UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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
(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
(Address of principal executive offices) (Zip Code)
(305) 569-2000
(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 May 13, 1999 was 18,024,548 shares of Class A Common Stock, $.01
par value, and 395,477 shares of Class B Common Stock, $.01 par value.
This Form 10-Q contains 33 pages.
The Index to Exhibits appears on page 32.
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
Form 10-Q Report for the Quarter Ended March 31, 1999
INDEX
PAGE NO.
--------
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition as of
March 31, 1999 (unaudited) and September 30, 1998 3
Consolidated Statements of Operations (unaudited)
for the Three and Six Months Ended March 31, 1999
and March 31, 1998 4
Consolidated Statements of Stockholders' Equity
(unaudited) for the Six Months Ended March 31,
1999 and March 31, 1998 5
Consolidated Statements of Cash Flows (unaudited)
for the Six Months Ended March 31, 1999
and March 31, 1998 6
Condensed Notes to Consolidated Financial
Statements (unaudited) 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 28
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 29
2
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
MARCH 31, 1999 SEPTEMBER 30,
(Unaudited) 1998
-------------- -------------
(in thousands except share data)
<S> <C> <C>
ASSETS
Cash $ 27,296 $ 26,243
Federal Home Loan Bank overnight deposits 20,128 65,268
Securities purchased under agreements to resell 370,000 --
Tax certificates (net of reserves of $1,616 at March 31, 1999 and
$469 at September 30, 1998) 25,956 40,007
Investments held to maturity (market value of approximately
$5,060 at March 31, 1999 and $14,699 at September 30, 1998) 5,052 14,542
Investments available for sale, at market 21,148 23,661
Mortgage-backed securities, held to maturity (market value
of approximately $57,681 at March 31, 1999
and $143,505 at September 30, 1998) 57,546 146,146
Mortgage-backed securities available for sale, at market 286,948 199,610
Loans receivable, net 2,425,304 2,869,604
Mortgage loans held for sale (market value of approximately $512,057
at March 31, 1999 and $179,503 at September 30, 1998) 511,074 172,410
Other interest earning assets 51,177 51,313
Office properties and equipment, net 14,980 14,198
Real estate owned 2,126 1,974
Accrued interest receivable 25,344 32,864
Mortgage servicing rights 9,202 8,917
Goodwill 32,261 32,106
Prepaid expenses and other assets 33,159 39,520
---------- ----------
Total assets $3,918,701 $3,738,383
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $2,240,123 $2,124,824
Securities sold under agreements to repurchase 3,860 121,148
Advances from Federal Home Loan Bank 1,021,447 1,021,466
Senior notes 200,000 --
Company obligated mandatorily redeemable trust preferred securities of
subsidiary trusts holding solely junior subordinated deferrable interest
debentures of BankUnited 218,500 218,500
Interest payable (primarily on deposits and advances from Federal Home
Loan Bank) 9,712 7,825
Advance payments by borrowers for taxes and insurance 8,409 12,645
Accrued expenses and other liabilities 28,394 32,683
---------- ----------
Total liabilities 3,730,445 3,539,091
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY:
Preferred stock, Series B and Series 9%, $0.01 par value. Authorized shares -
10,000,000; issued and outstanding shares -
952,938 at March 31, 1999 and 926,697 at September 30, 1998 10 9
Class A Common Stock, $.01 par value. Authorized shares - 30,000,000;
issued and outstanding shares - 17,992,068 at March 31, 1999 and
17,816,213 at September 30, 1998 180 178
Class B Common Stock, $.01 par value. Authorized shares - 3,000,000;
issued and outstanding shares - 385,477 at March 31, 1999 and 331,743
at September 30, 1998 4 3
Additional paid-in capital 179,853 178,777
Retained earnings 7,530 18,448
Accumulated other comprehensive income, net of tax 679 1,877
---------- ----------
Total stockholders' equity 188,256 199,292
---------- ----------
Total liabilities and stockholders' equity $3,918,701 $3,738,383
========== ==========
</TABLE>
SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
--------------------------- ---------------------------
(Unaudited)
1999 1998 1999 1998
--------- --------- --------- ---------
(in thousands, except earnings per share)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 40,286 $ 45,734 $ 91,123 $ 82,627
Interest on mortgage-backed securities 3,081 3,765 7,154 5,957
Interest on short-term investments 2,813 1,551 3,661 1,971
Interest and dividends on long-term investments
and other earning assets 2,073 2,198 4,460 4,143
--------- --------- --------- ---------
Total interest income 48,253 53,248 106,398 94,698
--------- --------- --------- ---------
Interest expense:
Interest on deposits 26,869 22,617 54,535 40,200
Interest on borrowings 14,540 15,803 29,642 27,395
Preferred dividends of trust subsidiaries 5,289 3,468 10,577 6,376
--------- --------- --------- ---------
Total interest expense 46,698 41,888 94,754 73,971
--------- --------- --------- ---------
Net interest income before provision for loan losses 1,555 11,360 11,644 20,727
Provision for loan losses 6,336 400 6,736 1,050
--------- --------- --------- ---------
Net interest income (expense) after provision for loan losses (4,781) 10,960 4,908 19,677
--------- --------- --------- ---------
Non-interest income:
Service fees, net 998 506 2,076 957
Net gain (loss) on sale of loans and mortgage-backed securities 1 424 (8) 1,539
Other 210 85 434 163
--------- --------- --------- ---------
Total non-interest income 1,209 1,015 2,502 2,659
--------- --------- --------- ---------
Non-interest expenses:
Employee compensation and benefits 4,397 2,694 7,511 5,174
Occupancy and equipment 2,599 1,207 4,240 2,094
Insurance 417 283 797 538
Professional fees - legal and accounting 774 569 1,356 1,191
Data processing 446 242 804 459
Loan servicing expense 1,519 1,427 3,481 2,624
Other operating expenses 3,784 1,748 5,969 3,115
--------- --------- --------- ---------
Total non-interest expenses 13,936 8,170 24,158 15,195
--------- --------- --------- ---------
Income (loss) before income taxes and
preferred stock dividends (17,508) 3,805 (16,748) 7,141
Provision (benefit) for income taxes (6,578) 1,513 (6,214) 2,874
--------- --------- --------- ---------
Net income (loss) before preferred stock dividends (10,930) 2,292 (10,534) 4,267
Preferred stock dividends of BankUnited 196 182 384 514
--------- --------- --------- ---------
Net income (loss) after preferred stock dividends $ (11,126) $ 2,110 $ (10,918) $ 3,753
========= ========= ========= =========
Earnings (Loss) Per Share:
Basic $ (0.61) $ 0.14 $ (0.60) $ 0.27
========= ========= ========= =========
Diluted $ (0.61) $ 0.13 $ (0.60) $ 0.26
========= ========= ========= =========
Weighted average number of common shares
assumed outstanding during the period:
Basic 18,255 14,976 18,222 13,963
========= ========= ========= =========
Diluted 18,255 16,029 18,222 15,470
========= ========= ========= =========
</TABLE>
SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31, 1998 AND 1999
-----------------------------------------------------------------------------------
(Unaudited)
ACCUMULATED
OTHER
PREFERRED COMMON PAID-IN RETAINED COMPREHENSIVE
STOCK STOCK CAPITAL EARNINGS INCOME TOTAL
--------- --------- --------- --------- ------------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1997 $ 22 $ 95 $ 86,679 $ 11,988 $ 861 $ 99,645
Comprehensive income:
Net income -- -- -- 4,267 -- 4,267
Dividends declared on preferred stock -- -- -- (514) -- (514)
Other comprehensive loss, net of tax -- -- -- -- (212) (212)
---------
Total comprehensive income 3,541
Issuance of preferred stock -- -- 397 -- -- 397
Redemption of preferred stock (13) 16 (471) -- -- (468)
Stock issued through the
exercise of options, restricted
stock grants, directors'
compensation and employee
stock grants -- 2 943 -- -- 945
Common stock issued in connection
with the Consumer Bancorp
acquisition -- 5 6,294 -- -- 6,299
Common stock issued through
public offering -- 37 43,906 -- -- 43,943
--------- --------- --------- --------- --------- ---------
Balance, March 31, 1998 $ 9 $ 155 $ 137,748 $ 15,741 $ 649 $ 154,302
========= ========= ========= ========= ========= =========
Balance, September 30, 1998 $ 9 $ 181 $ 178,777 $ 18,448 $ 1,877 $ 199,292
Comprehensive loss:
Net loss -- -- -- (10,534) -- (10,534)
Dividends declared on preferred stock -- -- -- (384) -- (384)
Other comprehensive loss, net of tax -- -- -- -- (1,198) (1,198)
---------
Total comprehensive loss (12,116)
Stock issued through the
exercise of options, restricted
stock grants, directors'
compensation and employee
stock grants 1 3 1,020 -- -- 1,024
Common stock issued through
preferred stock dividends -- -- 56 -- -- 56
--------- --------- --------- --------- --------- ---------
Balance, March 31, 1999 $ 10 $ 184 $ 179,853 $ 7,530 $ 679 $ 188,256
========= ========= ========= ========= ========= =========
</TABLE>
SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
-------------------------------
1999 1998
----------- -----------
(Unaudited; in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (10,534) $ 4,267
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Provision for loan losses 6,736 1,050
Provision for losses on tax certificates 1,150 (162)
Depreciation and amortization 1,201 693
Amortization of fees, discounts and premiums 21,379 1,691
Amortization of mortgage servicing rights 568 668
Amortization of goodwill 767 446
Net (gain) loss on sales of loans and mortgage-backed securities 8 (1,539)
Net (gain) loss on the sale of real estate owned (71) 10
Loans originated for sale (140,399) (89,660)
Proceeds from sale of loans 23,307 49,069
Decrease (increase) in accrued interest receivable 7,520 (8,374)
Increase in interest payable on deposits and FHLB advances 1,887 2,806
