3,065 -- 10,088
Cost over fair value of net assets acquired and
other intangible assets ........................ 2,457 -- 7,200 (1) 9,657
Prepaid expenses and other assets ................ 1,945 10,574 -- 12,519
----------- ---------- ------------ ----------
Total assets ................................... $824,360 $409,403 $ 5,148 $1,238,911
=========== ========== ============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits ........................................ $506,106 $298,461 $ -- $ 804,567
Advances from FHLB and other borrowings ........ 237,000 73,310 -- 310,310
Subordinated notes .............................. 775 -- -- 775
Advance payments by borrowers for taxes
and insurance ................................. 4,292 4,063 -- 8,355
Accrued expenses and other liabilities ......... 7,076 8,899 3,200 (3) 17,980
(1,195)(6)
----------- ----------- -------------- ----------
Total liabilities .............................. $755,249 $384,733 $ 2,005 $1,141,987
----------- ----------- -------------- ----------
Stockholders' Equity:
Preferred stock ................................. $ 27 $ 4,600 $ (4,591)(2)$ 36
Class A Common Stock ............................ 54 2,418 (2,396)(2) 76
Class B Common Stock ............................ 3 -- -- 3
Additional paid-in capital ...................... 62,055 17,657 10,125 (2) 89,837
Retained earnings ............................... 7,279 301 (301)(2) 7,279
Net unrealized gains on securities
available for sale ............................ (307) (306) 306 (307)
----------- ----------- ----------- ----------
Total stockholders' equity ..................... 69,111 24,670 3,143 96,924
----------- ----------- ----------- ----------
Total liabilities and stockholders' equity .... $824,360 $409,403 $ 5,148 $1,238,911
=========== =========== ============ ==========
Book value per common share ...................... $ 7.85 $ 7.44
Tangible book value per common share ............. $ 7.42 $ 6.22
Fully converted tangible book value per share ... $ 7.13 $ 6.64
</TABLE>
89
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
COMBINED
BANKUNITED SUNCOAST ADJUSTMENTS(1) PRO FORMA
------------- ----------- --------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
OPERATIONS DATA:
Interest income .............................................. $ 52,132 $28,501 $ 1,119 (1) $ 81,752
Interest expense ............................................. 34,622 17,781 20 (1) 52,423
------------ ---------- -------------- ---------
Net interest income before provision for loan losses ........ 17,510 10,720 1,099 29,329
Provision for loan losses .................................... (120) 165 -- 45
------------ ---------- -------------- ---------
Net interest income after provision for loan losses ......... 17,630 10,555 1,099 29,284
------------ ---------- -------------- ---------
Non-interest income:
Loan servicing income, net .................................. -- 4,109 364 (1) 4,473
Gain on sale of assets ...................................... -- 2,870 -- 2,870
Other ....................................................... 649 1,201 -- 1,850
------------ ---------- -------------- ---------
Total non-interest income .................................. 649 8,180 364 9,193
------------ ---------- -------------- ---------
Non-interest expense:
Employee compensation and benefits .......................... 4,275 7,328 (300)(4) 11,303
Occupancy and equipment ..................................... 1,801 2,874 35 (1) 4,710
SAIF special assessment ..................................... 2,614 2,317 -- 4,931
Other operating expenses .................................... 5,346 5,215 280 (1) 10,941
100 (4)
------------ ---------- -------------- ---------
Total non-interest expenses ................................ 14,036 17,734 115 31,885
------------ ---------- -------------- ---------
Income before income taxes and preferred stock dividends .... 4,243 1,001 1,348 6,592
Provision for income taxes ................................... 1,657 371 626 (6) 2,654
------------ ---------- -------------- ---------
Net income before preferred stock dividends .................. 2,586 630 722 3,938
Preferred stock dividends .................................... 2,145 1,104 -- 3,249
------------ ---------- -------------- ---------
Net income after preferred stock dividends ................... $ 441 $ (474) $ 722 $ 689
============ ========== ============== =========
PER COMMON SHARE DATA:
Primary earnings per common share and common
equivalent share ........................................... $ .10 $ .10
Earnings per common share assuming full dilution ............ .10 .10
Weighted average number of common shares and common
equivalent shares assumed outstanding during the period:
Primary .................................................. 4,558,521 6,695,848
Fully diluted .............................................. 4,558,521 6,695,848
OPERATIONS DATA (EXCLUDING SAIF SPECIAL ASSESSMENT):
SAIF special assessment, net of tax ........................ $ 1,621 $1,437 -- $ 3,058
============ ========== ============== =========
Net income before preferred stock dividends and excluding
SAIF special assessment .................................... $ 4,207 $ 2,067 $ 722 $ 6,996
============ ========== ============== =========
Net income after preferred stock dividends and excluding SAIF
special assessment ......................................... $ 2,062 $ 963 $ 722 $ 3,747
============ ========== ============== =========
PER COMMON SHARE DATA (EXCLUDING SAIF SPECIAL ASSESSMENT): ..
Primary earnings per common share and common
equivalent share ......................................... $ .45 $ .56
Earnings per common share assuming full dilution ............ .45 .50
Weighted average number of common shares and common
equivalent shares assumed outstanding during the period:
Primary .................................................. 4,558,521 6,695,848
Fully diluted .............................................. 4,558,521 7,498,847
</TABLE>
90
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(1) Adjustments to fair value for Suncoast's assets and liabilities are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
AMORTIZATION ANNUAL IMPACT ON
ADJUSTMENTS PERIOD AND METHOD STATEMENT OF OPERATIONS
-------------- ------------------------ ------------------------
<S> <C> <C> <C>
Commercial loans .................. $(2,000) 18 months/straight line $1,333
Residential loans ................. 1,070 5 years/straight line (214)
-------------- ------------------------
Total loans ..................... (930) 1,119
Deposits premium .................. 200 10 years/straight line (20)
Loan servicing assets ............. (1,822) 5 years/straight line 364
Land and buildings ................ 700 20 years/straight line (35)
Cost over fair value of net assets
acquired (goodwill) ............. 7,000 25 years/straight line (280)
</TABLE>
(2) The purchase price of $27,590,000 represents the issuance of 2,199,930
shares of BankUnited Class A Common stock at a price of $7.00 per share
(the closing bid price on the day of the Merger Agreement) and the
issuance of 920,000 shares of New BankUnited Preferred stock having an
estimated value of $13.25 per share. Also, $223,000, representing the
fair value of Suncoast's outstanding stock options and warrants which
will be exchanged for BankUnited stock options and warrants having
similar terms and conditions, was credited to paid-in capital.
The following summarizes the entries to Stockholders' Equity (dollars in
thousands):
<TABLE>
<CAPTION>
ENTRY TO
ENTRIES TO ENTRIES TO RECORD STOCK
ELIMINATE SUNCOAST'S RECORD STOCK OPTIONS AND
EQUITY TO BE ISSUED WARRANTS TOTAL
--------------------- --------------- --------------- -----------
<S> <C> <C> <C> <C>
Preferred Stock ................... $ (4,600) $ 9 $ -- $(4,591)
Class A Common Stock .............. (2,418) 22 -- (2,396)
Class B Common Stock .............. -- -- -- --
Additional Paid-in Capital ........ (17,657) 27,559 223 10,125
Retained Earnings ................. (301) -- -- (301)
Net unrealized gains on securities
available for sale .............. 306 -- -- 306
--------------- ----------- --------- ---------
Total Stockholders' Equity ..... $(24,670) $27,590 $223 $ 3,143
=============== =========== ========= =========
</TABLE>
(3) The total purchase price includes $3.2 million of accrued liabilities as
follows:
/bullet/ $1.35 million in severance costs.
/bullet/ $1.85 million for direct acquisition costs such as legal,
accounting, investment banking and other professional fees and
expenses.
(4) The pro forma statements of operations include an annual reduction in
salary expense of $300,000 and an annual increase in professional fees of
$100,000 representing the change in status and compensation of Mr. Finch
in accordance with the terms of his change-of-control agreement.
(5) The pro forma adjustments do not include the effect of any potential
expense reductions, revenue enhancements or restructuring charges.
(6) The statutory income tax rate is assumed to be 38%. Amortization of the
cost over fair value of net assets acquired (goodwill) is not deductible
for tax purposes.
91
Schedule 13E-4 Exhibit (g))(2)
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, September 30,
1997 1996
- -------------------------------------------------------------------------------------------------------------------
(Unaudited)
(Dollars in thousands, except per share amounts)
<S> <C> <C>
ASSETS
Cash and due from banks $ 20,598 $ 5,483
Federal funds sold and Federal Home Loan Bank overnight deposits 5,980 28,653
Tax certificates (net of reserves of $658 at March 31,1997
and $614 at September 30, 1996) 26,799 40,088
Investments held to maturity (market value of approximately $5,011 at
March 31, 1997 and $11 at September 30, 1996) 5,011 11
Investments, available for sale, at market 6,881 6,685
Mortgage-backed securities, held to maturity, (market
value of approximately $12,904 at March 31, 1997
and $14,274 at September 30, 1996) 13,155 14,698
Mortgage-backed securities available for sale, at market 100,219 55,467
Loans receivable, net 1,205,807 646,385
Other interest earning assets 11,246 12,225
Office properties and equipment, net 9,554 2,608
Accrued interest receivable 12,200 7,023
Mortgage servicing rights 4,397 --
Goodwill 12,727 2,457
Prepaid expenses and other assets 18,587 2,577
--------- ---------
Total assets $1,453,161 $824,360
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $1,011,475 $506,106
Advances from Federal Home Loan Bank 251,484 237,000
Subordinated notes 775 775
Accrued expenses and other liabilities 20,524 11,368
--------- ---------
Total liabilities 1,284,258 755,249
--------- ---------
Company Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust Holding Solely Junior Subordinated Deferrable Interest
Debentures of the Company 70,000 --
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, Series B,C,C-II, 1993, 1996 and 9%, $.01 par value. Authorized
shares - 10,000,000; issued and outstanding shares - 2,998,688 at March 31,
1997 and 2,664,547 at September 30, 1996 30 27
Class A Common Stock, $.01 par value. Authorized shares
30,000,000; issued and outstanding shares - 8,571,246
at March 31, 1997 and 5,454,201 at September 30, 1996 85 54
Class B Common Stock, $.01 par value. Authorized shares
3,000,000; issued and outstanding shares - 275,938 at
March 31, 1997 and 251,515 at September 30, 1996 3 3
Additional paid-in capital 90,608 62,055
Retained earnings 9,272 7,279
Net unrealized losses on securities available for sale, net of tax (1,095) (307)
---------- ----------
Total stockholders' equity 98,903 69,111
--------- ---------
Total liabilities and stockholders' equity $1,453,161 $824,360
=========== =========
</TABLE>
SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
<TABLE>
<CAPTION>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED MARCH 31,
1997 1996
(In thousands, except earnings per share)
<S> <C> <C>
Interest income:
Interest and fees on loans $ 21,062 $ 9,432
Interest on mortgage-backed securities 1,551 898
Interest on short-term investments 667 846
Interest and dividends on long-term investments
and other earning assets 925 826
-------- --------
Total interest income 24,205 12,002
