FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 5-43936
BANKUNITED FINANCIAL CORPORATION
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(Exact name of registrant as specified in its charter)
FLORIDA 65-0377773
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
255 ALHAMBRA CIRCLE, CORAL GABLES 33134
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(Address of principal executive offices) (Zip Code)
(305) 569-2000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the registrant's common stock at the close
of business on February 24, 1998 was 15,072,314 shares of Class A Common Stock,
$.01 par value, and 286,499 shares of Class B Common Stock, $.01 par value.
This Form 10-Q/A contains 19 pages. The Index to Exhibits appears on page 17.
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BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
Form 10-Q/A Report for the Quarter Ended December 31, 1997
INDEX
PAGE NO.
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PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition as of
December 31, 1997 (unaudited) and September 30, 1997 3
Consolidated Statements of Operations (unaudited)
for the Three Months Ended December 31, 1997
and December 31, 1996 4
Consolidated Statements of Cash Flows (unaudited)
for the Three Months Ended December 31, 1997 and
December 31, 1996 5
Condensed Notes to Consolidated Financial
Statements (unaudited) 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
PART II - OTHER INFORMATION
Item 2. CHANGES IN SECURITIES 15
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 15
2
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<TABLE>
<CAPTION>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, SEPTMEBER 30,
1997 1997
(Unaudited) 1997
-------------- -------------
(Dollars in thousands, except per share amounts)
<S> <C> <C>
ASSETS
Cash $ 13,136 $ 10,571
Federal Home Loan Bank overnight deposits 20,261 79,413
Securities purchased under agreements to resell 30,032 --
Tax certificates (net of reserves of $714 at December 31, 1997 and
$697 at September 30, 1997) 40,035 49,283
Investments held to maturity (market value of approximately
$14,612 at December 31, 1997 and $14,613 at September 30, 1997) 14,497 14,494
Investments available for sale, at market 8,168 10,166
Mortgage-backed securities, held to maturity (market
value of approximately $10,946 at December 31, 1997
and $11,292 at September 30, 1997) 10,882 11,352
Mortgage-backed securities available for sale, at market 84,403 108,919
Loans receivable, net 2,579,433 1,661,381
Mortgage loans held for sale (market value of approximately $93,443
at December 31, 1997 and $105,980 at September 30, 1997) 92,224 104,342
Other interest earning assets 63,098 33,599
Office properties and equipment, net 8,682 7,371
Real estate owned, net 780 611
Accrued interest receivable 22,743 16,261
Mortgage servicing rights 5,030 4,783
Goodwill 14,559 14,278
Prepaid expenses and other assets 20,813 18,582
---------- ----------
Total assets $3,028,776 $2,145,406
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $1,444,102 $1,195,892
Securities sold under agreements to repurchase 30,000 30,000
Advances from Federal Home Loan Bank 1,261,466 671,484
Company obligated mandatorily redeemable trust preferred securities of
subsidiary trust holding solely junior subordinated deferrable interest
debentures of the Company 116,000 116,000
Interest payable (primarily on deposits and advances from Federal Home
Loan Bank) 5,770 3,844
Advance payments by borrowers for taxes and insurance 6,434 10,688
Accrued expenses and other liabilities 19,373 17,853
---------- ----------
Total liabilities 2,883,145 2,045,761
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock, Series B, 1993, 1996 and 9%, $0.01 par value. Authorized
shares - 10,000,000; issued and outstanding shares - 1,644,805 at
December 31,1997 and 2,175,296 at September 30, 1997 16 22
Class A Common Stock, $.01 par value. Authorized shares - 30,000,000;
issued and outstanding shares - 13,923,022 at December 31, 1997 and
9,257,098 at September 30, 1997 139 92
Class B Common Stock, $.01 par value. Authorized shares - 3,000,000;
issued and outstanding shares - 285,958 at December 31, 1997 and 275,685
at September 30, 1997 3 3
Additional paid-in capital 131,149 86,679
Retained earnings 13,632 11,988
Net unrealized gains on securities available for sale, net of tax 692 861
---------- ----------
Total stockholders' equity 145,631 99,645
---------- ----------
Total liabilities and stockholders' equity $3,028,776 $2,145,406
========== ==========
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SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
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<CAPTION>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
(Unaudited)
1997 1996
-------- --------
(In thousands, except earnings per share)
<S> <C> <C>
Interest income:
Interest and fees on loans $ 36,893 $ 16,616
Interest on mortgage-backed securities 2,192 1,309
Interest on short-term investments 420 467