Increase (decrease) in accrued taxes (6,704) 1,736
Increase (decrease) in other liabilities 2,631 (2,192)
Decrease (increase) in prepaid expenses and other assets 6,879 (5,511)
Purchase of mortgage servicing rights (480) --
Other, net 907 8
----------- -----------
Net cash used in operating activities (83,248) (44,994)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in loans 196,540 (1,002,815)
Purchase of investment securities (1,009) (13,041)
Purchase of mortgage-backed securities (116,504) (40,491)
Purchase of other earning assets (24,749) (34,330)
Proceeds from repayments of investment securities 12,750 2,000
Proceeds from repayments of mortgage-backed securities 112,785 42,178
Proceeds from repayments of other earning assets 24,885 20,274
Proceeds from sale of mortgage-backed securities -- 16,646
Proceeds from the sale of real estate owned 1,087 492
Purchases of office properties and equipment (2,890) (3,731)
Net decrease in tax certificates 14,051 18,070
Purchase of Consumers, net of acquired cash equivalents -- 13,995
----------- -----------
Net cash provided by (used in) investing activities 216,946 (980,753)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 115,299 542,773
Net increase (decrease) in Federal Home Loan Bank Advances (19) 369,948
Net increase in other borrowings 82,712 --
Capitalized cost for senior notes (2,069) --
Net proceeds from issuance of common stock 856 44,830
Net proceeds from issuance of trust preferred securities -- 98,900
Preferred Stock , Series 9% tender offer -- (43)
Preferred Stock, Series 1996 redemption -- (85)
Preferred Stock, Series 1993 redemption -- (314)
Dividends paid on BankUnited's preferred stock (328) (514)
Decrease in advances from borrowers for taxes and insurance (4,236) (600)
----------- -----------
Net cash provided by financing activities 192,215 1,054,895
----------- -----------
Increase in cash and cash equivalents 325,913 29,148
Cash and cash equivalents at beginning of period 91,511 89,984
----------- -----------
Cash and cash equivalents at end of period $ 417,424 $ 119,132
=========== ===========
Supplemental Disclosures:
Interest paid on deposits and borrowings $ 92,867 $ 67,321
=========== ===========
Transfer of loans to real estate owned $ 1,545 $ 1,390
=========== ===========
Transfer of loans from held for sale to portfolio $ 73,825 $ --
=========== ===========
Transfer of loans from portfolio to held for sale $ 288,319 $ --
=========== ===========
Income taxes paid $ -- $ 1,764
=========== ===========
</TABLE>
SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying unaudited consolidated financial statements include the
accounts of BankUnited Financial Corporation ("BankUnited") and its
subsidiaries, including BankUnited, FSB (the "Bank"). All significant
intercompany transactions and balances have been eliminated.
The 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 have been included. Operating results for the three-month and
six-month periods ended March 31, 1999 are not necessarily indicative of the
results which may be expected for the year ending September 30, 1999. For
further information, refer to the Consolidated Financial Statements and Notes
thereto included in BankUnited's Annual Report on Form 10-K for the fiscal year
ended September 30, 1998.
Certain prior period amounts have been reclassified to conform to the
March 31, 1999 consolidated financial statements.
7
<PAGE>
2. EARNINGS PER SHARE
The following table reconciles basic and diluted earnings (loss) per
share for the three and six months ended March 31, 1999 and 1998.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
------------------------- -------------------------
1999 1998 1999 1998
-------- -------- -------- --------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
BASIC EARNINGS (LOSS) PER SHARE:
Numerator:
Net income (loss) after preferred
stock dividends .......................... $(11,126) $ 2,110 $(10,918) $ 3,753
======== ======== ======== ========
Denominator:
Weighted average common shares
outstanding ............................... 18,255 14,976 18,222 13,963
======== ======== ======== ========
Basic earnings (loss) per share ................. $ (0.61) $ 0.14 $ (0.60) $ 0.27
======== ======== ======== ========
DILUTED EARNINGS (LOSS) PER SHARE:
Numerator:
Net income (loss) after preferred
stock dividends ........................... $(11,126) $ 2,110 $(10,918) $ 3,753
Plus:
Reduction of preferred stock dividends .... -- 25 -- 200
-------- -------- -------- --------
Diluted net income (loss) available to
common shareholders ....................... $(11,126) $ 2,135 $(10,918) $ 3,953
======== ======== ======== ========
Denominator:
Weighted average common shares
outstanding ............................... 18,255 14,976 18,222 13,963
Plus:
Number of common shares from the
conversion of options and warrants(1) .. -- 747 -- 735
Number of common shares from the conversion
of dilutive preferred stock(2) ........ -- 306 -- 772
-------- -------- -------- --------
Diluted weighted average common
shares outstanding ........................ 18,255 16,029 18,222 15,470
======== ======== ======== ========
Diluted earnings (loss) per share ............... $ (0.61) $ 0.13 $ (0.60) $ 0.26
======== ======== ======== ========
</TABLE>
- -------------------------------
(1) For the three and six months ended March 31, 1999, there were 204,000
and 273,000 common stock equivalent shares, respectively, of dilutive
options that were not included in the computation of diluted earnings
(loss) per share because of their antidilutive effect.
(2) For the three months ended March 31, 1999 and 1998 there were 356,000
and 0 common stock equivalent shares, respectively, of convertible
preferred stock outstanding that were not included in the computation
of diluted earnings (loss) per share because of their antidilutive
effect.
For the six months ended March 31, 1999 and 1998 there were 349,000 and
0 common stock equivalent shares, respectively, of convertible
preferred stock outstanding that were not included in the computation
of diluted earnings (loss) per share because of their antidilutive
effect.
8
<PAGE>
3. IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In October 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise." This Statement amends FASB
Statement No. 65, "Accounting for Certain Mortgage Banking Activities," to
require that after the securitization of mortgage loans held for sale, an entity
engaged in mortgage banking activities classify the resulting mortgage-backed
securities or other retained interests based on its ability and intent to sell
or hold those investments. This Statement is effective for the first fiscal
quarter beginning after December 15, 1998. The adoption of this Statement is
reflected in the financial statements contained in this Quarterly Report on Form
10-Q, but has not had, and is not expected to have, a material impact on the
financial position or results of operations of BankUnited.
4. CAPITAL
In December 1998, the Board of Directors of BankUnited authorized the
purchase from time to time in open market transactions of up to 1,000,000 shares
of BankUnited's Class A Common Stock at such prices as the Executive Committee
deems advantageous. As of the date of filing of this Quarterly Report on Form
10-Q, BankUnited had not purchased any shares of its Class A Common Stock on the
open market.
The Office of Thrift Supervision ("OTS") requires that the Bank meet
minimum regulatory, 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, 1999 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>
Core Capital $152,884 3.0% $312,712 8.18% $159,828 5.18%
Risk-Based Capital $150,511 8.0% $323,776 17.21% $173,265 9.21%
</TABLE>
5. COMPREHENSIVE INCOME
BankUnited adopted SFAS No. 130, "Reporting Comprehensive Income,"
effective October 1, 1998. BankUnited's comprehensive income includes all items
which comprise net income plus other comprehensive income which includes the
unrealized holding gains and losses on available for sale securities. For the
three and six months ended March 31, 1999 and 1998, BankUnited's other
comprehensive loss was as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
-------- -------- -------- --------
1999 1998 1999 1998
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Other comprehensive loss, net of taxes:
Unrealized holding gains (losses) arising
during the period .................... $ (230) $ (43) $(1,198) $ 50
Less: reclassification adjustment for
gains included in net income ......... -- -- -- (262)
------- ------- ------- -------
Total other comprehensive loss ................ $ (230) $ (43) $(1,198) $ (212)
======= ======= ======= =======
</TABLE>
9
<PAGE>
6. CONTINGENCIES AND OFF-BALANCE SHEET ACTIVITIES
During November 1998, the Bank established a program to issue from time
to time up to a total of $500 million aggregate principal amount of its Senior
Notes (the "Senior Notes") backed by an irrevocable stand-by letter of credit of
the FHLB of Atlanta. These notes may have either a fixed or floating rate of
interest, determined at the time of issuance, and will mature no sooner than 9
months and no more than 10 years from the date of issuance. The Bank intends to
use the net proceeds from the sale of the Senior Notes for general corporate
purposes that will ultimately promote home financing or other housing activity
and encourage and assist the Bank's asset/liability management. The notes have
been rated "Aaa" by Moody's Investors Service, Inc. and "AAA" by Standard &
Poor's Ratings Services. On February 2, 1999, the Bank issued and sold $200.0
million of Senior Notes which mature five years from the date of issuance and
bear interest at an annual rate of 5.40%, payable semiannually.
During April 1998, the Bank entered into two interest rate cap
contracts with a major Wall Street firm in notional amounts of $90.0 million and
$60.0 million, terminating on October 23, 1999 and April 23, 2000, respectively.