-------- --------
Interest expense:
Interest on deposits 11,887 4,809
Interest on borrowings 2,967 3,435
-------- --------
Total interest expense 14,854 8,244
-------- --------
Net interest income before provision for loan losses 9,351 3,758
Provision for loan losses 165 --
-------- --------
Net interest income after provision for loan losses 9,186 3,758
-------- --------
Non-interest income:
Service fees, net 874 130
Other 127 (1)
-------- --------
Total non-interest income 1,001 129
-------- --------
Non-interest expenses:
Employee compensation and benefits 2,521 1,056
Occupancy and equipment 729 423
Insurance 110 243
Professional fees - legal and accounting 320 231
Preferred dividends of Trust Subsidiary 1,327 --
Other operating expenses 2,094 811
-------- --------
Total non-interest expenses 7,101 2,764
-------- --------
Income before income taxes and preferred stock dividends 3,086 1,123
Income taxes 1,243 430
-------- --------
Net income before preferred stock dividends 1,843 693
Preferred stock dividends of the Company 777 536
-------- --------
Net income after preferred stock dividends $ 1,066 $ 157
======== ========
Earnings Per Share
Primary $ 0.12 $ 0.04
======== ========
Fully-diluted $ 0.12 $ 0.04
======== ========
Weighted average number of common share equivalents assumed outstanding during
the period:
Primary 8,869 3,676
======== ========
Fully diluted 8,901 3,717
======== ========
</TABLE>
SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
<TABLE>
<CAPTION>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
SIX MONTHS ENDED MARCH 31,
1997 1996
(In thousands, except earnings per share)
<S> <C> <C>
Interest income:
Interest and fees on loans $ 37,678 $ 18,198
Interest on mortgage-backed securities 2,860 1,787
Interest on short-term investments 1,134 1,449
Interest and dividends on long-term investments
and other earning assets 2,024 1,892
-------- --------
Total interest income 43,696 23,326
-------- --------
Interest expense:
Interest on deposits 20,769 9,032
Interest on borrowings 6,472 6,998
-------- --------
Total interest expense 27,241 16,030
-------- --------
Net interest income before provision (credit) for loan losses 16,455 7,296
Provision (credit) for loan losses 415 (300)
-------- --------
Net interest income after provision (credit) for loan losses 16,040 7,596
-------- --------
Non-interest income:
Service fees, net 1,449 281
Other 152 6
-------- --------
Total non-interest income 1,601 287
-------- --------
Non-interest expenses:
Employee compensation and benefits 4,436 2,023
Occupancy and equipment 1,615 786
Insurance 471 469
Professional fees - legal and accounting 542 477
Preferred dividends of Trust Subsidiary 1,355 --
Other operating expenses 3,515 1,537
-------- --------
Total non-interest expenses 11,934 5,292
-------- --------
Income before income taxes and preferred stock dividends 5,707 2,591
Income taxes 2,265 987
-------- --------
Net income before preferred stock dividends 3,442 1,604
Preferred stock dividends of the Company 1,449 1,072
-------- --------
Net income after preferred stock dividends $ 1,993 $ 532
======== ========
Earnings Per Share
Primary $ 0.25 $ 0.18
======== ========
Fully-diluted $ 0.25 $ 0.18
======== ========
Weighted average number of common share equivalents
assumed outstanding during the period:
Primary 7,952 3,022
======== ========
Fully diluted 8,674 3,035
======== ========
</TABLE>
SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
<TABLE>
<CAPTION>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED MARCH 31,
1997 1996
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,442 $1,604
Adjustments to reconcile net income to net cash used in
operating activities:
Provision (credit) for loan losses 415 (300)
Provision for losses on tax certificates 45 76
Depreciation and amortization 546 265
Amortization of discounts and premiums on investments 14 4
Amortization of discounts and premiums on mortgage-backed securities 95 64
Amortization of discounts and premiums on loans (46) (1,909)
Loans originated for sale (5,193) (3,213)
Increase in accrued interest receivable (2,224) (1,096)
(Decrease) increase in interest payable on deposits and FHLB advances (1,345) 142
Increase in accrued expenses 1,662 612
Increase (decrease) in accrued taxes 231 (3,350)
Decrease in deferred taxes (632) (469)
Decrease in other liabilities (23,033) (553)
Decrease (increase) in prepaid expenses and other assets 2,588 (975)
Proceeds from sale of loans 5,971 3,432
Recovery on loans 19 941
Loss (gain) on sales of loans 11 (3)
Loss (gain) on sales of real estate owned 373 (57)
Loss on sale of other assets -- 7
------- --------
Net cash used in operating activities (17,061) (4,778)
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans (220,838) (98,847)
Proceeds from sale of real estate owned 1,252 1,114
Purchase of other earning assets (4,947) (400)
Purchase of investment securities (5,844) (1,511)
Purchase of mortgage-backed securities (33,768) (12,087)
Proceeds from repayments of mortgage-backed securities 7,861 4,046
Proceeds from repayments of other earning assets 9,176 750
Proceeds from repayments of investment securities 651 4,675
Purchases of premises and equipment (725) (340)
Net decrease in tax certificates 13,245 13,983
Purchase of Bank of Florida, net of acquired cash equivalents -- 1,521
Purchase of Suncoast's cash equivalents 32,803 --
------- ----------
Net cash used in investing activities (201,134) (87,096)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 181,632 86,206
Net decrease in other borrowings (37,016) (2,000)
Net proceeds from issuance of preferred stock 3 --
Net proceeds from issuance of common stock 771 23,187
Net proceeds from issuance of trust preferred securities 67,426 --
Dividends paid on the Company's preferred stock (1,449) (1,072)
Decrease in advances from borrowers for taxes and insurance (730) (2,060)
-------- ----------
Net cash provided by financing activities 210,637 104,261
-------- -------
Increase in cash and cash equivalents (7,558) 12,387
Cash and cash equivalents at beginning of period 34,136 34,730
------- --------
Cash and cash equivalents at end of period $26,578 $ 47,117
======= ========
SUPPLEMENTAL DISCLOSURES:
Transfer from loans to real estate owned $ 1,633 $ 610
======= ========
Transfers from real estate owned to loans $ -- $ 184
======= ========
Transfers of mortgage-backed securities from held-to-maturity to
available for sale $ -- $ 31,780
======= ========
</TABLE>
SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
<PAGE>
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying unaudited consolidated financial statements have been prepared
in conformity with Rule 10-01 of Regulation S-X of the Securities and Exchange
Commission and therefore do not include information or footnotes necessary for a
complete presentation of financial position, results of operations and cash
flows in conformity with generally accepted accounting principles ("GAAP").
However, all adjustments (consisting of normal recurring accruals) which, in the
opinion of management, are necessary for a fair presentation of the financial
statements of BankUnited Financial Corporation and its subsidiaries (the
"Company") have been included. Operating results for the three and six month
periods ended March 31, 1997 are not necessarily indicative of the results which
may be expected for the year ending September 30, 1997. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K/A for the fiscal year ended September
30, 1996.
2. REGULATORY CAPITAL
The Office of Thrift Supervision ("OTS") requires that BankUnited, FSB (the
"Bank") meet minimum regulatory tangible, core and risk-based capital
requirements. Currently, the Bank exceeds all regulatory capital requirements.
The Bank's required, actual and excess regulatory capital levels as of March 31,
1997 were as follows:
<TABLE>
<CAPTION>
REQUIRED ACTUAL EXCESS
----------------- ---------------------- ---------------------
% OF % OF % OF
AMOUNT ASSETS AMOUNT ASSETS AMOUNT ASSETS
------ ------ ------ ------ ------ ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Tangible Capital $ 21,377 1.5% $ 119,618 8.4% $ 98,241 6.9%
Core Capital $ 42,755 3.0% $ 119,618 8.4% $ 76,863 5.4%
Risk-Based Capital $ 74,130 8.0% $ 123,601 13.3% $ 49,471 5.3%
</TABLE>
3. COMPANY OBLIGATED MANDATORILY REDEEMABLE 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 (the "Trust Preferred Securities") 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 Trust Preferred
Securities.
On March 24, 1997, BankUnited Capital issued an additional $20 million of Trust
Preferred Securities and $800,000 of common securities, 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.
7
<PAGE>
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 Trust
Preferred Securities subject to certain limitations.
4. ACQUISITION
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 newly created 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 holders
of Suncoast's options and warrants holders. In addition, the Company incurred
approximately $1.3 million of costs directly related to the merger. At the date
of the acquisition, the fair value of the assets acquired (including goodwill of
approximately $10.4 million to be amortized over a period of 25 years) and
liabilities assumed totaled approximately $436 million and $408 million,
respectively.
The unaudited proforma combined condensed statements of operations for the three
and six month periods ended March 31, 1997 and 1996 assumes the acquisition had
occurred as of the beginning of the period presented and, after giving effect to
certain proforma adjustments, are as follows:
Proforma combined condensed Statement of Operations (in thousands except per
share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, SIX MONTHS ENDED MARCH 31,
(UNAUDITED) (UNAUDITED)
1997 1996 1997 1996
--------- ---------- --------- ------
<S> <C> <C> <C> <C>
Interest Income $ 24,205 $ 19,185 $47,564 $37,413
Interest expense 14,854 12,648 29,549 24,619
Provision (credit) for loan losses 165 69 521 (109)
Non-interest income 1,001 1,833 2,255 3,425
Non-interest expense 7,101 6,770 13,746 13,322
Income tax provision 1,243 616 2,398 1,204
Net income before preferred
stock dividends 1,843 915 3,605 1,802
Preferred stock dividends 777 812 1,587 1,624
--------- -------- -------- ------
Net income after preferred
stock dividends $ 1,066 $ 103 $ 2,018 $ 178
======== ======== ======== ======
Earnings per share
Primary $ 0.12 $ 0.02 $ 0.22 $ 0.03
Fully-diluted $ 0.12 $ 0.02 $ 0.22 $ 0.03
</TABLE>
8
<PAGE>
5. NEW ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 125 "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities" and in
December 1996, the FASB issued a related Statement of Financial Accounting
Standards No. 127, "Deferral of the Effective Date of Certain Provisions of FASB
No. 125" (collectively "Statement No. 125"). Statement No. 125 provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishment of liabilities based on a financial components
approach that focuses on control. Portions of Statement No. 125 were effective
for transactions entered into after December 31, 1996 with the remaining
portions effective for transactions entered into after December 31, 1997. The
impact of adopting Statement No. 125 has not been nor is it currently expected
to be material to the Company's financial position or the results of operations.
In February 1997, FASB issued Statement of Financial Accounting Standards No.
128 "Earnings per Share" ("Statement No. 128"). Statement No. 128 specifies the
computation, presentation and disclosure 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.
6. CONTINGENCIES
The Company is a party to certain 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis presents a review of the consolidated
operating results and financial condition of the Company for the three and six
month periods ended March 31, 1997 and 1996. This discussion and analysis should
be read in conjunction with the Consolidated Financial Statements and Notes
thereto contained in the Company's Annual Report on Form 10-K/A for the year
ended September 30, 1996.
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM SEPTEMBER 30, 1996 TO MARCH 31,
1997.