Interest and dividends on long-term investments
and other earning assets 1,945 1,099
-------- --------
Total interest income 41,450 19,491
-------- --------
Interest expense:
Interest on deposits 17,584 8,882
Interest on borrowings 11,591 3,505
Preferred dividends of Trust Subsidiary 2,908 28
-------- --------
Total interest expense 32,083 12,415
-------- --------
Net interest income before provision for loan losses 9,367 7,076
Provision for loan losses 650 250
-------- --------
Net interest income after provision for loan losses 8,717 6,826
-------- --------
Non-interest income:
Service fees, net 452 575
Gain (loss) on sale of loans and mortgage-backed securities 1,115 (11)
Other 77 36
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Total non-interest income 1,644 600
-------- --------
Non-interest expenses:
Employee compensation and benefits 2,480 1,915
Occupancy and equipment 886 886
Insurance 255 361
Professional fees - legal and accounting 622 222
Other operating expenses 2,782 1,421
-------- --------
Total non-interest expenses 7,025 4,805
-------- --------
Income before income taxes and preferred stock dividends 3,336 2,621
Income taxes 1,361 1,022
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Net income before preferred stock dividends 1,975 1,599
Preferred stock dividends 332 672
-------- --------
Net income after preferred stock dividends $ 1,643 $ 927
======== ========
Earnings Per Share
Basic $ 0.13 $ 0.14
======== ========
Diluted $ 0.12 $ 0.13
======== ========
Weighted average number of common shares
assumed outstanding during the period:
Basic 13,012 6,807
======== ========
Diluted 14,042 7,958
======== ========
</TABLE>
SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
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<CAPTION>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
(Unaudited)
1997 1996
--------- ---------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,975 $ 1,599
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Provision for loan losses 650 250
Provision for losses on tax certificates 16 18
Depreciation and amortization 328 313
Amortization of discounts and premiums on investments (2) 8
Amortization of discounts and premiums on mortgage-backed securities (633) 30
Amortization of discounts and premiums on loans (1,162) (23)
Amortization of loan servicing assets 285 163
Amortization of goodwill 208 113
Loans originated for sale (12,037) (5,193)
Increase in accrued interest receivable (6,481) (1,097)
Increase (decrease) in interest payable on deposits and FHLB advances 1,926 (845)
Increase (decrease) in accrued expenses (60) 2,347
Increase (decrease) in accrued taxes 2,687 (937)
Increase (decrease) in deferred taxes (249) 17
Decrease in other liabilities (1,005) (27,320)
(Increase) decrease in prepaid expenses and other assets (3,004) 1,763
Proceeds from sale of loans 28,574 3,657
Recovery on loans 5 11
(Gain) loss on sales of loans (692) 11
Gain on sale of mortgage-backed securities (423) --
(Gain) loss on sales of real estate owned (54) 23
--------- ---------
Net cash provided by (used in) operating activities 10,852 (25,092)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans (921,700) (58,864)
Proceeds from sale of real estate owned 313 488
Purchase of other earning assets (34,250) (2,650)
Proceeds from repayments of mortgage-backed securities 8,747 3,136
Proceeds from repayments of other earning assets 4,751 3,000
Proceeds from repayments of investment securities 2,000 --
Proceeds from sale of mortgage securities 17,021 --
Purchases of premises and equipment (1,639) (338)
Net decrease in tax certificates 9,231 6,281
Purchase of Suncoast's cash equivalents -- 32,803
--------- ---------
Net cash (used in) investing activities (915,526) (16,144)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 248,210 48,323
Net increase (decrease) in other borrowings 589,982 (16)
Net proceeds from issuance of preferred stock -- 9
Net proceeds from issuance of common stock 44,641 14
Net proceeds from issuance of trust preferred securities -- 48,350
Preferred Stock purchase (43) --
Preferred Stock, Series 1996 called (85) --
Dividends paid on the Company's preferred stock (332) (672)
Decrease in advances from borrowers for taxes and insurance (4,254) (4,490)
--------- ---------
Net cash provided by financing activities 878,119 91,518
--------- ---------
Increase (decrease) in cash and cash equivalents (26,555) 50,282
Cash and cash equivalents at beginning of period 89,984 34,136
--------- ---------
Cash and cash equivalents at end of period $ 63,429 $ 84,418
========= =========
SUPPLEMENTAL DISCLOSURES:
Transfer from loans to real estate owned $ 428 $ 1,160
========= =========
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SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
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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 month period
ended December 31, 1997 are not necessarily indicative of the results which may
be expected for the year ended 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, 1997.