The contracts require the counter-party to pay the Bank quarterly interest
payments based on the notional amounts and the difference between the "London
Inter Bank Offering Rate" (the "LIBOR rate") and 5.90% when the LIBOR rate
exceeds 5.90%, in return for a one-time payment by the Bank.
During May 1998, the Bank entered into a third interest rate cap
contract with another major Wall Street firm in a notional amount of $75.0
million terminating on May 30, 2000. The contract requires the counter-party to
pay the Bank quarterly interest payments based on the notional amount and the
difference between the LIBOR rate and 6.10% when the LIBOR rate exceeds 6.10%,
in return for a one-time payment by the Bank.
The Bank entered into these contracts for the purpose of hedging a
portion of BankUnited's interest rate risk against rising interest rates on
certain short-term borrowings. As of March 31, 1999, the 3-month LIBOR rate was
5.01%.
BankUnited 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 BankUnited's consolidated
financial position or results of operations.
7. SUBSEQUENT EVENT
In April, 1999, the Bank declared a dividend of $12.1 million on its
Class A Common Stock, which was paid on April 8, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis and the related financial data
present a review of the consolidated operating results and financial condition
of BankUnited Financial Corporation ("BankUnited") for the three and six month
periods ended March 31, 1999 and 1998. This discussion and analysis should
10
<PAGE>
be read in conjunction with the Consolidated Financial Statements and Notes
thereto contained in BankUnited's Annual Report on Form 10-K for the year ended
September 30, 1998.
This Quarterly Report on Form 10-Q contains forward-looking statements.
Additional written or oral forward-looking statements may be made by BankUnited
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.
GENERAL
BankUnited is a Florida-incorporated savings and loan holding company
for BankUnited, FSB (the "Bank"). BankUnited's principal business currently
consists of the operation of its wholly-owned subsidiary, the Bank. The Bank's
primary business is attracting retail deposits from the general public and
investing those deposits, together with borrowings, principal repayments and
other funds, primarily in one-to-four family residential mortgage loans and to a
lesser extent, mortgage-backed securities, commercial real estate loans,
multi-family mortgage loans, commercial business loans and consumer loans. The
Bank also invests in other permitted investments. The Bank is subject to the
regulations of certain federal agencies and undergoes periodic examinations by
those regulatory authorities. References to BankUnited include the activities of
all of its subsidiaries, including the Bank and its subsidiaries, if the context
so requires.
BankUnited's results of operations are dependent primarily on its net
interest income, which is the difference between the interest earned on its
assets, primarily its loan and securities portfolios, and its cost of funds,
which consists of the interest paid on its deposits and borrowings. BankUnited's
results of operations are also affected by its provision for loan losses as well
as non-interest income, non-interest expenses and income tax expense.
Non-interest expenses consist of employee compensation and benefits, occupancy
and equipment, insurance, professional fees, data processing, loan servicing
expense and other operating expenses. The earnings of BankUnited are also
significantly affected by general economic and competitive conditions,
particularly changes in market interest rates and the U.S. Treasury yield
curves, government policies and actions of regulatory authorities.
SIGNIFICANT DEVELOPMENTS FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 1999
RESTRUCTURING
BankUnited has completed its restructuring, which resulted in a special
charge of $15.1 million, as well as a provision for loan losses of $6.3 million,
a provision for tax certificate investment losses of $1.1 million and certain
other miscellaneous charges of $2.0 million.
BankUnited's earnings have been severely hampered during the past
several quarters due to the high levels of prepayments associated with one-year
CMT loans acquired in the secondary market. "One-Year CMT" loans are
adjustable-rate mortgages with an index tied to the yield on one-year U.S.
Treasury
11
<PAGE>
securities adjusted to a constant maturity published by the Federal
Reserve. During the quarter, BankUnited reviewed its various sources of revenues
and made a determination to change its overall strategy and become an
asset-generating entity. In that regard, BankUnited decided to stop purchasing
One-Year CMT loans and reduce its dependence on the purchase of residential
mortgages in the secondary market. In addition, it has transferred all of the
remaining One-Year CMT loans to held for sale as of March 31, 1999. Included in
the $15.1 million charge is a $14.8 million charge consisting of $13.0 million
of purchase premiums which was required to write down the carrying value of the
purchased One-Year CMT loan portfolio to the lower of cost or market and a $1.8
million charge for accelerated amortization of purchase premiums on a related
security. BankUnited has also made the decision to discontinue indirect consumer
lending and tax certificate investing because it was clear from management's
review that BankUnited could not anticipate future benefits from continuing
these lines of business.
The review also led to a rigorous review of BankUnited's loan
portfolio. This examination resulted in a provision for loan losses of $6.3
million. See "Results of Operations-Provision for Loan Losses," and a review of
the quality of its assets. BankUnited also made a $1.1 million provision for
losses on its tax certificates in connection with its decision to discontinue
this line of business and a review of the quality of the assets. The
miscellaneous charges of $2.0 million included $1.0 million in costs associated
with becoming Year 2000 compliant.
LIQUIDITY AND CAPITAL RESOURCES
BankUnited's primary source of funds is cash provided by investing
activities and includes principal and interest payments on loans,
mortgage-backed securities and other securities. During the six months ended
March 31, 1999 and 1998, principal repayments on loans and mortgage-backed
securities and proceeds from maturities of other securities totaled $930.3
million and $625.0 million, respectively. The increase in principal repayments
is primarily the result of the decrease in long-term interest rates which has
caused significant acceleration of prepayments on certain mortgage loans and
mortgage-backed securities.
BankUnited's other sources of funds are provided by financing
activities and includes borrowings and deposits. Net cash provided by financing
activities during the six months ended March 31, 1999 and 1998 totaled $192.2
million and $1.1 billion, respectively. The overall decrease in the sources of
funds resulted from the reduction in funds needed to purchase residential loans
in the secondary market. The decrease in borrowings was partially offset by the
issuance of the Bank's Senior Notes (the "Senior Notes"). During November 1998,
the Bank established a medium-term note program which permits the issuance, from
time to time, of up to a total of $500 million aggregate principal amount of the
Senior Notes, with maturities ranging from 9 months to 10 years from the date of
issuance. As a condition of issuance, interest, principal and any redemption
premium on all offered Senior Notes are supported by an irrevocable stand-by
letter of credit of the FHLB of Atlanta. The Senior Notes provide an additional
source of funding, potentially with longer maturities with attractive rates. On
February 2, 1999, the Bank issued and sold $200.0 million of Senior Notes which
mature five years from the date of issuance and bear interest at an annual rate
of 5.40% payable semiannually.
BankUnited's primary uses of funds in its operating and investing
activities has been the origination and purchase of loans and the purchase of
mortgage-backed securities and other securities. During the six months ended
March 31, 1999, BankUnited's originations of loans totaled $283.1 million,
purchases of loans totaled $433.0 million and purchases of mortgage-backed
securities and other securities totaled $142.3 million. For the same period in
1998, BankUnited's originations of loans totaled $154.5 million, purchases of
loans totaled $1.5 billion and purchases of mortgage-backed securities and other
securities totaled $87.9 million. The decrease in purchases of loans during the
six months ended March 31, 1999 is the result of
12
<PAGE>
BankUnited's decision to reduce its purchases of residential loans in the
secondary market and to turn its emphasis to originating its own loans.
The Bank is required under applicable federal regulations to maintain
specified levels of liquid investments in cash, United States government
securities and other qualifying investments. Regulations currently in effect
require the Bank to maintain liquid assets of not less than 4.0% of its net
withdrawable accounts plus short-term borrowings. The Bank had liquid assets of
11.40% and 7.18% as of March 31, 1999 and September 30, 1998, respectively, in
compliance with this requirement.
Federal savings banks such as the Bank are also required to maintain
capital at levels specified by applicable minimum capital ratios. At March 31,
1999, the Bank was in compliance with all capital requirements and met the
definition of a "well capitalized" institution under applicable federal
regulations.
ANALYSIS OF NET INTEREST INCOME
Net interest income represents the difference between income on
interest-earning assets and expense on interest-bearing liabilities. The
following tables set forth certain information relating to the categories of
BankUnited's interest-earning assets and interest-bearing liabilities for the
periods indicated, including the effect on yields of the accelerated
amortization of purchase premiums on the one-year CMT loan portfolio and a
related security recorded in the first quarter of fiscal 1990, due to the high
level of prepayments and the $14.8 million charge in the second quarter of
fiscal 1999 related to the write-off of purchase premiums on the One-Year CMT
loan portfolio and the continuing acceleration of amortization of purchase
premiums on a related security. See "Restructuring." 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 the product of average
interest-earning assets and the annualized yield earned minus the product of
average interest-bearing liabilities and the annualized rate paid, 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 tables have been calculated on a pre-tax basis.