ASSETS
Total assets increased by $626 million, or 76.0%, from $824 million at September
30, 1996, to $1.45 billion at March 31, 1997, due primarily to the acquisition
of Suncoast Savings and Loan Association, FSA
9
Schedule 13E-4 Exhibit (g)(3)
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Suncoast Savings and Loan Association, FSA
In our opinion, the accompanying consolidated statements of financial condition
and the related consolidated statements of income, of stockholders' equity and
of cash flows present fairly, in all material respects, the financial position
of Suncoast Savings and Loan Association, FSA and its subsidiaries ("Suncoast")
at June 30, 1996 and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended June 30, 1996, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of Suncoast's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
As discussed in Note A to the consolidated financial statements, Suncoast
changed its method of accounting for mortgage servicing rights during 1996.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Miami, Florida
August 12, 1996
56
<PAGE>
<TABLE>
<CAPTION>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA AND SUBSIDIARIES
Consolidated Statements of Financial Condition June 30,
------------------------------
1996 1995
---------- -----------
<S> <C>
ASSETS (In thousands)
Cash and cash equivalents:
Cash and amounts due from depository institutions $ 1,260 $ 157
Interest-earning deposits 622 43,613
---------- -----------
Total cash and cash equivalents 1,882 43,770
---------- -----------
Repurchase agreements 75,000
Federal Home Loan Bank Stock 3,875 3,758
Loans receivable:
In portfolio 320,828 129,786
Held for sale, sold under commitments 6,730 2,978
---------- -----------
Total loans receivable, net 327,558 132,764
---------- -----------
Mortgage-backed securities available for sale 18,391 136,856
Loan servicing assets:
Purchased mortgage servicing rights 9,525 8,572
Originated mortgage servicing rights 834
Premiums on the sale of loans 1,359 1,533
---------- -----------
Total loan servicing assets 11,718 10,105
---------- -----------
Accrued interest and dividends receivable 3,042 2,123
Real estate owned, net 261 523
Amounts due from purchasers of loans, loan
servicing rights and mortgage-backed securities 19,883 43,941
Office properties and equipment 6,640 6,285
Other assets 9,319 7,228
---------- -----------
$ 402,569 $ 462,353
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 301,201 $ 337,854
Advances by borrowers for taxes and insurance 3,138 1,642
Advances from Federal Home Loan Bank and other borrowings 68,500 88,623
Deferred income taxes 107 115
Principal and interest payable on loans serviced for others 274 576
Other liabilities 3,811 8,759
---------- -----------
Total liabilities 377,031 437,569
---------- -----------
Commitments and contingencies (Notes D, M and N)
Stockholders' equity:
Preferred stock - $5.00 par value; 1,000,000 shares authorized;
920,000 shares issued and outstanding 4,600 4,600
Common stock - $1.10 par value; 5,000,000 shares authorized; 1,996,930 shares
and 1,982,530 shares, respectively, issued and outstanding 2,197 2,181
Additional paid-in capital 17,295 17,252
Retained earnings 1,642 344
---------- -----------
25,734 24,377
Unrealized gain (loss) on mortgage-backed securities available
for sale, net of deferred income taxes (196) 407
---------- -----------
Total stockholders' equity 25,538 24,784
---------- -----------
$ 402,569 $ 462,353
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
57
<PAGE>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA AND SUBSIDIARIES
<TABLE>
<CAPTION>
Consolidated Statements of Income YEAR ENDED JUNE 30,
------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Interest income: (In thousands, except per share data)
Loans $ 19,902 $ 9,359 $ 15,220
Mortgage-backed securities 5,276 16,731 1,575
Premiums on the sale of loans 127 145 155
Repurchase agreements and investments 1,463 1,344 941
Other 1,190 276 720
--------- --------- ---------
27,958 27,855 18,611
--------- --------- ---------
Interest expense:
Deposits 14,891 14,087 9,406
Short-term borrowings 2,982 4,931 1,504
Long-term borrowings 64
--------- --------- ---------
17,937 19,018 10,910
--------- --------- ---------
Net interest income before provision for loan losses 10,021 8,837 7,701
Provision for loan losses 153 95
--------- --------- ---------
Net interest income after provision for loan losses 9,868 8,742 7,701
--------- --------- ---------
Other income (expense):
Loan servicing fees 6,016 7,450 8,088
Amortization of loan servicing assets (1,617) (1,175) (3,508)
--------- --------- ---------
Loan servicing income 4,399 6,275 4,580
Gains on the sale of loans and loan servicing assets, net 925 560 14,963
Gains on the sale of mortgage-backed securities, net 2,950 1,388
Loan origination income 435 391 6,075
Other 817 1,316 1,555
--------- --------- ---------
9,526 9,930 27,173
--------- --------- ---------
Non-interest expenses:
Employee compensation and benefits 7,240 8,005 18,362
Occupancy and equipment 2,866 4,057 4,209
Provision for losses on real estate 95 68 150
Other 5,380 5,611 9,045
--------- --------- ---------
15,581 17,741 31,766
--------- --------- ---------
Income before taxes 3,813 931 3,108
Provision for income taxes 1,411 330 1,005
--------- --------- ---------
Net income $ 2,402 $ 601 $ 2,103
========= ========= =========
Net income $ 2,402 $ 601 $ 2,103
Preferred stock dividends 1,104 1,104 780
--------- --------- ---------
Earnings (loss) available to common stockholders $ 1,298 $ (503) $ 1,323
========= ========= =========
Earnings (loss) per common share:
Primary $ 0.61 $ (0.26) $ 0.63
Fully diluted (omitted in 1995 due to anti-dilution) $ 0.61 $ 0.59
Weighted-average common and common equivalent shares:
Primary 2,137,327 1,940,275 2,105,358
Fully diluted 3,674,730 3,652,457 3,588,620
</TABLE>
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
ON MORTGAGE-
BACKED
ADDITIONAL SECURITIES TOTAL
PREFERRED COMMON PAID-IN RETAINED AVAILABLE STOCKHOLDERS'
STOCK STOCK CAPITAL EARNINGS FOR SALE, NET EQUITY
---------- --------- ------------ --------- ------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1993 $ -- $ 2,085 $ 9,302 $ (476) $ -- $ 10,911
Issuance of common stock 27 42 69
Issuance of preferred stock 4,600 7,628 12,228
Tax benefit on disqualification of
stock options 35 35
Net income 2,103 2,103
Cash dividends on preferred stock (780) (780)
------- ------- --------- ------- --------- ---------
Balance, June 30, 1994 4,600 2,112 17,007 847 -- 24,566
Common stock issued in acquisition 33 143 176
Issuance of common stock 36 47 83
Tax benefit on disqualification of
stock options 55 55
Net income 601 601
Cash dividends on preferred stock (1,104) (1,104)
Net change in unrealized gain (loss) on
mortgage-backed securities available
for sale 407 407
------- ------- --------- ------- --------- ---------
Balance, June 30, 1995 4,600 2,181 17,252 344 407 24,784
Issuance of common stock 16 25 41
Tax benefit on disqualification of
stock options 18 18
Net income 2,402 2,402
Cash dividends on preferred stock (1,104) (1,104)
Net change in unrealized gain (loss) on
mortgage-backed securities available
for sale (603) (603)
------- ------- --------- ------- --------- ---------
Balance, June 30, 1996 $ 4,600 $ 2,197 $ 17,295 $ 1,642 $ (196) $ 25,538
======= ======= ========= ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
59
<PAGE>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA AND SUBSIDIARIES
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flow YEAR ENDED JUNE 30,
-------------------------------------
1996 1995 1994
----------- --------- ----------
<S> <C> <C> <C>
(In thousands)
Cash flows from operating activities:
Net income $ 2,402 $ 601 $ 2,103
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization of office properties and equipment 1,140 1,409 1,330
Provision for income taxes 1,411 330 1,005
Accretion of deferred loan fees (223) (178) (88)
Amortization of purchased and originated mortgage servicing rights 1,336 990 3,090
Amortization of premiums on the sale of loans 281 185 418
Amortization of discounts and premiums, net (488) (1,419) (18)
Net (increase) decrease in loans receivable held for sale (3,002) 21,039 98,494
Provision for loan losses 153 95
Provision for losses on real estate 95 68 150
Net decrease (increase) in amounts due from purchasers of loans,
loan servicing rights and mortgage-backed securities 24,058 (35,441) 8,329
Federal Home Loan Bank stock dividends (64)
Gains on the sale of loans and loan servicing assets, net (925) (560) (14,963)
Gains on the sale of mortgage-backed securities (2,950) (1,388)
Increase in accrued interest and dividends receivable (919) (460) (918)
(Increase) decrease in other assets (2,122) 4,627 (2,463)
(Decrease) increase in other liabilities (6,314) 5,121 (890)
Other 31 33
----------- -------- ----------
Net cash provided by (used in) operating activities 13,964 (4,948) 95,515
----------- -------- ----------
Cash flows from investing activities:
Net increase in loans receivable in portfolio (191,821) (29,089) (65,905)
Principal repayments of mortgage-backed securities 7,016 18,897 715
Purchase of mortgage-backed securities (244,701) (256,711) (162,846)
Proceeds from sales of mortgage-backed securities 358,630 266,560
Purchase of repurchase agreements (2,110,000) (307,000) (2,968,000)
Proceeds from maturities of repurchase agreements 2,185,000 252,000 2,948,000
Capital (expenditures) dispositions, net (1,495) 80 (1,927)
Increase in originated mortgage servicing rights (863)
Payments for purchased mortgage servicing rights (2,260) (51)
Proceeds from sales of purchased servicing rights and premiums on the
sale of loans 621 380 9,576
Proceeds from sale of real estate owned 463 650 469
Purchase of Federal Home Loan Bank stock (3,417) (3,075) (3,840)
Proceeds from redemption of Federal Home Loan Bank stock 3,300 2,867 1,731
----------- -------- ----------
Net cash provided by (used in) investing activities 473 (54,492) (242,027)
----------- -------- ----------
Cash flows from financing activities:
Net (decrease) increase in deposits (36,653) 77,419 49,350
Increase in advances by borrowers for taxes and insurance 1,496 335 39
Advances from Federal Home Loan Bank 43,500 69,000
Repayments of advances and other borrowings from Federal Home Loan Bank, net (44,000)
(Repayments of) proceeds from other borrowings, net (63,623) 63,623
Proceeds from issuance of common stock 59 138 104
Proceeds from issuance of preferred stock 12,228
Cash dividends paid on preferred stock (1,104) (1,104) (780)
----------- -------- ----------
Net cash (used in) provided by financing activities (56,325) 96,411 129,941
----------- -------- ----------
Net (decrease) increase in cash and cash equivalents (41,888) 36,971 (16,571)
Cash and cash equivalents at beginning of year 43,770 6,799 23,370
----------- -------- ----------
Cash and cash equivalents at end of year $ 1,882 $ 43,770 $ 6,799
=========== ======== ==========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 18,088 $ 18,683 $ 10,782
Cash paid for income taxes, net of refunds received 1,208 120 841
Supplemental non-cash activities:
REO obtained through foreclosure $ 199 $ 1,133 $ 537
</TABLE>
The accompanying notes are an integral part of these financial statements.
60
<PAGE>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA AND
SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of Suncoast Savings and Loan Association, FSA
("Suncoast") conform to generally accepted accounting principles ("GAAP") and
to general practices within the savings and loan industry. The following
summarizes the most significant of those policies and procedures.
1. Principles of Consolidation--The consolidated financial
statements include the accounts of Suncoast and its wholly-owned subsidiaries.
All significant intercompany transactions and balances are eliminated in
consolidation.
In April, 1995, Suncoast issued common stock to acquire Intra-Coastal
Mortgage Company, Inc., a licensed lender/broker. The acquisition was
accounted for using the purchase method of accounting, and the effect of the
acquisition on the financial statements for the year ended June 30, 1995 was
not significant.
2. Cash and cash equivalents--Cash and amounts due from banks and
interest-earning deposits with original maturities of three months or less are
considered cash and cash equivalents for cash flow reporting purposes.
3. Repurchase Agreements, Mortgage-Backed Securities and
Investment Securities--On July 1, 1994, Suncoast adopted Statement of Financial
Accounting Standards No. 115 ("FAS 115"), "Accounting for Certain Investments
in Debt and Equity Securities". Under FAS 115, investments in debt and equity
securities which Suncoast has a positive intent and ability to hold to maturity
are classified as "securities held to maturity" and are carried at cost,
adjusted for discounts and premiums which are accreted or amortized to
estimated maturity under the interest method. In accordance with FAS 115, a
security cannot be classified as held to maturity if it might be sold in
response to changes in market interest rates, related changes in the security's
prepayment risk, liquidity needs, changes in the availability of and the yield
on alternative investments, and changes in funding sources and terms. Debt and
equity securities purchased or sold for the purpose of a short-term profit are
classified as "trading account securities" and are recorded at fair value, with
unrealized gains and losses reflected in operations. Suncoast does not have
trading account securities. Debt and equity securities not classified as held
to maturity or trading account securities are classified as "available for
sale". Debt and equity securities available for sale are carried at fair
value, with the related unrealized appreciation or depreciation, net of
deferred income taxes, reported as a separate component of stockholders'
equity. Realized gain or loss on sales of securities is based on the specific
identification method.
At June 30, 1996 and 1995, the portfolio of mortgage-backed securities
was classified as available for sale with an unrealized loss (net of taxes) of
$196,000 and an unrealized gain (net of taxes) of $407,000, respectively,
recorded as a separate component of stockholders' equity.
61
<PAGE>
The portfolio was classified as such because management restructured Suncoast's
assets in fiscal 1995 and sold its entire $138.7 million portfolio of fixed
rate securities, previously classified as held to maturity, realizing a gain of
approximately $486,000.