2. CAPITAL
In January 1998, the Company called its 743,870 shares of its 8% Noncumulative
Convertible Preferred Stock, Series 1993 effective February 20, 1998 at $10.00
per share. Management expects substantially all shares of the preferred stock to
be converted into common stock at a ratio of one for one.
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 December
31, 1997 were as follows:
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<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 $ 44,850 1.5% $ 212,474 7.1% $ 167,624 5.6%
Core Capital $ 89,699 3.0% $ 212,474 7.1% $ 122,775 4.1%
Risk-Based Capital $134,722 8.0% $ 217,097 12.9% $ 82,375 4.9%
</TABLE>
3. ACQUISITIONS
On January 23, 1998, the Company acquired Consumers Bancorp, Inc., for
approximately $11 million in a combination of cash and stock, and merged its
wholly-owned subsidiary, Consumers Savings Bank, which had assets of $101.2
million and deposits of $84.2 million as of December 31, 1997, into the Bank.
On December 30, 1997, the Company entered into a definitive agreement to acquire
Central Bank for 1,516,500 shares of the Company's Class A common stock, subject
to adjustment under certain conditions. Central Bank is a state chartered
commercial bank which had assets of $96.9 million and deposits of $72.8 million
as of December 31, 1997. Central Bank operates 4 branch offices in Miami-Dade
County, Florida.
6
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On November 15, 1996, the Company acquired Suncoast Savings and Loan
Association, FSA. The balance sheet and results of operations of Suncoast have
been included with those of the Company as of and for periods subsequent to
November 15, 1996.
4. NEW ACCOUNTING PRONOUNCEMENTS
In June 1996, the FASB issued Statement of Financial Accounting Standards No.
125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" and in December 1996, the FASB issued a related
Statement of Financial Accounting Standards No. 127, "Deferral of the Effective
Date of Certain Provisions of FASB No. 125" (collectively "Statement No. 125").
Statement No. 125 provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishment of liabilities based on a
financial components approach that focuses on control. Portions of Statement No.
125 were effective for transactions entered into after December 31, 1996 with
the remaining portions effective for transactions entered into after December
31, 1997. The impact of adopting Statement No. 125 has not been nor is it
currently expected to be material to the Company's financial position or the
results of operations.
The Company has adopted Statement of Financial Accounting Standards No. 128
"Earnings per Share" and as required, restated all earnings per share to report
"Basic" and "Diluted" earnings per share.
5. 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 month
periods ended December 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, 1997.
This Quarterly Report on form 10-Q/A
contains forward looking statements.
Additional written or oral forward looking statements may be made by the Company
from time to time in filings with the Securities and Exchange Commission or
otherwise. Such forward looking statements are within the meaning of that term
in Section 27A of the Securities Act of 1933, as amended, (the "Securities Act")
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Such statements may include, but not be limited to, projections
of income, borrowing costs, prepayment rates, and plans for future operations or
acquisitions, as well as assumptions relating to the foregoing. The words
"believe," "expect," "anticipate," "estimate," "project," "intend," and similar
expressions identify forward looking statements that are inherently subject to
risks and uncertainties, some of which cannot be predicted or quantified. Future
events and actual results could differ materially from those set forth in,
contemplated by, or underlying the forward looking statements.
7
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DISCUSSION OF FINANCIAL CONDITION CHANGES FROM SEPTEMBER 30, 1997 TO
DECEMBER 31, 1997.