13
<PAGE>
YIELDS EARNED AND RATES PAID
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------------------------------------------------------------
1999 1998
-------------------------------------------- ------------------------------------------
AVERAGE AVERAGE
BALANCE INTEREST YIELD/RATE BALANCE INTEREST YIELD/RATE
----------- ------------ ---------- ----------- ------------ ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans (1) ......................... $ 2,983,169 $ 40,286 5.40% $ 2,611,424 $ 45,734 7.01%
Mortgage-backed securities
and collateralized mortgage
obligations (1) ................ 315,977 3,081 3.90 190,552 3,765 7.90
Short-term investments (2) ........ 228,023 2,813 4.94 110,089 1,551 5.64
Tax certificates .................. 30,726 507 6.60 35,455 608 6.86
Long-term investments and
FHLB stock ...................... 86,753 1,566 7.30 90,497 1,590 7.10
----------- ----------- --------- ----------- ----------- ---------
Total interest-earning assets $ 3,644,648 $ 48,253 5.30% $ 3,038,017 $ 53,248 7.01%
----------- ----------- --------- ----------- ----------- ---------
Interest-bearing liabilities:
NOW/money market .................. $ 285,347 $ 2,067 2.94% $ 139,360 $ 1,137 3.31%
Savings ........................... 371,438 4,052 4.42 183,207 2,130 4.72
Certificates of deposit ........... 1,619,494 20,750 5.20 1,363,203 19,350 5.76
Trust preferred securities ........ 218,500 5,289 9.68 139,917 3,468 10.05
FHLB advances and other
borrowings ...................... 1,052,580 14,540 5.53 1,113,811 15,803 5.68
----------- ----------- --------- ----------- ----------- ---------
Total interest-bearing
liabilities ............. $ 3,547,359 $ 46,698 5.31% $ 2,939,498 $ 41,888 5.75%
----------- ----------- --------- ----------- ----------- ---------
Excess of interest-earning assets
over interest-bearing liabilities $ 97,289 $ 98,519
=========== ===========
Net interest income ................. $ 1,555 $ 11,360
=========== ===========
Interest rate spread ................ (0.01)% 1.26%
========= =========
Net interest margin ................. 0.13 % 1.45%
========= =========
Ratio of interest-earning assets to
interest-bearing liabilities ....... 102.74% 103.35%
=========== ===========
</TABLE>
- -------------------------------
(1) The yields and rates along with the corresponding interest rate spread
and net interest margin for the three months ended March 31, 1999
reflect the write-off of purchase premiums on the one-year CMT loan
portfolio and the accelerated amortization of purchase premiums on a
related security.
(2) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and
certificates of deposit.
14
<PAGE>
YIELDS EARNED AND RATES PAID
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
----------------------------------------------------------------------------------------
1999 1998
------------------------------------------- ------------------------------------------
AVERAGE AVERAGE
BALANCE INTEREST YIELD/RATE BALANCE INTEREST YIELD/RATE
----------- ---------- ---------- ----------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans (1) $3,011,950 $ 91,123 6.05% $2,338,659 $ 82,627 7.06%
Mortgage-backed securities
and collateralized mortgage
obligations (1) 328,240 7,154 4.36 151,810 5,957 7.85
Short-term investments (2) 146,236 3,661 4.95 68,787 1,971 5.67
Tax certificates 33,666 1,135 6.74 39,874 1,438 7.21
Long-term investments and
FHLB stock 91,025 3,325 7.32 76,123 2,705 7.12
---------- ---------- --------- ---------- ---------- ---------
Total interest-earning assets $3,611,117 $ 106,398 5.89% $2,675,253 $ 94,698 7.07%
---------- ---------- --------- ---------- ---------- ---------
Interest-bearing liabilities:
NOW/money market $ 262,906 $ 3,896 2.97% $ 122,685 $ 1,885 3.08%
Savings 343,344 7,753 4.53 175,609 4,121 4.71
Certificates of deposit 1,620,185 42,886 5.31 1,191,728 34,194 5.75
Trust preferred securities 218,500 10,577 9.68 127,827 6,376 10.00
FHLB advances and other
borrowings 1,067,883 29,642 5.50 951,334 27,395 5.70
---------- ---------- --------- ---------- ---------- ---------
Total interest-bearing
liabilities $3,512,818 $ 94,754 5.39% $2,569,183 $ 73,971 5.74%
---------- ---------- --------- ---------- ---------- ---------
Excess of interest-earning assets
over interest-bearing liabilities $ 98,299 $ 106,070
========== ==========
Net interest income $ 11,644 $ 20,727
========== ==========
Interest rate spread 0.50% 1.33%
========= =========
Net interest margin 0.65% 1.55%
========= =========
Ratio of interest-earning assets to
interest-bearing liabilities 102.80% 104.13%
========== ==========
</TABLE>
- -------------------------------
(1) The yields and rates along with the corresponding interest rate spread
and net interest margin for the six months ended March 31, 1999 reflect
the accelerated amortization of purchase premiums on the one-year CMT
loan portfolio and a related security in the first quarter of fiscal
1999 and the $14.8 million charge in the second quarter of fiscal 1999
related to the write-off of purchase premiums on the one-year CMT loan
portfolio and the continuing acceleration of amortization of purchase
premiums on a related security.
(2) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and
certificates of deposit.
15
<PAGE>
RATE/VOLUME ANALYSIS
The following tables presents, for the periods indicated, the changes
in interest income and the changes in interest expense attributable to the
changes in interest rates and the changes in the volume of interest-earning
assets and interest-bearing liabilities. For each category of interest-earning
assets and interest-bearing liabilities, information is provided on changes
attributable to: (i) changes in volume (change in volume multiplied by prior
year rate); (ii) changes in rate (change in rate multiplied by prior year
volume); (iii) changes in rate/volume (change in rate multiplied by change in
volume); and (iv) total changes in rate and volume.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------------------------
1999 VS. 1998
-----------------------------------------------------
INCREASE (DECREASE) DUE TO
-----------------------------------------------------
CHANGES CHANGES CHANGES TOTAL
IN IN IN INCREASE/
VOLUME RATE RATE/VOLUME (DECREASE)
-------- -------- ----------- --------
(in thousands)
<S> <C> <C> <C> <C>
Interest income attributable to:
Loans $ 6,530 $(10,547) $ (1,431) $ (5,448)
Mortgage-backed securities and
collateralized mortgage obligations 2,478 (1,907) (1,255) (684)
Short-term investments (1) 1,661 (192) (207) 1,262
Tax certificates (81) (22) 2 (101)
Long-term investments and
FHLB stock (59) 31 4 (24)
-------- -------- -------- --------
Total interest-earning assets 10,529 (12,637) (2,887) (4,995)
-------- -------- -------- --------
Interest expense attributable to:
NOW/money market 1,191 (127) (134) 930
Savings 2,189 (132) (135) 1,922
Certificates of deposit 3,638 (1,883) (355) 1,400
Trust preferred securities 1,948 (81) (46) 1,821
FHLB advances and other
borrowings (848) (696) 281 (1,263)
-------- -------- -------- --------
Total interest-bearing liabilities 8,118 (2,919) (389) 4,810
-------- -------- -------- --------
Increase (decrease) in net interest income $ 2,411 $ (9,718) $ (2,498) $ (9,805)
======== ======== ======== ========
--------
</TABLE>
- ------------------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and
certificates of deposit.
16
<PAGE>
RATE/VOLUME ANALYSIS
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
-----------------------------------------------------
1999 VS. 1998
-----------------------------------------------------
INCREASE (DECREASE) DUE TO
-----------------------------------------------------
CHANGES CHANGES CHANGES TOTAL
IN IN IN INCREASE/
VOLUME RATE RATE/VOLUME (DECREASE)
-------- -------- ----------- --------
(in thousands)
<S> <C> <C> <C> <C>
Interest income attributable to:
Loans $ 23,471 $(11,639) $ (3,336) $ 8,496
Mortgage-backed securities and
collateralized mortgage obligations 6,923 (2,648) (3,078) 1,197
Short-term investments (1) 2,219 (249) (280) 1,690
Tax certificates (224) (94) 15 (303)
Long-term investments and
FHLB stock 546 31 43 620
-------- -------- -------- --------
Total interest-earning assets 32,935 (14,599) (6,636) 11,700
-------- -------- -------- --------
Interest expense attributable to:
NOW/money market 2,154 (67) (76) 2,011
Savings 3,936 (156) (148) 3,632
Certificates of deposit 12,294 (2,650) (952) 8,692
Trust preferred securities 4,523 (188) (134) 4,201
FHLB advances and other
borrowings 3,362 (1,243) 128 2,247
-------- -------- -------- --------
Total interest-bearing liabilities 26,269 (4,304) (1,182) 20,783
-------- -------- -------- --------
Increase (decrease) in net interest income $ 6,666 $(10,295) $ (5,454) $ (9,083)
======== ======== ======== ========
</TABLE>
- ------------------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and
certificates of deposit.
17
<PAGE>
ASSET QUALITY
Non-performing assets as of March 31, 1999 were $31.7 million, which
represents an increase of $9.1 million or 40.3% from $22.6 million as of
September 30, 1998. The increase in non-performing assets primarily resulted
from increases in non-accrual loans and non-accrual tax certificates of $8.7
million and $0.5 million, respectively. Non-accrual loans increased primarily
due to a $3.3 million increase in one-to-four family residential loan
delinquencies and a $5.1 million increase in commercial mortgage loan
delinquencies. Included in the increase of $5.1 million in commercial mortgage
loans is one loan in the amount of $2.5 million. The increase in non-accrual tax
certificates resulted from a change in BankUnited's policy regarding
classification of tax certificates relating to bankruptcy proceedings initiated
by the debtor. The policy was changed in the first quarter of fiscal 1999 to
require classification of the tax certificates as non-accrual upon filing of
bankruptcy by the debtor instead of upon finalization of the bankruptcy plan by
the courts. Non-performing assets as a percentage of total assets increased from
0.61% as of September 30, 1998 to 0.81% as of March 31, 1999 due to the increase
in non-performing assets for the reasons discussed above.