4. Mortgage Banking Activities--Suncoast originates mortgage
loans for portfolio investment or sale in the secondary market. Mortgage loans
are designated as either available for sale or held in portfolio. Mortgage
loans held in the portfolio are stated at unpaid principal balances, less the
allowance for loan losses, and net deferred loan origination fees and
discounts. Mortgage loans available for sale are carried at the lower of cost
or fair market value, determined on an aggregate basis, and net unrealized
losses, if any, are recognized in a valuation allowance with a corresponding
charge to income. Suncoast recognizes gains or losses on the sales of
servicing rights when the related sales contract has been executed and legal
title and substantially all risks and rewards of ownership of the servicing
asset has passed to the buyer. Gains or losses are computed by deducting any
associated deferred excess servicing rights, mortgage servicing rights, and
other related expenses from the sales proceeds.
Suncoast minimizes its interest rate risk on loan commitments
expected to close and the inventory of mortgage loans held for sale through
commitments to permanent investors.
Effective July 1, 1995, Suncoast adopted Statement of Financial
Accounting Standards No. 114, ("FAS 114") "Accounting by Creditors for
Impairment of a Loan", subsequently amended by FAS 118. Loans within the scope
of FAS 114 are measured for impairment based on (a) the present value of
expected future cash flows discounted at the loan's effective interest rate,
(b) the market price, or (c) if collateral dependent, the fair value of the
collateral. If the value of the loan so determined is less than the loan's
recorded value, Suncoast recognizes a loss for the difference by creating a
valuation allowance or adjusting an existing valuation allowance with a
corresponding charge to operations. FAS 118 amended certain income recognition
and disclosure provisions of FAS 114. The adoption of FAS 114 and FAS 118 did
not have any significant effect on Suncoast's financial condition and results
of operations, due to the composition of the loan portfolio and its policy for
establishing its allowance for loan losses.
At June 30, 1996, 1995 and 1994, Suncoast was servicing loans
amounting to approximately $1.5 billion, $1.6 billion and $2.0 billion,
respectively. Servicing loans generally consists of collecting mortgage
payments, maintaining custodial accounts, disbursing payments to investors and
foreclosure processing. Loan servicing income is recorded on the accrual basis
and includes servicing fees from investors and certain charges collected from
borrowers, such as late payment fees. In connection with loans serviced for
others, Suncoast held in non-interest or low-interest bearing deposit accounts
borrowers' custodial balances of approximately $24.2 million and $37.3 million
at June 30, 1996 and 1995, respectively. Suncoast makes a provision for
expected unreimbursed costs, which are incurred as a result of Suncoast's
responsibility as servicer of Federal Housing Administration (FHA) insured,
Veterans Administration (VA) guaranteed, and other loans for investors. The
provision is determined based on a number of variables, including the amount of
delinquent loans serviced for other investors, the length of delinquency, and
the amounts previously advanced on behalf of the borrower that Suncoast does
not expect to recover. Actual cost incurred may vary from Suncoast's estimate
due to a number of factors beyond Suncoast's control.
62
<PAGE>
Effective July 1, 1995, Suncoast adopted Statement of Financial
Accounting Standards No. 122 ("FAS 122") "Accounting for Mortgage Servicing
Rights." FAS 122 requires that rights to service mortgage loans for others
acquired through either purchase or origination of mortgage loans be recognized
as separate assets if the related mortgage loan is intended to be sold with
servicing retained. The adoption of FAS 122 resulted in aggregate realized net
gains of approximately $600,000 ($380,000, net of income taxes) on the sale of
loans during the year ended June 30, 1996. Purchased mortgage servicing rights
("PMSRs") represent the cost of acquiring the rights to service mortgage loans,
and such cost is capitalized and amortized in proportion to, and over the
period of, estimated net servicing income.
Premiums on the sale of loans represent the present value of the cash
flows associated with the portion of estimated future interest income retained
on loans sold (based upon certain prepayment rate and interest rate assumptions
and net of a normal servicing fee), which are recognized as gains on the sale
of loans at the time the sales occur. As the cash flows are collected, Suncoast
amortizes the premiums and recognizes a normal servicing fee and interest
income on the premiums at the rate assumed in determining the present value of
the premiums. Such premiums are amortized in proportion to and over the
estimated period such cash flows will be collected.
Suncoast periodically makes an assessment of capitalized mortgage
servicing rights for impairment based on the fair value of those rights. The
carrying values of Suncoast's servicing assets, and the amortization thereon,
are evaluated in relation to estimated future net servicing cash flows
(discounted) to be received and retained. Such carrying values are adjusted
for indicated impairments based on management's best estimate of remaining cash
flows. Such estimates may vary from the actual remaining cash flows due to
prepayments of the underlying mortgage loans and increases in servicing costs.
Changes in open market values do not directly affect the expected cash flows
used in determining the carrying values.
5. Office Properties and Equipment--Land is carried at cost.
Office properties and equipment are carried at cost less accumulated
depreciation. Depreciation and amortization are computed on the straight-line
method over the estimated useful lives of the related assets, which range from
3 to 30 years; amortization of leasehold improvements is computed over the
terms of the respective leases (including renewal periods which management
intends to exercise) or their estimated useful lives, whichever is shorter.
6. Loan Fees--Suncoast defers loan origination fees (after
offsetting certain direct costs of originating the loans) and recognizes these
fees using the interest method over the life of the loans as an adjustment of
the loans' yield. Loan origination fees received on loans sold are recorded as
income upon the sale of the loans. Loan commitment fees received are deferred
and recognized similarly over the life of the loan or at the expiration of the
commitment if the commitment expires unexercised.
7. Provisions for Losses--Provisions for loan losses and losses
on real estate owned (included in non- interest expenses) include charges to
adjust the recorded balances of loans receivable and real estate owned to their
estimated net realizable value, as applicable. Such provisions are
63
<PAGE>
based on management's estimate of fair market value of the collateral,
considering the current and anticipated future operating or sales conditions.
Recovery of the carrying value of such loans and real estate owned is dependent
to a great extent on economic, operating and other conditions that may be
beyond Suncoast's control. Suncoast also provides an allowance for loan losses
based upon historical loss experience, delinquency trends, the value of
underlying collateral, known and inherent risks in the assets, prepayment rates
and the general state of the real estate market.
8. Provision for Uncollected Interest--When a loan becomes ninety
days or more delinquent, Suncoast stops the accrual of interest income and
reverses any interest previously accrued but uncollected. Such interest, if
ultimately collected, is credited to income in the period of recovery.
9. Real Estate Owned--Real estate owned represents property
acquired by foreclosure or deed in lieu of foreclosure. Real estate owned is
initially recorded at the fair market value less estimated selling expenses of
the property at date of foreclosure. Subsequent adjustments to the fair market
value at date of foreclosure are recorded as an expense. Sales of real estate
are recorded under the accrual method of accounting. Under this method, a sale
is not recognized until payments received aggregate a specific required
percentage of the contract sales price. Until a contract qualifies as a sale,
all collections are recorded as deposits.
The ability of Suncoast to recover the carrying value of its
investment in real estate owned is based upon future sales. The ability to
complete such sales is subject to market conditions and other factors, all of
which are beyond Suncoast's control.
10. Income Taxes--Suncoast uses the asset and liability approach
to account for income taxes. Deferred tax assets and liabilities are
recognized for the expected future tax consequences attributable to differences
between the financial statement carrying amounts and the tax bases of assets
and liabilities.
11. Earnings (Loss) Per Share--Earnings (loss) per share is
computed on the basis of the weighted average number of shares of common stock
outstanding during the period plus common stock equivalents applicable to stock
options. When dilutive, fully diluted earnings per common share is derived as
follows: Earnings (loss) available to common stockholders are increased by
preferred dividends paid eliminated upon conversion of preferred shares to
common shares. This remainder is divided by the sum of the average number of
common shares outstanding for the period plus the added common shares that
would have been outstanding if: (a) all of the outstanding preferred shares
had been converted into common shares at the beginning of the period and (b)
all stock options granted that have economic value were exercised at the
beginning of the period, and the related funds that would have been received by
Suncoast upon such exercise were used to repurchase outstanding common shares.
12. Use of Estimates--The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and
64
<PAGE>
expenses during the reporting period. Actual results could differ from those
estimates. Estimates that are particularly susceptible to significant change
in the near term are the adequacy of reserves available for loan losses and the
present value of the estimated future cash flows utilized to calculate loan
servicing assets.
13. New Accounting Standards--In October 1995, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards No. 123 ("FAS 123"), "Accounting for Stock-Based Compensation." This
statement requires certain disclosures about stock-based employee compensation
arrangements, regardless of the method used to account for them, and defines a
fair value based method of accounting for an employee stock option or similar
equity instrument and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. However, it
also allows an entity to continue to measure compensation cost for stock based
compensation plans using the intrinsic value method of accounting prescribed by
existing principles. Suncoast has elected to remain with the existing
principles and will make pro forma disclosures of net income and earnings per
share, as if the fair value method of accounting defined in FAS 123 had been
applied. Under the fair value method, compensation cost is measured at the
grant date based on the value of the award and is recognized over the service
period, which is usually the vesting period. Under the intrinsic value based
method, compensation cost is the excess, if any, of the quoted market price of
the stock at grant date or other measurement date over the amount an employee
must pay to acquire the stock. The disclosure requirements of FAS 123 are
effective for financial statements for Suncoast's fiscal years beginning after
June 30, 1996.
In June 1996, the FASB issued Statement of Financial Accounting
Standards No. 125 ("FAS 125"), "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." FAS 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. FAS 125 is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring
after December 31, 1996 and is to be prospectively applied. Management is
currently evaluating the impact of adoption of FAS 125 on its financial
position and results of operations.
14. Reclassifications--Certain amounts reported in prior periods'
financial statements have been reclassified to conform to current
classifications.
B. REGULATORY CAPITAL REQUIREMENTS
Under the regulatory capital regulations of the Office of Thrift
Supervision ("OTS"), Suncoast is required to maintain minimum levels of capital
as measured by three ratios. Savings institutions are currently required to
maintain tangible capital of at least 1.5% of tangible assets, core capital of
at least 3.0% of adjusted tangible assets and risk based capital of at least
8.0% of risk-weighted assets.
65
<PAGE>
At June 30, 1996 Suncoast exceeded all three of its current capital
requirements. The status of the capital requirements of Suncoast at June 30,
1996 is as follows (dollars are in thousands and are unaudited):
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE RISK- PERCENTAGE OF
TANGIBLE OF CORE OF BASED RISK-BASED
CAPITAL ASSETS(1) CAPITAL ASSETS(1) CAPITAL ASSETS (1)
-------- ---------- --------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity before adjustments $ 25,538 6.36% $ 25,538 6.36% $ 25,538 11.05%
Regulatory adjustments:
General valuation reserves 657 .28
Non-qualifying PMSRs (720) (.18) (720) (.18) (720) (.30)
Goodwill (47) (.01) (47) (.01) (47) (.02)
Unrealized loss on mortgage-backed
securities available for sale, net 196 .05 196 .05 196 .08
--------- ---- --------- ---- ---------- ----
Regulatory capital 24,967 6.22 24,967 6.22 25,624 11.09
Minimum capital requirement 6,024 1.50 12,048 3.00 18,486 8.00
--------- ---- --------- ---- ---------- ----
Regulatory capital excess $ 18,943 4.72% $ 12,919 3.22% $ 7,138 3.09%
========= ==== ========= ==== ========== ====
Assets for capital calculation $ 401,605 $ 401,605 $ 231,069
========= ========= ==========
</TABLE>
- - -------------------------------
(1) Tangible and core capital percentages are computed as a percentage of
tangible and adjusted tangible assets, respectively. The risk-based
capital percentage is computed as a percentage of risk-adjusted
assets.
Under current OTS capital rules, PMSRs and OMSRs (collectively,
"MSRs") may be included in regulatory capital only to the extent that, in the
aggregate, they do not exceed 50% of core capital. For purposes of calculating
core capital, MSRs are valued at the lesser of 90 percent of fair market value
or 100 percent of their book value (net of any valuation allowance). Any
excess amounts are deducted from assets and core capital. The estimated fair
market value of MSRs must be determined at least quarterly. Suncoast also uses
the services of an independent expert to perform an annual market valuation in
accordance with guidance issued by the OTS. The amount of MSRs that may be
included in tangible capital is the same as that permitted in core capital.