ASSETS
Total assets increased by $883 million, or 41.2%, from $2.1 billion at September
30, 1997, to $3.0 billion at December 31, 1997, principally due to the purchase
of $1.1 billion of residential mortgages as discussed more fully below.
The Company's short-term investments, primarily consisting of Federal Home Loan
Bank ("FHLB") overnight deposits, and securities purchased under agreements to
resell decreased by $29.1 million, or 36.7%, to $50.3 million at December 31,
1997, from $79.4 million at September 30, 1997 as a result of the Company's
acquisition of residential mortgages.
Mortgage-backed securities available for sale decreased $24.5 million or 22.5%
from $108.9 million at September 30, 1997 to $84.4 million at December 31, 1997,
due primarily to repayments and to sales of such securities as management took
advantage of the declining interest rate environment.
The Company's net loans receivable increased by $918 million, or 55.3%, to $2.6
billion at December 31, 1997, from $1.7 billion at September 30, 1997, primarily
due to the purchase of $1.1 billion of residential loans. Of these loans
purchased, $822 million, or 79.3%, were one year adjustable rate mortgages with
an initial or "teaser" rate below the fully indexed rate. These loans were
purchased primarily to leverage the additional capital ($43.9 million in net
proceeds) obtained from the issuance of 3.68 million shares of Class A Common
Stock during the quarter. (See "Capital" below).
During the three months ended December 31, 1997, the Company sold $27.9 million
of loans and recorded a gain of $692,000 on the sales.
Non-performing assets as of December 31, 1997 were $12.2 million which
represents a decrease of $2.1 million or 14.8% from $14.3 million as of
September 30, 1997. Non-performing assets as a percentage of total assets
declined 27 basis points from .67% as of September 30, 1997 to .40% as of
December 31, 1997 due not only to the decline in non-performing assets but also
to the increase in total assets.
The allowance for loan losses increased $611,000 from $3.7 million as of
September 30, 1997 to $4.3 million as of December 31, 1997. The increase was
attributable to additional provision for loan losses resulting primarily from
the growth of the loan portfolio.
8
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The following table sets forth information concerning the Company's
non-performing assets as of the dates indicated.
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------ -------------
(Dollars in thousands)
Non-accrual loans (1) $ 9,365 $10,866
Restructured loans 1,190 1,888
Loans past due 90 days and still accruing -- --
------- -------
Total non-performing loans 10,555 12,754
Non-accrual tax certificates 872 958
REO 780 611
------- -------
Total non-performing assets $12,207 $14,323
======= =======
Allowance for tax certificates losses $ 713 $ 697
Allowance for loan losses 4,304 3,693
------- -------
Total allowance $ 5,017 $ 4,390
======= =======
Non-performing assets as a percentage of
total assets .40% .67%
Non-performing loans as a percentage of
total loans .39% .72%
Allowance for loan losses as a percentage of
total loans .16% .21%
Allowance for loan losses as a percentage of
non-performing loans 40.78% 28.96%
Net charge-offs as a percentage of
average total loans .002% .04%
- -----------
(1) In addition to the above, management had concerns as to the borrower's
ability to comply with present repayment terms on $1,410,000 and
$1,878,000 of accruing loans as of December 31, 1997 and September 30,
1997. Management estimates the loss, if any, on these loans will not be
significant.
LIABILITIES
Deposits increased by $248 million, or 20.7%, to $1.44 billion at December 31,
1997 from $1.20 billion at September 30, 1997. Management believes this increase
is attributable to the Company's offering competitive interest rates and
personalized service in a market area dominated by super-regional banks and to
continued industry consolidation.
During the quarter, the Company opened two de novo branch offices and during
January 1998 opened a third branch office. The Company has announced that it has
signed leases for three additional de novo branch offices and has plans to open
as many as six more during the next twelve months.
9
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FHLB advances were $1.26 billion at December 31, 1997, up $590 million from $671
million at September 30, 1997. This increase was used to fund, together with
other liquidity sources, the loan purchases. (See "Discussion of Financial
Condition Changes from September 30, 1997 to December 31, 1997 - Assets").