The following table sets forth information concerning the BankUnited's
non-performing assets at March 31, 1999 and September 30, 1998.
MARCH 31, SEPTEMBER 30,
1999 1998
--------- -------------
(dollars in thousands)
Non-accrual loans $24,688 $15,999
Restructured loans 1,129 1,137
Loans past due 90 days and still accruing (1) 1,986 2,313
------- -------
Total non-performing loans 27,803 19,449
Non-accrual tax certificates 1,749 1,225
Real estate owned 2,126 1,974
------- -------
Total non-performing assets $31,678 $22,648
======= =======
Allowance for losses on tax certificates $ 1,616 $ 469
Allowance for loan losses 12,342 6,128
------- -------
Total allowance $13,958 $ 6,597
======= =======
Non-performing assets as a percentage of
total assets 0.81% 0.61%
Non-performing loans as a percentage of
total loans 0.94% 0.64%
Allowance for loan losses as a percentage of
total loans 0.42% 0.20%
Allowance for loan losses as a percentage of
non-performing loans 44.39% 31.51%
Net charge offs as a percentage of average
total loans 0.03% 0.02%
(1) Consists primarily of loans guaranteed by the Federal Housing Authority
("FHA").
18
<PAGE>
BankUnited's allowance for loan losses is established and maintained
based upon management's evaluation of the risks inherent in BankUnited's loan
portfolio including the economic trends and other conditions in specific
geographic areas as they relate to the nature of BankUnited's portfolio. In
connection with management's rigorous review of its loans at the time it
evaluated its interest-earning assets, BankUnited increased its allowance for
loan losses by $6.2 million from $6.1 million as of September 30, 1998 to $12.3
million as of March 31, 1999. See "Results of Operations-Provision for Loan
Losses."
The following table sets forth the change in BankUnited's allowance for
loan losses for the three and six months ended March 31, 1999 and 1998.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
------------------------- -------------------------
1999 1998 1999 1998
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Balance at beginning of period ........... $ 6,594 $ 4,304 $ 6,128 $ 3,693
Provision .............................. 6,336 400 6,736 1,050
Allowance from Consumers acquisition.... -- 362 -- 362
Loans charged off ...................... (596) (226) (698) (269)
Recoveries ............................. 8 4 176 8
-------- -------- -------- --------
Balance at end of period ................. $ 12,342 $ 4,844 $ 12,342 $ 4,844
======== ======== ======== ========
</TABLE>
The following table sets forth BankUnited's allocation of the allowance
for loan losses by category as of March 31, 1999.
AS OF MARCH 31,
---------------
1999
---------------
(in thousands)
One-to-four family.................. $ 4,869
Multi-family........................ 347
Commercial real estate.............. 4,411
Construction........................ 87
Land................................ 842
Commercial business and consumer.... 1,786
--------------
Total allowance................... $ 12,342
==============
19
<PAGE>
The following table sets forth the composition of BankUnited's loan
portfolio, including loans held for sale, at March 31, 1999 and September 30,
1998.
<TABLE>
<CAPTION>
MARCH 31, 1999 SEPTEMBER 30, 1998
-------------------------- -------------------------
PERCENT PERCENT
OF OF
AMOUNT TOTAL AMOUNT TOTAL
------------- ----------- ------------ -----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Mortgage loans:
One-to-four family................................ $ 2,685,412 91.5% $ 2,788,838 92.4%
Multi-family...................................... 28,605 1.0 24,392 0.8
Commercial real estate............................ 150,782 5.1 145,819 4.8
Construction...................................... 8,724 0.3 7,827 0.3
Land.............................................. 7,767 0.3 5,410 0.2
------------- ----------- ------------ -----------
Total mortgage loans............................ 2,881,290 98.2 2,972,286 98.5
------------- ----------- ------------ -----------
Other loans:
Commercial........................................ 19,300 0.7 15,550 0.5
Consumer.......................................... 33,534 1.1 30,401 1.0
------------- ----------- ------------ -----------
Total other loans............................... 52,834 1.8 45,951 1.5
------------- ----------- ------------ -----------
Total loans................................... 2,934,124 100.0% 3,018,237 100.0%
=========== ===========
Unearned discounts, premiums and
deferred loan fees, net......................... 14,596 29,905
Allowance for loan losses......................... (12,342) (6,128)
------------- ------------
Total loans receivable, net.......................... $ 2,936,378 $ 3,042,014
============= ============
</TABLE>
YEAR 2000
BankUnited utilizes extensive electronic data processing hardware and
software in its banking operations, among other things, to process and record
customer transactions, determine and collect revenue to be earned and expenses
to be paid in connection with customer transactions, maintain and report
customer transaction information, record and manage BankUnited's short-term and
long-term investments, and assist with accounting and financial management and
risk management. BankUnited also relies on certain vendors to provide critical
services to BankUnited's banking operations, including telecommunications, loan
servicing and correspondent banking. Failure of the electronic data processing
hardware or software of BankUnited, its third party service bureaus, or certain
vendors to properly recognize the Year 2000 could result in a significant
disruption of BankUnited's banking operations. Based on the measures taken by
BankUnited so far, a significant disruption of its banking operations due to
such a failure is not currently expected.
BankUnited's customer transactions are processed through a network of
electronic data processing workstations in its branch offices and loan servicing
department and are recorded on electronic data processing hardware and software,
a substantial portion of which are maintained by two third-party service
bureaus. BankUnited has been assured that the two third-party service bureaus
which handle its data processing are Year 2000 compliant. BankUnited has
replaced the majority of its hardware and software used in its operations as
necessary for Year 2000 compliance. BankUnited is also seeking Year 2000
compliance certifications from its major telecommunications, loan servicing and
correspondent banking
20
<PAGE>
vendors. While a portion of BankUnited's financial assets and liabilities are
with commercial businesses and government-sponsored entities, BankUnited's loans
and deposits are primarily with individuals. As a result, BankUnited does not
expect any significant disruptions resulting from customers that may not be Year
2000 compliant.
While BankUnited does not anticipate any difficulties becoming Year
2000 compliant with its telecommunications, loan servicing and correspondent
banking vendors, BankUnited continues to monitor the feasibility of using
substitute vendors in the event of such difficulties.
BankUnited has designated a Year 2000 task force under the direction of
one of its senior officers, which is identifying and coordinating BankUnited's
efforts to become Year 2000 compliant. Such effort is expected to be completed
by September 30, 1999. Additionally, BankUnited is subject to regulation and
supervision by the OTS which regularly conducts reviews of the safety and
soundness of BankUnited's operations, including BankUnited's progress in
becoming Year 2000 compliant. Failure by BankUnited to adequately prepare for
Year 2000 issues could negatively impact BankUnited's banking operations
resulting in restrictions on its banking operations by the OTS. No such
restrictions exist at this time, nor does BankUnited expect any such
restrictions resulting from failure to address Year 2000 issues.
BankUnited has estimated the costs associated with becoming Year 2000
compliant to be approximately $1.6 million, exclusive of internal costs, of
which approximately $1.4 million has been incurred through March 31, 1999. The
costs consist of approximately $0.5 million for the replacement of hardware and
software, $0.9 million for the write-off of non-compliant hardware and software
and $0.2 million of other incremental costs. BankUnited does not separately
track the internal costs incurred for the Year 2000 project and such costs are
principally the related payroll costs for its information systems department.
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM SEPTEMBER 30, 1998 TO MARCH 31,
1999 AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 1999
AND 1998.
FINANCIAL CONDITION
ASSETS
Total assets remained relatively constant from September 30, 1998 to
March 31, 1999, which is consistent with BankUnited's expectations that assets
will not grow significantly during the 1999 fiscal year.
BankUnited's short-term investments, primarily consisting of Federal
Home Loan Bank ("FHLB") overnight deposits and securities purchased under
agreements to resell, increased by $324.8 million, or 497.4% to $390.1 million
at March 31, 1999, from $65.3 million at September 30, 1998 due to the purchase
of securities under agreements to resell. These securities were purchased to
invest the unapplied proceeds of BankUnited's borrowings (primarily FHLB
advances and Senior Notes) to maximize earnings while maintaining liquidity
until such time as loans and/or securities of a price and quality in line with
BankUnited's investment strategy become available.
21
<PAGE>
BankUnited's investment in tax certificates decreased by $14.0 million,
or 35.0%, to $26.0 million at March 31, 1999 from $40.0 million at September 30,
1998, as a result of certificate redemptions and repayments.
The levels of BankUnited's mortgage-backed securities held-to-maturity,
mortgage-backed securities available-for-sale and net loans receivable were
significantly affected during the period from September 30, 1998 to March 31,
1999 by increased repayments of purchased loans and mortgage-backed securities.
Mortgage-backed securities held-to-maturity decreased by $88.6 million,
or 60.6% to $57.5 million at March 31, 1999 from $146.1 million at September 30,
1998 due to repayments and amortization of premiums.
Mortgage-backed securities available-for-sale increased by $87.3
million or 43.7% to $286.9 million at March 31, 1999, from $199.6 million at
September 30, 1998, due primarily to purchases of $116.5 million, offset by
repayments and amortization of $27.5 million, and also due to a reduction of
$1.7 million in the market value of the underlying securities.
BankUnited's net loans receivable (including loans held for sale)
remained relatively constant from September 30, 1998 to March 31, 1999. Mortgage
loan purchases of $433.0 million and loan originations of $283.1 million were
offset by repayments of $798.4 million (net of accretion of discount and
amortization of premium) and loan sales of $23.3 million. For further discussion
of repayments of loans and mortgage-backed securities, see " Results of
Operations-Net Interest Income," and Item 3, "Quantitative and Qualitative
Disclosures About Market Risk."