At June 30, 1996, Suncoast's book value of MSRs was $10.4 million, and based
upon a market valuation of MSRs at that date, a deduction from assets and
capital for regulatory capital purposes in the amount of $720,000 was
necessary.
The OTS amended risk-based capital rules to incorporate interest-rate
risk ("IRR") requirements which require a savings association to hold
additional capital if it is projected to experience an excessive decline in net
portfolio value in the event interest rates increase or decrease by two
percentage points. The additional capital required is equal to one-half of the
amount by which any decline in net portfolio value exceeds 2 percent of the
savings association's total net portfolio value. Suncoast does not expect the
interest-rate risk requirements to have a material impact on its required
capital levels at the present time.
The OTS rules establish the capital levels for which an insured
institution will be categorized as: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized or critically
undercapitalized. A well capitalized institution must have risk-based capital
of 10% or more, core capital of 5% or more and Tier 1 risk- based capital
(based on the ratio of core capital to risk-weighted assets ) of 6% or more and
may not be subject to any written agreement, order, capital directive or prompt
corrective action directive issued by the OTS. The
66
<PAGE>
OTS and other federal banking agencies are required to take prompt corrective
action to resolve the problems of critically undercapitalized financial
institutions. Suncoast is a well capitalized institution under the definitions
as adopted.
C. REPURCHASE AGREEMENTS AND FEDERAL HOME LOAN BANK STOCK
During the years ended June 30, 1996 and 1995, Suncoast invested in
repurchase agreements but had no such investment at June 30, 1996. These
investments were collateralized by U.S. Government securities through agency
agreements with a national brokerage firm (the "counter-party"). The
securities underlying the agreements are book- entry securities. The
securities were delivered by appropriate entry with a third-party custodian as
per agreement between Suncoast and the counter-party. Based on month-end
balances for the years ended June 30, 1996 and 1995 repurchase agreements
averaged $16.7 million and $21.3 million, respectively, the maximum amount
outstanding at any month-end in each year was $75.0 million, and the maximum
amount outstanding in each year with any single counter-party was $75.0
million. The market values of these agreements approximated their carrying
value.
Federal Home Loan Bank ("FHLB") stock ownership is required for
membership in the bank system. Its carrying value approximates market value.
D. LOANS RECEIVABLE
Loans receivable at June 30 are comprised of (in thousands):
<TABLE>
<CAPTION>
1996 1995
------------ -------------
<S> <C> <C>
Loans in portfolio:
Real estate loans:
Commercial, collateralized by--
Undeveloped land $ 3,115 $ 5,256
Office buildings 8,287 7,625
Hotel property 21,692 9,082
Retail stores 21,552 17,245
Multi-family residential and other 43,836 34,099
------------ -------------
Total commercial 98,482 73,307
Residential (one to four family) 215,044 55,449
Construction 8,491 7,085
Consumer loans 1,917 1,750
------------ -------------
323,934 137,591
Allowance for loan losses (657) (504)
Deferred loan fees, net (617) (493)
Undisbursed portion of loans in process (4,354) (7,137)
Premiums paid on loans held in portfolio 2,522 329
------------ -------------
$ 320,828 $ 129,786
============ =============
</TABLE>
67
<PAGE>
<TABLE>
<S> <C> <C>
Loans held for sale:
Residential real estate loans $ 6,675 $ 2,962
Deferred loan fees, net (31) (19)
Premiums paid on loans held for sale 86 35
------------ -------------
$ 6,730 $ 2,978
============ =============
Total loans receivable, net $ 327,558 $ 132,764
============ =============
</TABLE>
At June 30, 1996, Suncoast had pledged approximately $163.5 million of
first mortgage loans as collateral for FHLB advances (see Note L).
The commercial real estate loans are primarily in the State of Florida
and are considered by management to be of somewhat greater risk of
uncollectibility due to the dependency on income production or future
development of real estate. Loans not accruing interest were $853,000 and
$151,000 at June 30, 1996 and 1995, respectively. If non-accrual loans had been
accruing interest, interest income of $54,000, $10,000 and $42,000 would have
been recorded during the years ended June 30, 1996, 1995 and 1994,
respectively.
The OTS regulatory capital regulations require that the portion of
nonresidential construction and land loans in excess of 80% loan-to-value ratio
be deducted from total capital for purposes of the risk-based capital standard.
At June 30, 1996, Suncoast had no loans subject to this regulation.
Suncoast originates and purchases both adjustable and fixed interest
rate loans. At June 30, 1996, the composition of these loans was approximately
as follows (in thousands):
<TABLE>
<CAPTION>
FIXED-RATE ADJUSTABLE-RATE
- - ------------------------------------------- ----------------------------------------
<S> <C> <C> <C>
Term to Term to
maturity Carrying value rate adjustment Carrying value
- - -------- -------------- --------------- --------------
1mo.-1 yr. $ 353 1 mo.-1 yr. $ 217,509
1 yr.-3 yr. 3,138 1 yr.-3 yr. 65,967
3 yr.-5 yr. 4,261 3 yr.-5 yr 8,542
5 yr.-10 yr. 3,016
10 yr.-20 yr. 7,204
Over 20 years 13,944
----------- -----------
Total loans
in portfolio 31,916 292,018
Total loans held
for sale 6,480 195
----------- -----------
$ 38,396 $ 292,213
=========== ===========
</TABLE>
The adjustable-rate loans have interest rate adjustment limitations
and are generally indexed to U.S. Treasury Bill rates. Future market factors
may affect the correlation of the interest rate adjustment with the rates
Suncoast pays on the short-term deposits that have been primarily utilized to
fund these loans.
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<PAGE>
The following summarizes the activity in the allowance for loan losses
for the years ended June 30 (in thousands):
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
------ ----- ------
Balance, at beginning of year $504 $504 $521
Provision for loan losses 153 95
Chargeoffs and recoveries, net (95) (17)
------ ------ ------
Balance, at end of year $ 657 $ 504 $ 504
====== ====== ======
</TABLE>
At June 30, 1996, Suncoast had commitments to originate and purchase
loans, excluding the undisbursed portion of loans in process, of approximately
$3.7 million. These commitments are scheduled to be disbursed within one year.
Suncoast had also entered into commitments to sell loans of approximately $7.6
million at June 30, 1996 of which approximately $1.0 million are binding on the
investor but not on Suncoast. At June 30, 1996, Suncoast had no floating
market rate commitments outstanding.
Loans to executive officers, directors and principal holders of equity
securities were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions
with other customers (unless they were in effect under regulations prior to
1989) and do not involve more than the normal risk of collectibility. The
activity regarding these loans is as follows (in thousands):
<TABLE>
<CAPTION>
BEGINNING NEW ENDING
YEAR ENDED JUNE 30, BALANCE LOANS REPAYMENTS BALANCE
- - ------------------- --------- ----- ---------- -------
<S> <C> <C> <C> <C>
1996 $2,199 $ 328 $ 336 $2,191
1995 1,083 1,365 249 2,199
1994 2,693 1,610 1,083
</TABLE>
E. MORTGAGE-BACKED SECURITIES
At June 30, 1996, mortgage-backed securities with an aggregate book
value of $11.8 million were pledged as collateral for FHLB advances (see Note
L). Summarized below are the amortized costs and market value of
mortgage-backed securities at June 30, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COSTS GAINS LOSSES VALUE
-------- ---------- ---------- --------
<S> <C> <C> <C> <C>
June 30, 1996:
Adjustable rate:
GNMA $ 14,659 $ - $ (312) $ 14,347
Private Issue 4,044 4,044
-------- --------- ------- --------
Total mortgage-backed
securities $ 18,703 $ - $ (312) $ 18,391
======== ========= ======= ========
</TABLE>
69
<PAGE>
<TABLE>
<CAPTION>
June 30, 1995:
<S> <C> <C> <C> <C>
FHLMC $ 59,015 $ 414 $ (80) $ 59,349
FNMA 51,069 363 (51) 51,381
FNMA Real Estate Mortgage
Investment Conduit 26,126 26,126
-------- -------- ------ --------
Total mortgage-backed
securities $136,210 $ 777 $ (131) $136,856
======== ======== ====== ========
</TABLE>
Mortgage-backed securities as of June 30, 1996 and 1995 were
adjustable-rate securities with a term to rate adjustment not exceeding one
year.
F. LOAN SERVICING ASSETS
1. Purchased mortgage servicing rights--The following table sets
forth the activities of Suncoast's PMSRs for the years ended June 30 (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -------------
<S> <C> <C> <C>
Balance, at beginning of year $ 8,572 $ 9,511 $ 12,830
Cost of acquiring servicing rights 2,260 51
Sales of servicing rights (229)
Amortization charged against loan
servicing fee income (1,307) (990) (3,090)
----------- ------------ -------------
Balance, at end of year $ 9,525 $ 8,572 $ 9,511
=========== ============ =============
</TABLE>
2. Originated mortgage servicing rights ("OMSR")--The following
table sets forth the activities of Suncoast's OMSR's for the years ended June
30 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Balance, at beginning of year $ - $ - $ -
Servicing rights originated 863
Amortization charged against loan
servicing fee income ( 29)
----------- ----------- ----------
Balance, at end of year 834 $ - $ -
=========== =========== ==========
</TABLE>
The fair value of Suncoast's PMSRs and OMSRs is determined annually by
an independent firm which has the necessary expertise to perform such valuation
studies. At June 30, 1996, the fair value of Suncoast's PMSRs and OMSRs was
approximately $10.0 million and $949,000, respectively.
70
<PAGE>
Fair value has been estimated by using a discounted cash flow model,
the most significant assumptions of which are as follows:
Prepayment Rate--The average "Dealer Prepayment Estimates" as of July
8, 1996 as published by Bloomberg Financial Markets.
Discount Rate--A base rate of 10.5%, adjusted for loan type, size and
remaining term. Cost of Service--$45 incremental per loan per year.
Ancillary Income--Suncoast's actual ancillary income was utilized for
the portfolio purchased prior to 1995 and $10 annually per loan was
utilized on the portfolio purchased subsequent to 1995.
Escrow Balances--Determined using a twelve month weighted average
multiple calculated by state.
For purposes of evaluating and measuring PMSRs and OMSRs for
impairment, Suncoast stratifies the population by product type, investor type
and interest rate. No valuation allowance for the impairment of PMSRs or OMSRs
was required at June 30, 1996.
The ability of Suncoast to recover the carrying value of the PMSRs and
OMSRs is dependent upon certain factors including future prepayment experience,
which is influenced by economic and other conditions that may be beyond
Suncoast's control. If actual future prepayment experience exceeds the rate
anticipated in the valuation study, a reduction in the carrying value of the
PMSRs and OMSRs may be required.
3. Premiums on the sale of loans--The following table sets forth
the activities of Suncoast's premiums on the sale of loans for the years ended
June 30 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Balance, at beginning of year $ 1,533 $ 1,737 $ 2,169
Premium on sales 107 14
Sales of servicing rights (19) (28)
Amortization charged against loan
servicing fee income (281) (185) (418)
----------- ----------- ----------
Balance, at end of year $ 1,359 $ 1,533 $ 1,737
=========== =========== ==========
</TABLE>
Management has estimated the future constant prepayment rates ("CPRs")
used to determine the above premiums based upon an analysis of the actual
historical CPRs, comparative industry CPRs and market conditions. Suncoast
calculates premiums using the present value model, which calculates present
values based upon estimated annual cash inflows.