CAPITAL
The Company's total stockholders' equity was $145.6 million at December 31,
1997, an increase of $46.0 million, or 46.1%, from $99.6 million at September
30, 1997. The increase is due primarily to the issuance of 3.68 million shares
of Class A Common Stock pursuant to a public stock offering. The net proceeds
from the offering were $43.9 million.
In September 1997, the Company exercised its right to call all the outstanding
shares of its 8% Noncumulative Convertible Preferred Stock, Series 1996,
effective October 10, 1997. As a result 927,204 shares (387,709 shares as of
September 30, 1997) converted to 1,548,410 shares of Class A Common Stock at a
ratio of 12/3 shares of common stock for each share of preferred. The remaining
5,696 shares of preferred stock were redeemed at $15 per share.
In January 1998, the Company called its 743,870 shares of its 8% Noncumulative
Convertible Preferred Stock, Series 1993 effective February 20, 1998 at $10.00
per share. Management expects substantially all shares of the preferred stock to
be converted into common stock at a ratio of one for one.
LIQUIDITY AND CAPITAL RESOURCES
OTS regulations require that savings institutions, such as the Bank, maintain
specified levels of liquid investments in cash, United States government
securities and other qualifying investments. Regulations currently in effect
require the Bank to maintain liquid assets, as defined, of not less than 4.0% of
its net withdrawal deposit accounts plus short term borrowings. As of December
31, 1997 the Bank had liquid assets of 5.08%, which was in compliance with this
requirement.
The Company is in the process of securitizing certain purchased residential
mortgages in its portfolio. The securitization will give the Bank the capability
of borrowing, on a secured basis, additional funds which may be used to fund
additional loan purchases or repay a portion of FHLB advances.
The Company is also currently exploring several alternative financing
arrangements that would provide additional capital to permit additional growth.
The Company periodically has discussions with and reviews financial information
on other financial institutions which may lead to the acquisition of all or part
of that financial institution by the Company.
YEAR 2000
Data processing for the Company's major applications is performed by two third
party service bureaus. Both have indicated that their systems will be year 2000
compliant. Consequently, management does not anticipate that the year 2000 issue
will be material to the Company's operations or financial condition.
10
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1996.
NET INCOME AFTER PREFERRED STOCK DIVIDENDS
The Company had net income after preferred stock dividends of $1.64 million for
the three months ended December 31, 1997, compared to net income after preferred
stock dividends of $927,000 for the three months ended December 31, 1996. All
major categories of income and expense increased significantly in the three
months ended December 31, 1997 as compared to the three months ended December
31, 1996 and reflect the significant growth the Company has experienced in the
last year. Below is a more detailed discussion of each major category of income
and expenses.
NET INTEREST INCOME
Net interest income increased $2.29 million, or 32.3%, to $9.37 million for the
three months ended December 31, 1997 from $7.08 million for the three months
ended December 31, 1996. This increase is attributable to an increase in average
earning assets of $1.32 billion, or 132%, to $2.32 billion for the three months
ended December 31, 1997 from $998.3 million for the three months ended December
31, 1996, offset by a decline in the net interest spread of 120 basis points.
The increase in average earning assets is due primarily to loan purchases;
approximately $200 million of the increase in average earning assets is a result
of the acquisition of Suncoast Savings on November 15, 1996. The decline in the
interest rate spread of 120 basis points from 2.59% for the three months ended
December 31, 1996 to 1.39% for the three months ended December 31, 1997 is due
to a decline in the yield on interest earning assets of 65 basis points and an
increase in the rate paid on interest bearing liabilities of 55 basis points,
each for the reasons discussed below.
The increase in interest income of $21.96 million, or 113%, to $41.45 million
for the three months ended December 31, 1997 from $19.49 million for the three
months ended December 31, 1996, reflects increases in interest and fees on loans
of $20.27 million.