Mortgage loans held for sale increased by $338.7 million, or 196.5%, to
$511.1 million at March 31, 1999 from $172.4 million at September 30, 1998,
principally due to the transfer of $288.3 million of loans from loans
receivable, net in the second quarter of fiscal 1999 and residential loan
originations of $140.4 million (which were not subsequently transferred to loans
receivable, net). This increase was partially offset by sales of $23.3 million
and the transfer to loans receivable, net in the first quarter of fiscal 1999,
of $73.8 million of loans originated in the prior fiscal year. The transfer of
loans from loans receivable, net in the second quarter resulted from
BankUnited's decision to classify its One-Year CMT purchased mortgage loan
portfolio as held for sale. The transfer of loans to loans receivable, net in
the first quarter resulted from the discontinuation of BankUnited's policy of
selling substantially all of its internally generated residential loans. In the
second quarter of fiscal 1999, BankUnited began to classify the majority of its
originated residential loans as loans receivable, net.
Other interest earning assets remained relatively constant from
September 30, 1998 to March 31, 1999. This category primarily represents stock
in the FHLB which BankUnited is required to purchase as FHLB advances increase.
Accrued interest receivable decreased by $7.6 million to $25.3 million
at March 31, 1999 from $32.9 million at September 30, 1998. Prepaid expenses and
other assets decreased by $6.3 million or 15.9% to $33.2 million at March 31,
1999, from $39.5 million at September 30, 1998.
LIABILITIES
Deposits increased by $115.3 million from September 30, 1998 to March
31, 1999 due to an increase in savings and checking accounts of $112.3 million
and $63.6 million. This increase was partially offset by
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<PAGE>
a $60.6 million decrease in certificates of deposit resulting from the
elimination of all brokered certificates of deposit. This change in the deposit
mix resulted in a favorable reduction in BankUnited's cost of funds.
Securities sold under agreements to repurchase decreased by $117.2
million, or 96.8%, to $3.9 million at March 31, 1999 from $121.1 million at
September 30, 1998. This decrease resulted from the maturity of the agreements
and the decision of BankUnited's management not to replace the agreements but to
seek longer-term sources of funds to more effectively control BankUnited's cost
of funds and to take advantage of the current low interest rate environment.
FHLB advances remained relatively constant from September 30, 1998 to
March 31, 1999.
Senior Notes increased $200.0 million as a result of the issuance and
sale of the Bank's Senior Notes during the second quarter of fiscal 1999. See
Note 6 - "Contingencies and Off-Balance Sheet Activities" of the Condensed Notes
to Consolidated Financial Statements.
CAPITAL
BankUnited's total stockholders' equity was $188.3 million at March 31,
1999, a decrease of $11.0 million, or 5.5%, from $199.3 million at September 30,
1998. The decrease is due primarily to a $1.2 million decrease in accumulated
other comprehensive income, and a current year net loss, offset, in part, by the
issuance of common stock from stock awards and the exercise of options. See Note
3 - "Comprehensive Income" of the Condensed Notes to Consolidated Financial
Statements.
In December 1998, the Board of Directors of BankUnited authorized the
purchase from time to time in open market transactions of up to 1,000,000 shares
of BankUnited's Class A Common Stock at such prices as the Executive Committee
deems advantageous. As of the date of filing of this Quarterly Report on Form
10-Q, BankUnited had not purchased any shares of its Class A Common Stock on the
open market.
RESULTS OF OPERATIONS
GENERAL
Net income after preferred stock dividends decreased to a loss of $11.1
million for the three months ended March 31, 1999, compared to net income after
preferred stock dividends of $2.1 million for the three months ended March 31,
1998. For the six months ended March 31, 1999, net income after preferred stock
dividends decreased to a loss of $10.9 million from net income after preferred
stock dividends of $3.8 million for the six months ended March 31, 1998. Below
is a more detailed discussion of each major category of income and expenses. The
primary reasons for the decline in net income after preferred stock dividends
for the three and six month periods ended March 31, 1999 (i) the accelerated
amortization of purchase premiums on the one-year CMT loan portfolio and the
related security recorded in the first quarter of fiscal 1999 as a result of
high levels of prepayments; (ii) the write-off of purchase premiums on the
One-Year CMT loan portfolio, and the continuing acceleration of amortization of
purchase premiums on a related security in the second quarter of fiscal 1999;
(iii) the provision for loan losses resulting from the re-evaluation of the loan
portfolio; (iv) the provision for tax certificate losses resulting from the
increase in nonperforming tax certificates and the decision to discontinue
investing in this asset; and (v) other miscellaneous charges including costs
associated with becoming year 2000 compliant. See "Significant Developments for
the Three and Six Months Ended March 31, 1999- Restructuring" and "-Asset
Quality."
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NET INTEREST INCOME
Net interest income before provision for loan losses decreased by $9.8
million, or 86.0%, to $1.6 million for the three months ended March 31, 1999
from $11.4 million for the same prior year period. For the six months ended
March 31, 1999, net interest income was $11.6 million compared to $20.7 million
for the same period in 1998, a decrease of $9.1 million, or 44.0%.
The decreases in net interest income were primarily the result of the
accelerated amortization of purchase premiums recorded in the first quarter of
fiscal 1999 and the $14.8 million charge in the second quarter
of fiscal 1999 related to the One-Year CMT loan portfolio and a related
security. See "Significant Developments for the Three and Six Months Ended March
31, 1999-Restructuring." This charge had the effect of reducing the net interest
margin to 0.13% and 0.65% for the three and six months ended March 31, 1999,
compared to 1.45% and 1.55% for the same prior year periods.
For the three months ended March 31, 1999, the decrease in the net
interest margin was due to a decrease in the yield on interest-earning assets to
5.30% (6.92% prior $14.8 million charge in the second quarter of fiscal 1999)
from 7.01% for the same period in 1998, primarily attributable to the lower
yields on the loans purchased, partially offset by a 44 basis point decrease in
the cost of interest-bearing liabilities to 5.31% from 5.75% for the same period
in 1998. For the six months ended March 31, 1999, the decrease in the net
interest margin was due to a decrease in the yield on interest-earning assets to
5.89% (7.02% prior to accelerated amortization of purchase premiums in the first
quarter of fiscal 1999 and the $14.8 million charge in the second quarter of
fiscal 1999, from 7.07% for the same period in 1998, primarily attributable to
the lower yields on the loans purchased, partially offset by a 35 basis point
decrease in the cost of interest-bearing liabilities to 5.39% from 5.74% for the
same period in 1998.
Interest income for the three months ended March 31, 1999 was $48.3
million, compared to $53.2 million for the same prior year period, a decrease of
$4.9 million, or 9.2%. For the six months ended March 31,1999, interest income
was $106.4 million compared to $94.7 million for the same prior year period in
1998, an increase of $11.7 million, or 12.4%.
The results of operations for the three months ended December 31, 1998
reflect the amortization of premiums on purchased loans and mortgage-backed
securities. The amortization of premiums, net of discounts and deferred
origination costs, increased from $1.0 million for the three months ended
December 31, 1997 to $6.1 million for the same period in 1999. The increase in
premium amortization was a result of the high level of loan prepayments
experienced in the first quarter of fiscal 1999. The results of operations for
three months ended March 31, 1999 include the $14.8 million charge and $0.2
million of other amortization for a total reduction to interest income of $15.0
million. The decrease in interest income due to these reductions was offset by
an increase in the average balance of loans receivable, which increased by
$371.7 million or 14.2% and $673.3 million, or 28.8%, for the three and six
month periods ended March 31, 1999, as compared to the same prior year period,
which resulted primarily from purchases of residential loans in the secondary
mortgage market. See "Significant Developments for the Three and Six Months
Ended March 31, 1999-Restructuring" and "Analysis of Net Interest Income."
As a result of the $14.8 million charge, the yield on loans and the
yield on mortgage-backed securities declined from 7.01% and 7.90% for the three
months ended March 31, 1998, to 5.40% and 3.90% for the three months ended March
31, 1999. This 161 and 400 basis point drop in the yields earned on loans and
mortgage-backed securities was a significant factor in the decline of the yield
on interest earning assets. The
24
<PAGE>
yield on loans and on mortgage-backed securities declined from 7.06% and 7.85%
for the six months ended March 31, 1998, to 6.05% and 4.36% for the six months
ended March 31, 1999. As of March 31, 1999, BankUnited had no premiums remaining
on the One-Year CMT loans, $8.5 million of premiums remaining on other purchased
loans and $0.1 million of premiums remaining on a mortgage-backed security
related to the securitization of a pool of BankUnited's purchased loans. See
"Quantitative and Qualitative Disclosures About Market Risk."
Interest expense for the three months ended March 31, 1999 was $46.7
million compared to $41.9 million for the same prior year period, an increase of
$4.8 million, or 11.5%. Interest expense for the six months ended March 31, 1999
was $94.8 million compared to $74.0 million for the same prior year period, an
increase of $20.8 million, or 28.1%. The increases reflect significant increases
in the average balance for interest-bearing deposits and trust preferred
securities during the period. There was an increase in average interest-bearing
deposits of $0.6 billion and $0.7 billion to $2.3 billion and $2.2 billion for
the three and six months ended March 31, 1999, from $1.7 billion and $1.5
billion for the same prior year periods. Average trust preferred securities
increased to $218.5 million for both the three and six months ended March 31,
1999, from $139.9 million and $127.8 million for the same prior year periods.