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<PAGE>
G. ACCRUED INTEREST AND DIVIDENDS RECEIVABLE
Interest and dividends receivable at June 30 are accrued for (in
thousands):
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Loans receivable $ 2,782 $ 885
Mortgage-backed securities 164 1,041
Federal Home Loan Bank Stock 88 68
Repurchase agreements 121
Interest-earning deposits 8 8
----------- -----------
$ 3,042 $ 2,123
=========== ===========
</TABLE>
H. REAL ESTATE OWNED
At June 30, 1996, real estate owned consisted of one single-family
residence. The following summarizes the activity in the allowance for losses on
real estate owned for the years ended June 30 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
Balance, at beginning of year $ - $ - $ -
Provision for losses on real estate 95 68 150
Chargeoffs and recoveries, net (15) (68) (150)
------- ------- --------
Balance, at end of year 80 $ - $ -
======= ======= ========
</TABLE>
I. OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment at June 30 are as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Land $ 1,204 $ 827
Buildings 3,971 3,630
Leasehold improvements 839 669
Furniture, fixtures and equipment 6,890 7,341
--------- ---------
12,904 12,467
Less accumulated depreciation and
amortization 6,264 6,182
--------- ---------
$ 6,640 $ 6,285
========= =========
</TABLE>
72
<PAGE>
J. OTHER ASSETS
Other assets at June 30 are comprised of (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Foreclosure advances $ 3,821 $ 1,633
Other receivables 2,978 1,404
Escrow advances on serviced loans 1,036 1,580
Prepaid income taxes 1,145 302
All other 339 2,309
--------- ---------
$ 9,319 $ 7,228
========= =========
</TABLE>
K. DEPOSITS
The nominal interest rates paid on deposits and related balances are as
follows (amounts in thousands):
<TABLE>
<CAPTION>
Weighted June 30, 1996 June 30, 1995
Average Rate at ------------------------ -----------------------
June 30, 1996 Amount Percent Amount Percent
--------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Negotiable
order of
withdrawal
("NOW")
accounts 2.42% $ 17,751 5.9% $ 6,418 1.9%
Non-interest
bearing 874 0.3% 556 0.2
Money market 3.19% 11,805 3.9% 16,859 5.0
Passbook 4.08% 40,959 13.6% 48,605 14.3
-------- ------ -------- ------
71,389 23.7% 72,438 21.4
-------- ------ -------- ------
Custodial
accounts 0% 24,198 8.0% 37,275 11.0
-------- ------ -------- ------
Certificates of
deposit:
2.00%-2.99% 204 0.1%
3.00%-3.99% 4 411 0.1
4.00%-4.99% 29,464 9.8% 11,212 3.3
5.00%-5.99% 146,965 48.8% 104,003 30.8
6.00%-6.99% 26,194 8.7% 108,712 32.2
7.00%-7.99% 2,783 0.9% 3,801 1.1
8.00%-8.99% 2 0.1
--------- ------ -------- -----
Total certificates
of deposit 5.46% 205,614 68.3% 228,141 67.6%
--------- ------ -------- -----
4.55% $ 301,201 100.0% $337,854 100.0%
========= ====== ======== =====
</TABLE>
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<PAGE>
The amounts of scheduled maturities of certificate accounts, including
those with balances exceeding $100,000, at June 30, 1996 for future fiscal
years ending June 30 are summarized below (in thousands):
<TABLE>
<CAPTION>
Certificates
Exceeding Total
$100,000 Certificates
----------- ------------
<S> <C> <C>
1997 $7,389 $176,957
1998 824 19,699
1999 209 2,955
2000 106 4,430
2001 101 1,573
------- --------
$8,629 $205,614
====== ========
</TABLE>
Interest on deposits for the years ended June 30 is summarized below
(in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Certificate accounts $ 12,537 $ 11,893 $ 7,849
Money market accounts 565 420 748
NOW accounts 272 451 92
Passbook accounts 1,368 1,226 27
----------- ----------- ----------
Deposit accounts 14,742 13,990 8,716
----------- ----------- ----------
Interest on custodial accounts:
Escrow accounts 82 78 105
Serviced loans paid off 67 19 585
----------- ----------- ----------
149 97 690
----------- ----------- ----------
Total interest on deposits $ 14,891 $ 14,087 $ 9,406
=========== =========== ==========
</TABLE>
L. ADVANCES FROM FEDERAL HOME LOAN BANK AND OTHER BORROWINGS
Advances from the Federal Home Loan Bank and other borrowings at June
30 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
AT JUNE 30, 1996 DURING YEAR ENDED JUNE 30, 1996
--------------------------------------------------- -------------------------------
Average Maximum
Balance Weighted
Outstanding Average Rate Maturity Outstanding Outstanding
----------- ------------ -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Advances from FHLB
Short term $67,000 5.30% 7/96-2/97 $50,963 $117,000
Long term 1,500 6.65 12/05 1,000 1,500
Borrowings under reverse
repurchase agreements 850 10,199
Borrowings under fixed coupon
dollar reverse repurchase0
agreements 2,631 31,572
-------- ----
$ 68,500 5.30%
======== ====
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
AT JUNE 30, 1995 DURING YEAR ENDED JUNE 30, 1995
----------------------------------------------------- --------------------------------
Average Maximum
Balance Weighted Balance Balance
Outstanding Average Rate Maturity Outstanding Outstanding
----------- ------------ -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Advances from
FHLB - short term $ 25,000 6.13% 5/96 $ 61,371 $ 108,000
Borrowings under
reverse
repurchase
agreements 32,051 6.09 7/95-8/95 20,821 62,766
Borrowings under
fixed coupon
dollar reverse
repurchase
agreements 31,572 5.77 7/95 10,025 35,148
-------- ----
$ 88,623 5.99%
======== ====
</TABLE>
At June 30, 1996, Suncoast is a party to two advance agreements with
the FHLB whereby the FHLB will provide borrowings as requested by Suncoast when
such borrowings are secured by specific collateral. Under the first agreement,
advances are secured by government securities and U.S. government agency
securities with a market value of 103% of the advance amount. Under the second
agreement, advances are secured by a blanket floating loan on eligible single
family residential mortgage loan collateral. In determining the amount of
advances available under the second agreement, the unpaid principal balance of
eligible collateral is discounted to 75% (see note D). The stock of the FHLB
owned by Suncoast is also pledged as collateral for advances under this
agreement. After meeting all of its collateral requirements, Suncoast had
excess qualifying assets eligible as collateral for additional borrowings under
this agreement of approximately $54.1 million at June 30, 1996.
Suncoast enters into sales of securities under agreements to
repurchase, which are treated as financings. The obligations to repurchase
securities sold are reflected as a liability and the carrying amount of the
securities underlying the agreements is included in mortgage-backed securities
available for sale in the Consolidated Statements of Financial Condition.
Mortgage-backed securities sold under reverse repurchase agreements are
delivered to the broker- dealers who arrange the transactions. The
broker-dealers may sell, loan, or otherwise dispose of such securities to other
parties in the normal course of their operation, and agree to resell to
Suncoast the identical securities at the maturities of the agreements. As of
June 30, 1996, no such financings were outstanding.
Suncoast also enters into fixed coupon dollar reverse repurchase
agreements, which are treated as financings. Under a fixed coupon dollar
reverse repurchase agreement, Suncoast sells a security and agrees to
repurchase another security which is substantially the same as the one sold.
These agreements are accounted for in the same manner as reverse repurchase
agreements. As of June 30, 1996, no such financings were outstanding.
During the period from July 1, 1993 to February 28, 1995, RFC, a
lender, provided Suncoast with a revolving warehouse credit facility for as
much as $100.0 million which bore interest either at the prime rate or at
tiered rates over the U.S. Dollar London Interbank Offered Rate. Suncoast drew
advances on this line of credit to fund its mortgage originations and the
advances were collateralized by specific mortgages originated and awaiting sale
by Suncoast.
75
<PAGE>
Commitment fees of $41,666 and $58,800 were paid during Fiscal 1995 and 1994,
respectively, to RFC by Suncoast to use the credit line. Upon expiration, this
credit line was not renewed by Suncoast.
Interest expense on borrowed funds for the years ended June 30 is
summarized below (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- --------
<S> <C> <C> <C>
Advances from:
FHLB $ 2,772 $ 3,155 $ 349
RFC 1,155
Reverse repurchase agreements 159 1,283
Dollar reverse repurchase agreements 115 493
--------- -------- --------
$ 3,046 $ 4,931 $ 1,504
========= ======== ========
</TABLE>
M. LEASES
Suncoast leases space for its administrative offices, two savings
branch offices, storage facilities and certain equipment. All office leases
have escalation clauses tied either to a fixed schedule or to increases in the
Consumer Price Index. The following is a schedule of approximate future minimum
payments required under these operating leases at June 30, 1996 for future
fiscal years ending June 30 (in thousands):
1997 $1,078
1998 906
1999 881
2000 610
2001 66
Thereafter -
------
3,541
Less:
Income from subleases 147
------
$3,394
======
Rent expense was $1.2 million, $2.0 million and $2.1 million for the
years ended June 30, 1996, 1995, and 1994, respectively.
N. STOCKHOLDERS' EQUITY
Suncoast has an incentive stock option plan approved by its Board of
Directors and stockholders. There are 467,500 total shares in the plan, and a
total of 349,760 shares of common stock are reserved and authorized for
issuance under this plan. Transactions relating to this stock option plan for
the three year period ended June 30, 1996 are as follows:
76
<PAGE>
<TABLE>
<CAPTION>
Options Option Price
Outstanding Per Share
----------- ------------
<S> <C> <C>
Balance, June 30, 1993 349,400 $ 2.00-3.00
Exercised (24,400) 2.00-3.00
Cancelled (8,200) 2.00-3.00
---------- ------------
Balance, June 30, 1994 316,800 2.00-3.00
Granted 84,000 7.19-7.38
Exercised (33,000) 2.00-3.00
Cancelled (11,600) 2.00-7.38
---------- ------------
Balance, June 30, 1995 356,200 2.00-7.38
Granted 7,000 6.94
Exercised (14,400) 2.00-3.00
Cancelled (26,800) 2.00-7.38
---------- ------------
Balance, June 30, 1996 322,000 $ 2.00-7.38
========== ============
</TABLE>
At June 30, 1996 and 1995, options for 284,600 and 274,800 shares were
exercisable at an average price per share of $3.26 and $3.12, respectively.
Suncoast has an Employee Stock Bonus/401K Plan (Stock Bonus Plan) for
the benefit of certain eligible employees of Suncoast. Contributions to the
Stock Bonus Plan by Suncoast are at the discretion of Suncoast's Board of
Directors. No contributions were made to the Stock Bonus Plan for the years
ended June 30, 1996 and 1995. Suncoast expensed $224,400 for contributions made
to the Stock Bonus Plan for the year ended June 30, 1994.
There are various regulatory limitations on the extent to which
Suncoast can pay dividends. Suncoast is required to comply with the OTS capital
distribution regulations, which condition Suncoast's ability to make certain
dividend distributions on Suncoast's capital level and supervisory condition.
The OTS has established a three-tiered qualification system, and gives savings
associations meeting their fully phased-in capital requirements greater
flexibility to pay dividends than associations that must build their capital
levels to reach the fully phased-in capital requirement. Even though Suncoast
presently meets its fully phased-in capital requirements, dividends cannot be
paid if Suncoast does not meet its capital requirements at a future date or if
payment of dividends would cause Suncoast not to meet its capital requirements.
The payment of dividends is also prohibited if after such payment Suncoast
would be considered undercapitalized. Moreover, the OTS has the authority to
prohibit the payment of dividends even if Suncoast meets its capital
requirements if such payments would affect the safety and soundness of the
institution.
On July 9, 1993, Suncoast issued 920,000 shares of its 8%
Noncumulative Convertible Preferred Stock, Series A (the "Preferred Stock") in
a public offering which added net proceeds of approximately $12.2 million to
stockholders' equity. The Preferred Stock is convertible by the holder into
Suncoast Common Stock at any time, unless previously redeemed by Suncoast, at a
conversion price of $9.00 per share of Common Stock. Suncoast can redeem the
Preferred Stock after July 1, 1995, at a redemption price of $15.00 per share
if the Common Stock is trading at a minimum price of $10.80 per share for 20 to
30 trading days prior to redemption.