This increase in interest and fees on loans is due to an increase in average
loans outstanding of $1.24 billion, or 150% to $2.07 billion for the three
months ended December 31, 1997 from $830 million for the three months ended
December 31, 1996 which resulted from purchases of residential mortgages in the
secondary market. Because many of the loans purchased are adjustable-rate
mortgages in the "teaser" period, the yield on loans declined from 7.97% for the
three months ended December 31, 1996 to 7.10% for the three months ended
December 31, 1997. This 87 basis point drop in the yield earned on loans caused
the yield on all interest earning assets to decline 65 basis points from 7.78%
to 7.13%.
The increase in interest expense of $19.67 million, or 158%, to $32.08 million
for the three months ended December 31, 1997 from $12.42 million for the three
months ended December 31, 1996 primarily reflects an increase in interest
expense on interest bearing deposits of $8.70 million, or 98%, from $8.88
million for the three months ended December 31, 1996, to $17.58 million for the
three months ended December 31, 1997, an increase in interest expense on FHLB
advances and other borrowings of $8.09 million from $3.51 million for the three
months ended December 31, 1996 to $11.59 million for the three months ended
December 31, 1997, and an increase in preferred dividends of Trust Subsidiary of
$2.88 million to $2.91 million for the three months ended December 31, 1997. The
increase in each of these categories reflects significant increases in the
average balance for each category. The increase in the average balances in
interest bearing deposits, FHLB advances and other borrowings were used to fund
loan purchases. The proceeds from the Trust Preferred Securities were
contributed as capital to the Bank to
11
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fund its growth. Of the $599 million growth in average interest bearing
deposits, $504 million, or 84% was in certificates of deposits. Because the
growth in interest bearing liabilities was concentrated in the higher costing
categories of certificates of deposits, FHLB advances and other borrowings, and
preferred dividends of the Trust Subsidiary, the rate paid on interest bearing
liabilities increased 55 basis points from 5.19% for the three months ended
December 31, 1996 to 5.74% for the three months ended December 31, 1997.
PROVISION FOR LOAN LOSSES
The provision for loan losses for the three months ended December 31, 1997 was
$650,000 as compared to $250,000 for the three months ended December 31, 1996.
This increase is related to the strong loan growth in the three months ended
December 31, 1997.
The provision for loan losses represents management's estimate of the charge to
operations after reviewing the nature, volume, delinquency status, and inherent
risk in the loan portfolio in relation to the allowance for loan losses.
NON-INTEREST INCOME
Non-interest income for the three months ended December 31, 1997 was $1.6
million compared with $600,000 for the three months ended December 31, 1996, an
increase of $1.0 million. This increase is due to the gain on sale of loans and
mortgage-backed securities of $1.1 million recorded in the three months ended
December 31, 1997.
NON-INTEREST EXPENSES
Operating expenses increased $2.2 million, or 46.2%, to $7.03 million for the
three months ended December 31, 1997 compared to $4.81 million for the three
months ended December 31, 1996. The increase in expenses is attributable to the
rapid growth and branch office expansion the Company has experienced.
INCOME TAXES
The income tax provision was $1.36 million for the three months ended December
31, 1997, compared to $1.02 million for the three months ended December 31,
1996. The increase in income taxes is the result of the Company's higher pre-tax
earnings during the three months ended December 31, 1997, compared to the three
months ended December 31, 1996.
PREFERRED STOCK DIVIDENDS
Preferred stock dividends for the three months ended December 31, 1997 were
$332,000, a decrease of $340,000, as compared to $672,000 for the three months
ended December 31, 1996. This decrease is the result of the conversion to common
stock of Noncumulative Convertible Preferred Stock, Series C, C II and Series
1996 as well as the purchase by the Company of 452,883 shares of the 9%
Noncumulative Perpetual Preferred Stock.
12
<PAGE>
YIELDS EARNED AND RATES PAID
The following table sets forth certain information relating to the categories of
the Company's interest-earning assets and interest-bearing liabilities for the
periods indicated. All yield and rate information is calculated on an annualized
basis. Yield and rate information for a period is average information for the
period calculated by dividing the income or expense item for the period by the
average balances during the period of the appropriate balance sheet item. Net
interest margin is net interest income divided by average interest-earning
assets. Non-accrual loans are included in asset balances for the appropriate
period, whereas recognition of interest on such loans is discontinued and any
remaining accrued interest receivable is reversed, in conformity with federal
regulations. The yields and net interest margins appearing in the following
table have been calculated on a pre-tax basis.