Average FHLB advances remained relatively constant at $0.9 billion and $1.0
billion for the three and six months ended March 31, 1999, compared to $1.1
billion and $0.9 billion for the same prior year periods. The increase in
interest expense was partially offset by a decline in the average cost of
interest-bearing liabilities, due to recent declines in market interest rates.
For the three months ended March 31, 1999, the average rate paid on
interest-bearing liabilities decreased 44 basis points to 5.31% from 5.75% for
the same prior year period. For the six months ended March 31, 1999, the average
rate paid on interest-bearing liabilities decreased 35 basis points to 5.39%
from 5.74% for the three months ended March 31, 1998. See "Significant
Developments for the Three and Six Months Ended March 31, 1999-Analysis of Net
Interest Income."
PROVISION FOR LOAN LOSSES
The provision for loan losses increased to $6.3 million and $6.7
million for the three and six months ended March 31, 1999, compared to $0.4
million and $1.1 million for the same prior year periods. The provision relates
to one-to-four family residential mortgage loans ($2.1 million), commercial
mortgage loans ($2.7 million) and other loans ($1.5 million). In connection with
the review of interest-earning assets, management conducted a rigorous review of
the loan portfolio, which included a systematic and detailed evaluation of the
estimated loss exposure in BankUnited's loan portfolio in light of the economic
trends and other conditions in specific geographic areas as they relate to the
nature of BankUnited's portfolio. Management utilized historical loan loss
experience (including a detailed state-by-state analysis) and current trends in
delinquencies and charge-offs in order to determine the adequacy of the
allowance for loan losses; as a result of this review, some of the loss
presumptions in determining the adequacy of the allowance for loan losses have
been revised. Additionally, the decision was made to discontinue indirect
consumer lending. See "Significant Developments for the Three and Six Months
Ended March 31, 1999-Asset Quality."
Also, during the quarter management performed a detailed re-evaluation
of the non-performing commercial loans. For these loans, an estimated value of
the property or collateral securing the loan is determined through an appraisal,
where possible. In instances where BankUnited has not taken possession of the
property or does not otherwise have access to the premises and therefore cannot
obtain an appraisal, a real estate broker's opinion as to the value of the
property is obtained based primarily on a drive-by
25
<PAGE>
inspection. If the unpaid balance of the loan is greater than the estimated fair
value of the property, reduced by estimated costs to dispose of the property, a
reserve is established for the difference between the carrying value and the
estimated fair value.
Other non-performing loans such as non-mortgage commercial loans are
evaluated individually as well. For these loans, a determination is made of the
value of the collateral, if any, through examination of current financial
information. If the unpaid balance of the loan is greater than estimated fair
value of the property, reduced by estimated costs to dispose of the property, a
reserve is established for the difference between the carrying value and the
estimated fair value.
General valuation allowances are also established on all classes of the
performing portfolio and represent loss allowances that have been established to
recognize the unspecified losses inherent in the loan portfolio.
The above-described method of establishing an adequate provision for
the allowance for loan losses inherently lacks precision. Because of the many
factors that can affect recoverability, the estimated loss on an individual loan
or pool of loans may not be the same as the ultimate loss, if any, actually
sustained. BankUnited's goal, therefore, is to determine a provision (and an
allowance for losses) that in the aggregate is reasonable in the context of
BankUnited's loan portfolio and financial condition taken as a whole.
NON-INTEREST INCOME
Non-interest income increased to $1.2 million and decreased to $2.5
million for the three and six months ended March 31, 1999, compared to $1.0
million and $2.7 million for the same prior year periods. The results reflect an
increase in net service fee income and other non-interest income, partially
offset by a decrease in income related to a reduction in the sales of loans and
mortgage-backed securities.
NON-INTEREST EXPENSES
Non-interest expenses increased to $13.9 million and $24.2 million for
the three and six months ended March 31, 1999, compared to $8.2 million and
$15.2 million for the same prior year periods. Included in the increase in
non-interest expenses is the additional provision for tax certificate losses of
$1.1 million, $1.0 million of expenses related to Year 2000 compliance and $1.0
million of miscellaneous other charges. See "Significant Developments for the
Three and Six Months Ended March 31, 1999-Restructuring." The remaining increase
in expenses is attributable to the growth BankUnited has experienced, including
the additional costs relating to the acquisitions of Consumers Bancorp, Inc. and
Central Bank during the second and third quarters, respectively, of the 1998
fiscal year. Total non-interest expenses, as a percentage of average assets,
increased from 1.1% and 1.1% for the three and six months ended March 31, 1998,
to 1.5% and 1.3% for the same periods in 1999 as a result of the additional
charges.
INCOME TAXES
The income tax provision decreased to a net benefit of $6.6 million and
$6.2 million for the three and six months ended March 31, 1999, compared to a
net expense of $1.5 million and $2.9 million for the same prior year periods.
This decrease was due to BankUnited's lower pre-tax earnings during the three
and six months ended March 31, 1999, compared to the same prior year periods,
partially offset by the increase in the effective income tax rate due to the
effect of non-deductible goodwill.
26
<PAGE>
PREFERRED STOCK DIVIDENDS
Preferred stock dividends remained relatively constant at $0.2 million
for the three months ended March 31, 1999 and 1998. Preferred stock dividends
decreased to $0.4 million for the six months ended March 31, 1999, as compared
to $0.5 million for the same prior year period. The decrease was the result of
the retirement in January 1998 of the Noncumulative Convertible Preferred Stock,
Series 1993, partially offset by the issuance of shares of Noncumulative
Convertible Preferred Stock, Series B in October 1997 and April 1998.
27
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The discussion contained in BankUnited's Annual Report on Form 10-K for
the year ended September 30, 1998, under Item 7a, "Quantitative and Qualitative
Disclosures about Market Risk," provides detailed quantitative and qualitative
disclosures about market risk and should be referenced for information thereon.
In addition, the following discussion addresses the sources and effects of
developments during the six months ended March 31, 1999 which related to
refinancing risks.
REFINANCING RISKS. A significant portion of BankUnited's loans
receivable are single-family residential mortgages that generally have an
imbedded option that allows the borrower to prepay the loan at any time without
penalty. A substantial portion of these loans have been purchased by BankUnited
in the secondary mortgage market at a premium.
In the current interest rate environment, when long-term interest rates
are generally low on a historical basis and the spread between short-term rates
and long-term rates is relatively narrow, prepayments of adjustable rate
mortgage ("ARM") loans and higher fixed-rate mortgages tend to accelerate.
BankUnited's results of operations for the first quarter of fiscal 1999 reflect
the accelerated amortization of premiums on purchased loans and mortgage-backed
securities. The amortization of premiums, net of discounts and deferred
origination costs, increased from $1.0 million for the three months ended
December 31, 1997 to $6.1 million for the three months ended December 31, 1998
as a result of such prepayments. BankUnited continued to experience high levele
of prepayments in the second quarter of fiscal 1999, the effect of which are
included in the $14.8 million charge to write-off the remaining purchase
premiums on the One-Year CMT loan portfolio and to record the continuing
accelerated amortization of purchase premiums on a related security. See
"Significant Developments chase the Three and Six Months Ended March 31,
1999-Restructuring." As a result of the premium amortization, the yield on loans
and mortgage-backed securities declined from 7.06% and 7.85%, respectively, for
the six months ended March 31, 1998 to 6.05% and 4.36%, respectively, for the
six months ended March 31, 1999. This 101 and 349 basis point drop in the yields
earned on loans and mortgage-backed securities was a significant factor in the
decline of the yield on interest earning assets.
In addition, at March 31, 1999, $332.6 million of BankUnited's ARMs had
teaser rates, which will be subject to interest rate adjustments within the next
twelve months. Teaser rate loans may tend to be prepaid near the end of the
teaser period in the current interest rate environment, creating higher levels
of prepayments on loans overall which BankUnited may not be able to reinvest
quickly enough and at sufficient interest rates to mitigate the effect on its
net interest margin.
Premiums, net of discounts and deferred origination costs, which at
March 31, 1999 were $14.7 million, including $8.6 million of premiums on
purchased loans and a mortgage-backed security related to the securitization of
a pool of BankUnited's purchased loans, are recognized as a reduction to
interest income using the interest method over the contractual life of the loans
adjusted for estimated prepayments, based on BankUnited's historical prepayment
experience. As prepayments accelerate, BankUnited's historical prepayment
experience changes, resulting in a shortening of the estimated life of the loan
portfolio, and an increase in the rate at which premiums are expensed, resulting
in a greater reduction in interest income. Accelerated prepayments could,
therefore, have a material adverse effect on BankUnited's results of operations.
BankUnited's exposure to increased amortization of premiums from continued
prepayments has been significantly reduced due to the write-off of purchase
premiums on the One-Year CMT portfolio and on a related security.
BankUnited has reviewed its practice of purchasing mortgage loans on
the secondary market, particularly ARM loans, and has turned its focus to
originating its own loans. This change is expected to mitigate the effect of the
accelerated amortization of premiums which has continued throughout the first
half of fiscal 1999. BankUnited may continue to purchase loans, except One-Year
CMT loans, on a limited basis to maintain appropriate levels of liquidity.