77
<PAGE>
The Preferred Stock is otherwise redeemable from July 1, 1998 to June 30, 1999
at $16.20 per share and at declining premiums thereafter. Dividends on the
Preferred Stock are payable at an annual rate of $1.20 per share if, when and
as declared by Suncoast's Board of Directors. Dividends are not cumulative and
are payable quarterly in arrears. Dividends on the Preferred Stock were paid
each quarter after the issuance of the stock and amounted to $1.1 million in
each of the years ended June 30, 1996 and 1995. In connection with this stock
offering, Suncoast issued warrants to the offering underwriters to purchase an
aggregate of 80,000 shares of Preferred Stock. These warrants are exercisable
at a price per share of $18.00 in the case of Preferred Stock or at $10.80 in
the case of Common Stock for a period of four years after July 9, 1994. At
June 30, 1996, none of these warrants had been exercised and none of the
Preferred Stock had been converted or redeemed.
Suncoast has a deferred compensation plan to provide its President
with a supplemental retirement benefit. Under this plan, Suncoast funded an
irrevocable trust with a lump sum of $213,000, which has been invested in
corporate- owned life insurance. The President will be fully vested in the
plan in 1997. Suncoast recorded an expense of $49,000 and $108,000 under this
Plan in Fiscal 1996 and Fiscal 1995, respectively.
O. INCOME TAXES
The provision for income taxes for the years ended June 30 differs
from the amount of income tax determined by applying the applicable U.S.
statutory federal income tax rate to pretax income as a result of the following
differences (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- -------------------- ---------------------
% Amount % Amount % Amount
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Statutory U.S.
tax rates 35.0 $1,335 35.0 $326 35.0 $1,088
Increase (decrease)
in rates resulting
from:
Benefit of Federal
surtax exemption (1.0) (31)
State tax (net of
Federal benefit) 3.7 141 3.7 34 3.2 100
Other (1.7) (65) (3.3) (30) (4.9) (152)
---- ------ ---- ---- ---- -------
37.0 $1,411 35.4 $330 32.3 $ 1,005
==== ====== ==== ==== ==== =======
</TABLE>
The components of the provision for income taxes for the years ended
June 30, 1996, 1995 and 1994 consist of (in thousands):
78
<PAGE>
<TABLE>
<CAPTION>
1996 1995 1994
---------- ----------- ----------
<S> <C> <C> <C>
Current:
Federal $ 950 $ 24 $ 555
State 95 61 153
----------- ----------- ----------
Total current 1,045 85 708
----------- ----------- ----------
Deferred:
Federal 326 209 267
State 22 (19) (5)
----------- ----------- ----------
Total deferred 348 190 262
----------- ----------- ----------
Tax benefit for disqualification of
stock options credited to stockholders'
equity 18 55 35
----------- ----------- ----------
Total provision 1,411 $ 330 $ 1,005
=========== =========== ==========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities as of June 30, 1996 and 1995
are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred tax asset:
Capitalized servicing costs $ 375 $ 442
Deferred loan fees 243 191
Deferred gain on sale of servicing 38
Accrued vacation 76 81
Reserves 278 189
Unrealized loss on mortgage-backed
securities available for sale 117
Alternative minimum tax credit carryover 66
Other 87 40
-------- --------
Gross deferred tax asset 1,176 1,047
-------- --------
Deferred tax liability:
Deferred premium on loans sold 468 573
Deferred premium on loans in portfolio 230 123
Fixed assets 199 137
Book over tax basis for originated
mortgage servicing rights 312
Unrealized gain on mortgage-backed
securities available for sale 239
Other 74 90
-------- --------
Gross deferred tax liability 1,283 1,162
-------- --------
Deferred tax asset valuation allowance -- ---
-------- --------
Net deferred tax (liability) asset $ (107) $ (115)
======== ========
</TABLE>
79
<PAGE>
Management believes, based on Suncoast's earnings history and its
future expectations, that Suncoast will have sufficient taxable income in
future years to realize the net deferred income tax asset. In evaluating the
expectation of sufficient future taxable income, management considered future
reversal of temporary differences and available tax planning strategies that
could be implemented, if required. A valuation allowance was not required as of
June 30, 1996 and 1995 as it was management's assessment that, based on
available information, it is more likely than not that the deferred tax asset
will be realized. A valuation will be established if there is a change in
management's assessment of the amount of the net deferred tax asset that is
expected to be realized.
P. OTHER INCOME
The following is a computation of Suncoast's gains on the sale of
loans and loan servicing rights for the years ended June 30 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- -----------
<S> <C> <C> <C>
Proceeds from sales of loans
and loan servicing rights $ 117,818 $ 79,873 $ 2,181,886
Carrying value of loans sold (117,000) (79,313) (2,166,937)
----------- ---------- -----------
Cash before premiums
on the sale of loans 818 560 14,949
Premiums on the sale of loans 107 14
----------- ---------- -----------
$ 925 $ 560 $ 14,963
=========== ========== ===========
</TABLE>
Other income for the years ended June 30 consists of (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Loan processing and other
fees from RTC contracts $ 169 $ 573 $1,004
Rental income 306 310 180
Other 342 433 371
------ ------ ------
$ 817 $1,316 $1,555
====== ====== ======
</TABLE>
Q. OTHER EXPENSES
Other expenses for the years ended June 30 consists of (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- --------
<S> <C> <C> <C>
Loan expenses $ 375 $ 824 $ 2,162
Federal deposit insurance 859 773 772
Foreclosure expenses on servicing
portfolio 995 614 487
Data processing 645 535 634
Telephone 329 469 1,247
Business insurance 421 463 640
</TABLE>
80
<PAGE>
<TABLE>
<S> <C> <C> <C>
Professional and legal 356 381 294
Postage and overnight delivery 172 240 736
Stationery and supplies 240 210 502
Bank service charges and fees 109 95 207
Other 879 1,007 1,364
------- --------- --------
$ 5,380 $ 5,611 $ 9,045
======= ========= ========
</TABLE>
R. BUSINESS SEGMENTS
Suncoast's operations consist of activities in three principal
business segments: banking, mortgage banking and loan servicing. Revenues in
the banking segment consist primarily of interest on mortgage loans and
investment securities. Mortgage banking activities derive revenues primarily
from the interest on loans held for sale, sales of loans in the secondary
mortgage market, sale of loan servicing rights and loan origination income.
Loan servicing activities derive revenues primarily from the collection of fees
on loans serviced. During 1995, Suncoast shifted its primary business emphasis
from mortgage banking to banking. The following is segment information for the
fiscal years ended June 30 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
BANKING
Revenues:
Interest income $ 23,949 $ 25,011 $ 9,358
Gains on the sale of
mortgage-backed securities 2,950 1,388
Other income 731 1,117 1,154
-------- -------- --------
27,630 27,516 10,512
-------- -------- --------
Expenses:
Interest expense 16,489 18,499 6,449
Employee compensation
and benefits 3,048 1,918 1,311
Depreciation 396 212 178
Provision for losses on real
estate 95 68 150
Provision for loan losses 153 95
Other expenses 2,700 2,318 1,557
-------- -------- --------
22,881 23,110 9,645
-------- -------- --------
Banking income before income
taxes $ 4,749 $ 4,406 $ 867
======== ======== ========
MORTGAGE BANKING
Revenues:
Interest income $ 1,654 $ 300 $ 5,526
Gains on the sale of loans and
loan servicing assets, net 304 560 14,963
Loan origination and other income 331 336 6,212
-------- -------- --------
2,289 1,196 26,701
-------- -------- --------
</TABLE>
81
<PAGE>
<TABLE>
<S> <C> <C> <C>
Expenses:
Interest expense 1,009 236 3,703
Employee compensation
and benefits 1,272 2,438 13,347
Depreciation 134 412 564
Other expenses 1,050 2,667 8,249
-------- -------- --------
3,465 5,753 25,863
-------- -------- --------
Mortgage banking income (loss)
before income taxes $ (1,176) $ (4,557) $ 838
======== ======== ========
LOAN SERVICING
Revenues:
Loan servicing fees $ 6,016 $ 7,450 $ 8,088
Amortization of loan
servicing assets (1,617) (1,175) (3,508)
-------- -------- --------
Loan servicing income 4,399 6,275 4,580
Interest income 2,355 2,544 3,727
Gain on sale of loans and
loan servicing assets, net 621
Other income 190 254 264
-------- -------- --------
7,565 9,073 8,571
-------- -------- --------
Expenses:
Interest expense 439 283 758
Employee compensation
and benefits 2,920 3,649 3,704
Depreciation 610 784 559
Other expenses 3,356 3,275 2,147
-------- -------- --------
7,325 7,991 7,168
-------- -------- --------
Loan servicing income (loss)
before income taxes $ 240 $ 1,082 $ 1,403
======== ======== ========
Assets:
Banking $372,861 $439,175 $297,926
Mortgage banking 8,844 6,356 43,827
Loan servicing 20,864 16,822 17,337
-------- -------- --------
$402,569 $462,353 $359,090
======== ======== ========
Capital dispositions
(expenditures), net:
Banking $ (447) $ 8 $ (81)
Mortgage banking (188) 64 (1,760)
Loan servicing (860) 8 (86)
-------- -------- --------
$ (1,495) $ 80 $ (1,927)
======== ======== ========
</TABLE>
82
<PAGE>
S. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate fair value:
-- The book value was used as a reasonable estimate of fair value for
cash and amounts due from depository institutions, interest-bearing
deposits, variable rate loans and fixed rate loans with maturities
less than one year, demand and savings deposits, and short-term time
deposits.
-- The book value was used as a reasonable estimate of fair value for
stock issued by the Federal Home Loan Bank and short-term repurchase
agreements maturing within one month.
-- Fair values of fixed rate loans and certificates of deposit with
maturities greater than one year are estimated by discounting the
future cash flows using the current rates at which similar instruments
would be issued with comparable credit ratings and terms.
-- The fair values of commitments, letters of credit and guarantees are
equal to their contractual amount based on the assumptions that
Suncoast will be required to perform on all such instruments existing.
-- The fair value of loan servicing assets is determined by independent
valuation or discounted cash flow analysis as discussed in Note F.
Since the reported fair values of financial instruments are based on a
variety of factors, they may not represent actual values that could have been
realized or that will be realized in the future.
The estimated fair values of Suncoast's financial instruments for
which fair value differed from book value are as follows (in thousands):
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
---------------------------- ----------------------------
Book Value Fair Value Book Value Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Loans receivable in portfolio $ 31,563 $ 31,635 $ 16,568 $ 16,634
Loan servicing assets $ 11,718 $ 12,140 $ 10,105 $ 10,186
Certificates of deposit $ 28,657 $ 29,103 $ 40,458 $ 40,758
</TABLE>
T. CONTINGENCIES
In order to increase the Savings Association Insurance Fund ("SAIF")
of the Federal Deposit Insurance Corporation to its minimum required reserve
ratio of 1.25%, a proposal has been made to impose a special one-time
assessment of 65 to 90 basis points on all SAIF-insured deposits as of March
31, 1995. This one-time assessment may be payable in 1997 at which point the
Association's annual premium would thereafter be reduced. If the assessment is
made at the currently proposed rate, the effect on the Bank would be an
after-tax charge of approximately $1.9 million.
83
<PAGE>
U. SUBSEQUENT EVENT
On July 15, 1996, Suncoast entered into a definitive agreement to be
acquired by BankUnited Financial Corporation ("BankUnited"). Under terms of
the agreement one share of BankUnited Class A Common Stock will be issued for
each share of Suncoast Common Stock. Each share of Suncoast Preferred Stock
will be exchanged for a new issue of BankUnited Preferred Stock having
substantially similar terms as the Suncoast Preferred Stock. The transaction
is subject to stockholder and regulatory approvals and other conditions and is
expected to close by December 1996.