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
-----------------------------------------------------------------------------
1997 1996
----------------------------------- ----------------------------------
AVERAGE AVERAGE
BALANCE INTEREST YIELD/RATE BALANCE INTEREST YIELD/RATE
---------- --------- ---------- --------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net $2,071,826 $ 36,893 7.10% $830,157 $ 16,616 7.97%
Mortgage-backed securities 113,910 2,192 7.70 78,721 1,309 6.65
Short-term investments (1) 28,383 420 5.79 33,021 467 5.53
Tax certificates 44,198 831 7.52 36,681 756 8.24
Long-term investments and
FHLB stock, net 62,062 1,114 7.14 19,736 343 6.89
--------- ------- ---- -------- -------- ----
Total interest-earning assets 2,320,379 41,450 7.13 998,316 19,491 7.78
--------- ------- ---- -------- -------- ----
Interest-bearing liabilities:
NOW/money market 106,372 748 2.79 73,103 413 2.24
Savings 168,177 1,991 4.70 106,209 1,254 4.68
Certificates of deposit 1,023,980 14,845 5.75 519,785 7,215 5.51
Trust Preferred securities 116,000 2,908 10.03 1,087 28 10.30
FHLB advances and other
borrowings 792,391 11,591 5.72 245,520 3,505 5.59
-------- ------- ---- -------- -------- ----
Total interest-bearing
liabilities 2,206,920 32,083 5.74 945,704 12,415 5.19
--------- ------- ---- ---------- -------- ----
Excess of interest-earning assets
over interest-bearing liabilities $ 113,459 $ 52,612
========= ========
Net interest income $ 9,367 $ 7,076
======= =======
Interest rate spread 1.39% 2.59%
===== =====
Net interest margin 1.66% 2.86%
===== =====
Ratio of interest-earning assets to
interest-bearing liabilities 105.14% 105.56%
======= =======
<FN>
- --------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and certificates
of deposit.
</FN>
</TABLE>
13
<PAGE>
RATE/VOLUME ANALYSIS
The following table presents, for the periods indicated, the change in interest
income and the changes in interest expense attributable to the changes in
interest rates and the changes in the volume of interest-earning assets and
interest-bearing liabilities. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable
to: (i) changes in volume (change in volume multiplied by prior year rate); (ii)
changes in rate (change in rate multiplied by prior year volume); (iii) changes
in rate/volume (change in rate multiplied by change in volume); and (iv) total
changes in rate and volume.
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
----------------------------------------------------
1997 VS. 1996
----------------------------------------------------
INCREASE (DECREASE) DUE TO
----------------------------------------------------
CHANGES CHANGES CHANGES TOTAL
IN IN IN INCREASE/
VOLUME RATE RATE/VOLUME (DECREASE)
--------- --------- ----------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest income attributable to:
Loans $ 24,186 $ (1,384) $ (2,526) $ 20,276
Mortgage-backed securities 585 206 92 883
Short-term investments (1) (66) 22 (3) (47)
Tax certificates 155 (66) (14) 75
Long-term investments and FHLB
stock 730 13 29 772
-------- -------- -------- --------
Total interest-earning assets 25,590 (1,209) (2,422) 21,959
-------- -------- -------- --------
Interest expense attributable to:
NOW/money market 188 101 46 335
Savings 732 3 2 737
Certificates of deposit 6,999 321 310 7,630
Trust Preferred securities 2,960 (1) (79) 2,880
FHLB advances and other
borrowings 7,785 75 226 8,086
-------- -------- -------- --------
Total interest-bearing liabilities 18,664 499 505 19,668
-------- -------- -------- --------
Increase (decrease) in net interest income $ 6,926 $ (1,708) $ (2,927) $ 2,291
======== ======== ======== ========
<FN>
- ----------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and certificates
of deposit.