84
<PAGE>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA AND SUBSIDIARIES
- - -----------------------------------------------------------------------------
Consolidated Quarterly Results (Unaudited)
- - -----------------------------------------------------------------------------
The following table summarizes the quarterly results of operations for the
fiscal years ended June 30, 1996 and 1995 (in thousands, except per share data):
<TABLE>
<CAPTION>
First Quarter Second Quarter
Ended September 30, Ended December 31,
--------------------- ---------------------
1995 1994 1995 1994
------ ------ ------ -------
<S> <C> <C> <C> <C>
Income $9,510 $8,502 $9,333 $9,371
Expense 8,804 8,201 8,613 9,170
------ ------ ------ ------
Net income 706 301 720 201
Preferred stock dividends 276 276 276 276
------ ------ ------ ------
Earnings (loss) available to common stockholders $ 430 $ 25 $ 444 $ (75)
====== ====== ====== ======
Earnings (loss) per share - primary $ 0.20 $ 0.01 $ 0.21 $(0.04)
Earnings per share - fully diluted $ 0.19 * $ 0.20 *
====== ====== ====== ======
<CAPTION>
Third Quarter Fourth Quarter
Ended March 31, Ended June 30,
---------------------- ---------------------
1996 1995 1996 1995
------ ------- ------ -------
<S> <C> <C> <C> <C>
Income $9,136 $9,755 $9,505 $10,157
Expense 8,633 9,926 9,032 9,887
------ ------ ------ -------
Net income (loss) 503 (171) 473 270
Preferred stock dividends 276 276 276 276
------ ------ ------ -------
Earnings (loss) available to common stockholders $ 227 $ (447) $ 197 $ (6)
====== ====== ====== =======
Earnings (loss) per share - primary $ 0.10 $(0.23) $ 0.10 $ -
Earnings per share - fully diluted $ 0.10 * $ 0.10 *
====== ====== ====== =======
</TABLE>
* Omitted due to anti-dilution.
85
Schedule 13E-4 Exhibit (g)(4)
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA
FORM 10-Q
INDEX
DESCRIPTION
PAGE
Part I. FINANCIAL INFORMATION ----
Item 1. Financial Statements:
1. Consolidated Statements of Financial
Condition as of September 30, 1996 (Unaudited)
and June 30, 1996 3
2. Consolidated Statements of Operations [Unaudited),
Three months ended September 30,1996
and 1995 4
3. Consolidated Statements of Cash Flow (Unaudited),
Three months ended September 30,1996 and 1995 5
4. Notes to Unaudited Consolidated Financial
Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-20
Part II. OTHER INFORMATION 21
SIGNATURE PAGE 22
<PAGE>
<TABLE>
<CAPTION>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPT. 30,
1996 JUNE 30,
(UNAUDITED) 1996
---------- ---------
ASSETS (In thousands)
<S> <C> <C>
Cash and cash equivalents:
Cash and amounts due from depository institutions $ 4,588 $ 1,260
Interest-earning deposits 1,430 622
---------- ---------
Total cash and cash equivalents 6,018 1,882
---------- ---------
Repurchase agreements 15,000
Federal Home Loan Bank Stock 3,075 3,875
Loans receivable:
In portfolio 330,781 320,828
Held for sale, sold under commitments 4,208 6,730
---------- ---------
Total loans receivable, net 334,989 327,558
---------- ---------
Mortgage-backed securities available for sale 18,196 18,391
Loan servicing assets:
Purchased mortgage servicing rights 9,396 9,525
Originated mortgage servicing rights 747 834
Premiums on the sale of loans 1,311 1,359
---------- ---------
Total loan servicing assets 11,454 11,718
---------- ---------
Accrued interest and dividends receivable 3,065 3,042
Real estate owned, net 245 261
Amounts due from purchasers of loans and loan servicing rights 128 19,883
Office properties and equipment 6,787 6,640
Other assets 10,446 9,319
---------- ---------
$ 409,403 $ 402,569
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 298,461 $ 301,201
Advances by borrowers for taxes and insurance 4,063 3,138
Advances from Federal Home Loan Bank and other borrowings 73,310 68,500
Deferred income taxes 0 107
Principal and interest payable on loans serviced for others 105 274
Other liabilities 8,794 3,811
---------- ---------
Total liabilities 384,733 377,031
---------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred stock - $5.00 par value; 1,000,000 shares authorized;
920,000 shares issued and outstanding 4,600 4,600
Common stock - $1.10 par value; 5,000,000 shares authorized; 2,197,930 shares
and 1,996,930 shares, respectively, issued and outstanding 2,418 2,197
Additional paid-in capital 17,657 17,295
Retained earnings 301 1,642
---------- ---------
24,976 25,734
Unrealized gain (loss) on mortgage-backed securities available for sale, net of
deferred income taxes (306) (196)
---------- ---------
Total stockholders' equity 24,670 25,538
---------- ---------
$ 409,403 $ 402,569
========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
-------- --------
(In thousands, except per share data)
<S> <C> <C>
Interest income:
Loans $ 6,600 $ 3,138
Mortgage-backed securities 379 2,738
Repurchase agreements and investments 256 561
Premiums on the sale of loans 30 34
Other 48 299
-------- --------
7,313 6,770
-------- --------
Interest expense:
Deposits 3,442 3,981
Short-term borrowings 972 614
Long-term borrowings 25
-------- --------
4,439 4,595
-------- --------
Net interest income before provision for loan losses 2,874 2,175
Provision for loan losses 12
-------- --------
Net interest income after provision for loan losses 2,862 2,175
-------- --------
Other income (expense):
Loan servicing fees 1,412 1,536
Amortization of loan servicing assets (466) (300)
-------- --------
Loan servicing income 946 1,236
Gains on the sale of loans and loan servicing assets, net 222 14
Gains on the sale of mortgage-backed securities, net 1,213
Other 226 277
-------- --------
1,394 2,740
-------- --------
Non-interest expenses:
Employee compensation and benefits 1,715 1,627
Occupancy and equipment 739 731
Provision for losses on real estate 16
Other 1,161 1,437
Assessment to recapitalize Savings Association Insurance Fund 2,317
-------- --------
5,948 3,795
-------- --------
Income before taxes (1,692) 1,120
(Benefit from) provision for income taxes (626) 414
-------- --------
Net (loss) income $ (1,066) $ 706
======== ========
Net (loss) income (1,066) 706
Preferred stock dividends 276 276
-------- --------
(Loss) earnings available to common stockholders $(1,342) $ 430
======== ========
(Loss) earnings per common share:
Primary $ (0.62) $ 0.20
Fully diluted $ (0.62) $ 0.19
Weighted-average common and common equivalent shares:
Primary 2,160 2,140
Fully diluted 3,710 3,680
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNUADITED)
THREE MONTHS ENDED
SEPTEMBER 30
1996 1995
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES: (IN THOUSANDS)
<S> <C> <C>
Net (loss) income $ (1,065) $ 706
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization of office properties and equipment 296 283
(Benefit from) provision for income taxes (626) 414
Accretion of deferred loan fees (61) (45)
Amortization of purchased and originated mortgage servicing rights 379 255
Amortization of premiums on the sale of loans 48 45
Amortization of discounts and premiums, net 67 (136)
Net decrease (increase) in loans receivable held for sale 2,532 (2,304)
Provision for loan losses 12
Provision for losses on real estate 16
Net decrease in amounts due from purchasers of loans and loan servicing rights 19,755 254
Increase in amounts due for purchases of mortgage securities 48,634
Gains on the sale of loans and loan servicing assets, net (222) (14)
Gains on the sale of mortgage-backed securities (1,212)
Increase in accrued interest and dividends receivable (23) (496)
Increase in other assets ( 1,135) (231)
Increase (decrease) in other liabilities 5,398 (3,412)
Other 8 8
--------- ---------
Net cash provided by (used in) operating activities 25,379 42,749
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans receivable in portfolio (9,909) (34,379)
Principal repayments of mortgage-backed securities 20 4,361
Purchase of mortgage-backed securities (149,307)
Proceeds from sales of mortgage-backed securities 117,158
Purchase of repurchase agreements (15,000) (1,870,000)
Proceeds from maturities of repurchase agreements 1,935,000
Capital (expenditures) dispositions, net (443) (115)
(Decrease) increase in originated mortgage servicing rights 45 (68)
Payments for purchased mortgage servicing rights (208)
Proceeds from sales of purchased servicing rights and premiums on the sale of loans 150
Proceeds from sale of real estate owned 285
Purchase of Federal Home Loan Bank stock 2,900
Proceeds from redemption of Federal Home Loan Bank stock (2,100)
--------- ---------
Net cash provided by (used in) investing activities (24,545) 2,935
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in deposits (2,740) (21,529)
Increase in advances by borrowers for taxes and insurance 925 318
Advances from Federal Home Loan Bank 108,500
Repayments of advances and other borrowings from Federal Home Loan Bank, net (118,000)
Proceeds from (repayments of) other borrowings, NET 14,310 (63,623)
Proceeds from issuance of common stock 583 14
Cash dividends paid on preferred stock (276) (276)
--------- ---------
Net cash (used in) provided by financing activities 3,302 (85,096)
--------- ---------
Net (decrease) increase in cash and cash equivalents 4,136 (39,412)
Cash and cash equivalents at beginning of period 1,882 43,770
--------- ---------
Cash and cash equivalents at end of period $ 6,018 $ 4,358
--------- ---------
Supplemental disclosures of cash flow information:
Cash paid for interest $ 4,293 $ 4,867
Cash paid for income taxes, net of refunds received -0- 1
Supplemental non-cash activities:
REO obtained through foreclosure $ -0- $ -0-
</TABLE>
The accompanying notes are an integral part of these financial statements.
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SUNCOAST SAVINGS AND LOAN ASSOCIATION, FSA
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
( 1 ) ACCOUNTING PRINCIPLES
The unaudited interim consolidated financial statements of Suncoast
Savings and Loan Association, FSA ("Suncoast") presented herein should be read
in conjunction with the audited consolidated financial statements of Suncoast
for the fiscal year ended June 30, 1996 and the footnotes to such statements.
The Consolidated Statement of Financial Condition as of September
30, 1996 and the Consolidated Statements of Operations for the three months
ended September 30, 1996 and 1995 and the Consolidated Statements of Cash Flows
for the three months ended September 30, 1996 and 1995 are unaudited, but in the
opinion of management reflect all adjustments (none of which was other than a
normal recurring accrual) which are necessary to a fair statement of the results
for the interim periods presented. Interim results are not necessarily
indicative of the results to be expected for the entire year.
Certain amounts reported in prior periods' financial statements have
been reclassified to conform to classifications used for the period ended
September 30, 1996.
(2) EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per share is computed on the basis of the weighted
average number of common shares outstanding during the period plus common stock
equivalents applicable to stock options. When dilutive, fully diluted earnings
(loss) per common share is derived as follows: Earnings (loss) available to
common shareholders are increased by preferred dividends paid eliminated upon
conversion of the preferred shares to common shares. This remainder is divided
by the sum of the average number of common shares outstanding for the period
plus the added common shares that would have been outstanding if: (a) all of the
outstanding preferred shares had been converted into common shares at the
beginning of the period and (b) all stock options granted that have economic
value were exercised at the beginning of the period, and the related funds that
would have been received by Suncoast upon such exercise were used to repurchase
outstanding common shares.
(3) ASSESSMENT TO RECAPITALIZE THE SAVINGS ASSOCIATION INSURANCE FUND ("SAIF")
On September 30, 1996, Congressional legislation was enacted to
recapitalize the SAIF and to merge the fund into the Bank Insurance Fund
("BIF"). Both SAIF and BIF are administered by the Federal Deposit Insurance
Corporation ("FDIC"). As a result of the legislation, Suncoast
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has been assessed $2,317,000 which has been accrued as an expense at September
30, 1996 and will be paid on November 27, 1996.
(4) PENDING MERGER
On July 15, 1996, Suncoast entered into a definitive agreement to be
acquired by BankUnited Financiai Corporation ("BankUnited"). Under terms of the
agreement one share of BankUnited Class A Common Stock will be issued for each
share of Suncoast Common Stock. Each share of Suncoast Preferred Stock will be
exchanged for a new issue of BankUnited Preferred Stock having substantially
similar terms as the Suncoast Preferred Stock. The transaction has now been
approved by stockholders of both Suncoast and BankUnited and has received all
regulatory approvals. The merger is expected to be effective on November 15,
1996.
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