</FN>
</TABLE>
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
Effective October 1, 1997 the Company and the holders of the Company's
Noncumulative Convertible Preferred Stock, Series B (the "Series B
Preferred Stock") agreed that the dividend rate on the Series B
Preferred Stock would be reduced from $0.7375 per share to $0.6750 per
share and that the Company would not redeem the Series B Preferred
Stock until October 1, 2007 or later, unless earlier redemption is
approved by the holders of at least 50% of the shares of Series B
Preferred Stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
11.1 Calculation of Earnings Per Share.
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
The Company filed the following current reports on Form 8-K during
the quarter for which this report is filed:
(i) Current Report on Form 8-K dated October 10, 1997 reporting
the conversion and redemption of the Company's 8%
Noncumulative Convertible Preferred Stock, Series 1996 and
the sale in a public offering of 3,680,000 shares of the
Company's Class A Common Stock; and
(ii) Current Report on Form 8-K dated December 30, 1997,
reporting the Company's agreement to acquire Central Bank.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
BANKUNITED FINANCIAL CORPORATION
Date: February 27, 1998 By: /s/ SAMUEL A MILNE
-------------------------
Samuel A. Milne
Executive Vice President
and Chief Financial Officer
16
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
Form 10-Q/A for the Quarter Ended December 31, 1997
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NO. NUMBERED PAGE
- ----------- -------------
11.1 Calculation of Earnings Per Share .................. 18
27.1 Financial Data schedule .................. 19
17
<TABLE>
<CAPTION>
EXHIBIT 11.1
Calculation of Earnings Per Share
(In thousands, except per share data)
FOR THE THREE MONTHS
ENDED DECEMBER 31,
----------------------
CALCULATION OF BASIC EARNINGS PER SHARE 1997 1996
-------- --------
<S> <C> <C>
Net income before preferred stock dividends $ 1,975 $ 1,599
Preferred stock dividends (332) (672)
-------- --------
Net income available to common shares $ 1,643 $ 927
======== ========
Weighted average number of common shares outstanding
during the period 13,012 6,807
======== ========
Basic earnings per share $ 0.13 $ 0.14
======== ========
FOR THE THREE MONTHS
ENDED DECEMBER 31,
----------------------
CALCULATION OF DILUTED EARNINGS PER SHARE 1997 1996
-------- --------
Net income before preferred stock dividends $ 1,975 $ 1,599
Preferred stock dividends (306) (588)
-------- --------
Net income available to common shares $ 1,669 $ 1,011
======== ========
Weighted average number of common shares outstanding
during the period 13,012 6,807
Conversion of Preferred Stock 306 803
Assumed exercise of stock options (Treasury Stock Method) 724 348
Weighted average number of diluted common shares
assumed outstanding during the period 14,042 7,958
======== ========
Diluted earnings per share $ 0.12 $ 0.13
======== ========
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BANK UNITED, FSB FOR THE THREE MONTHS ENDED December 31,
1997 AND IS QUALIFIED IN TIS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 13,136
<INT-BEARING-DEPOSITS> 50,293
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 92,571
<INVESTMENTS-CARRYING> 25,379
<INVESTMENTS-MARKET> 0
<LOANS> 2,675,961
<ALLOWANCE> 4,304
<TOTAL-ASSETS> 3,028,776
<DEPOSITS> 1,444,102
<SHORT-TERM> 1,407,466
<LIABILITIES-OTHER> 31,577
<LONG-TERM> 0
0
16
<COMMON> 142
<OTHER-SE> 145,473
<TOTAL-LIABILITIES-AND-EQUITY> 3,028,776
<INTEREST-LOAN> 36,893
<INTEREST-INVEST> 4,557
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 41,450
<INTEREST-DEPOSIT> 17,584
<INTEREST-EXPENSE> 32,083
<INTEREST-INCOME-NET> 9,367
<LOAN-LOSSES> 650
<SECURITIES-GAINS> 1,115
<EXPENSE-OTHER> 7,025
<INCOME-PRETAX> 3,336
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,336
<EPS-PRIMARY> .13
<EPS-DILUTED> .12
<YIELD-ACTUAL> 1.66
<LOANS-NON> 9,365
<LOANS-PAST> 0
<LOANS-TROUBLED> 1,190
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,693
<CHARGE-OFFS> 42
<RECOVERIES> 3
<ALLOWANCE-CLOSE> 4,304
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