28
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
10.1 First Amendment to Employment Agreement, as
executed on January 4, 1999, between Mehdi
Ghomeshi, BankUnited Financial Corporation
and BankUnited, FSB.*
10.2 1996 Incentive Compensation and Stock Award Plan, as
amended on January 28, 1999.**
27.1 Financial Data Schedule
* Management Contract
** Compensatory Plan
(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 January 28,
1999 with press release announcing first
quarter earnings for the Company for the
quarter ended December 31, 1998.
(ii) Current Report on Form 8-K dated February 3,
1999 with press release regarding the
issuance and sale of $200 million aggregate
principal amount of the 5.40% Senior Notes of
the Company's subsidiary, BankUnited, FSB.
(iii) Current Report on Form 8-K dated April 19,
1999 with press release announcing a
significant restructuring by the Registrant
and a second quarter loss.
29
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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
By: /s/ Diane Delella
-----------------------------------------
Diane DeLella
Senior Vice President, Chief Financial
Officer and Controller
Date: May 17, 1999
30
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BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
Form 10-Q for the Quarter Ended March 31, 1999
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.1 First Amendment to Employment Agreement, executed on January 4,
1999, between Mehdi Ghomeshi, BankUnited Financial Corporation
and BankUnited, FSB
10.2 1996 Incentive Compensation and Stock Award Plan, as amended on
January 28, 1999
27.1 Financial Data Schedule
EXHIBIT 10.1
FIRST AMENDMENT EXHIBIT 10.1
TO
EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement (this "Amendment")
executed January 4, 1999, Nun Pro Tunc January 1, 1999 is attached to, and
hereby made a part of, the Employment Agreement (the "Agreement") dated the 18th
day of November 1998 by and between Mehdi Ghomeshi (hereinafter the "Executive")
and BankUnited Financial Corporation, a Florida corporation ("BankUnited"), and
its principal wholly owned subsidiary, BankUnited, FSB (BankUnited and
BankUnited, FSB hereinafter collectively referred to as the "Company").
RECITALS
WHEREAS, pursuant to Section 4.9 of the Agreement, the
Executive has received a grant of 35,000 shares of the Company's Class
A Common Stock (the "Stock Grant"), ownership of which will vest on
January 4, 1999; and
WHEREAS, the Executive and the Company mutually desire to
change the vesting schedule of the Stock Grant;
NOW THEREFORE, BE IT MUTUALLY UNDERSTOOD AND AGREED AS
FOLLOWS:
Section 4.9 of the Agreement is deleted in its entirety and is
replaced by the following:
"4.9 SECURITIES GRANTS. Upon execution of this Agreement,
Executive shall receive:
(a) a grant of 35,000 shares of the Company's Class A
Common Stock, ownership of which shall vest 50% on March 1,
1999 and 50% on March 1, 2000; provided that, in the event
that the Executive's employment hereunder terminates for any
reason, including death or disability, prior to March 1, 2000,
then ownership of all 35,000 shares shall be deemed to have
vested as of the date of termination;
(b) a grant of options to purchase 70,000 shares of
Company's Class A Common Stock at a price of $7 1/8 and with
an expiration date of ten (10) years, which options will vest
50% at the first anniversary from the Commencement Date, 25%
at the second anniversary from the Commencement Date, and 25%
at the third anniversary from the Commencement Date, subject
to immediate vesting in the event of the Executive's
termination under Sections 5.2 or 5.3, the Company or the
Executive advising the other pursuant to Section 2.1 that the
Term of this Agreement will not be extended, or in the event
of a Change of Control as defined in Section 6."
<PAGE>
IN WITNESS WHEREOF, the Executive and, pursuant to authorization of
their respective Boards, BankUnited and BankUnited, FSB, have executed and made
this Amendment as of January 4, 1999.
BANKUNITED, FSB BANKUNITED FINANCIAL CORPORATION
By: /s/ ALFRED R. CAMNER By: /s/ ALFRED R. CAMNER
---------------------------------- ------------------------------
Name: Name:
Title: Title:
ATTEST: ATTEST:
By: By:
---------------------------------- ------------------------------
Name: Name:
Title: Title:
EXECUTIVE
/s/ MEHDI GHOMESHI
- -------------------------------------
Mehdi Ghomeshi
EXHIBIT 10.2
BANKUNITED FINANCIAL CORPORATION
1996 INCENTIVE COMPENSATION AND STOCK AWARD PLAN
1. PURPOSE. The purpose of this 1996 Incentive Compensation and Stock
Award Plan (the "Plan") is to assist BankUnited Financial Corporation (the
"Company") and its subsidiaries and affiliates in attracting, motivating,
retaining and rewarding high-quality executives and other employees, officers,
directors and affiliates enabling such persons to acquire or increase a
proprietary interest in the Company in order to strengthen the mutuality of
interests between such persons and the Company's stockholders, and providing
such persons with annual and long term performance incentives to expend their
maximum efforts in the creation of shareholder value.
2. DEFINITIONS.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Affiliate" means any entity other than the Company and
its Subsidiaries that is designated by the Board or the Committee as a
participating employer under the Plan, provided that such entity is controlled
by or under common control with the Company.
(b) "Award" means any Option, Restricted Stock, Restricted
Stock Units, Stock Bonus or Stock Award in Lieu of Cash, or Other Stock-Based
Award granted to a Participant under the Plan.
(c) "Award Agreement" means any written agreement, contract or
other instruments or document evidencing an Award.
(d) "Beneficiary" means the person, persons, trust or trusts
which have been designated by such Participant in his or her most recent written
beneficiary designation filed with the Company to receive the benefits specified
under this Plan upon the death of the Participant, or, if there is no designated
Beneficiary or surviving designated Beneficiary, then the person, persons, trust
or trusts entitled by will or the laws of descent and distribution to receive
such benefits.
(e) "Board" means the Board of Directors of the Company.
(f) "Change in Control" means Change in Control as defined
with related terms in Section 8.
(g) "Code" means the Internal Revenue Code of 1986, as amended
from time to time. References to any provision of the Code shall be deemed to
include successor provisions thereto and regulations thereunder.
(h) "Committee" means the Compensation Committee of the Board,
or such other Board committee as may be designated by the Board to administer
the Plan; provided, however, that Committee action shall be taken by act of such
members specified in, and otherwise in accordance with, Section 3(b). The
Committee shall consist solely of two or more directors of the Company. In
appointing members of the Committee, the Board will consider whether each member
will qualify as a "non-employee director" within the meaning of Rule
16b-3(b)(3), but such members are not required to so qualify at the time of
appointment or during their term of service on the Committee.
B-1
<PAGE>
(i) "Company" means BankUnited Financial Corporation, a
corporation organized under the laws of the State of Florida, or any successor
corporation.
(j) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time. References to any provision of the Exchange Act
shall be deemed to include successor provisions thereto and regulations
thereunder.
(k) "Fair Market Value" means, with respect to Stock, Awards,
or other property, the fair market value of such Stock, Awards, or other
property determined by such methods or procedures as shall be established from
time to time by the Committee. Unless otherwise determined by the Committee, the
Fair Market Value of Stock as of any given date shall mean the per share value
of Stock as determined by using the average of the mean of the closing prices of
such Stock as quoted on the NASDAQ system on each of the immediately preceding
five days on which the stock was traded, as reported for such dates in the table
contained in The Wall Street Journal or an equivalent successor table.
(l) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(m) "NQSO" means any Option that is not an ISO.
(n) "Option" means a right, granted to a Participant under
Section 6(b), to purchase Stock or other Awards. An Option may be either an ISO
or an NQSO.
(o) "Participant" means a person who, as an executive officer,
officer, director, or employee or independent contractor of the Company (which
includes employees of Subsidiaries or Affiliates), has been granted an Award
under the Plan.
(p) "Restricted Stock" means an award of shares of Stock to a
Participant under Section 6(d) that may be subject to certain restrictions and
to a risk of forfeiture.
(q) "Restricted Stock Unit" means a right, granted to a
Participant under Section 6(d), to receive Stock or cash at the end of a
specified deferral period.
(r) "Plan" means this 1996 Incentive Compensation and Stock
Award Plan.
(s) "Rule 16b-3" means Rule 16b-3, as from time to time in
effect and applicable to the Plan and Participants, promulgated by the
Securities and Exchange Commission under Section 16 of the Exchange Act.
(t) "Stock" means the Series I Class A Common Stock, the Class
B Common Stock (which together shall be referred to as "Common Stock"), or the
Noncumulative Convertible Preferred Stock, Series B ("Preferred Stock") of the
Company or such other securities as may be substituted or resubstituted therefor
pursuant to Section 5.
(u) "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if each
of the corporations (other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in the chain.
B-2
<PAGE>
3. ADMINISTRATION.
(a) AUTHORITY OF THE COMMITTEE. Except as otherwise provided
herein, the Plan shall be administered by the Committee. The Committee shall
have full and final authority to take the following actions, in each case
subject to and consistent with the provisions of the Plan:
(i) to select Participants to whom Awards may be
granted;
(ii) to designate Affiliates;
(iii) to determine the type or types of Awards to be
granted to each Participant;
(iv) to determine the type and number of Awards to be
granted, the number and type of shares of Stock to which an Award may
relate, the terms and conditions of any Award granted under the Plan
(including, but not limited to, any exercise price, grant price, or
purchase price, any restriction or condition, any schedule for lapse of
restrictions or conditions relating to transferability or forfeiture,
exercisability, or settlement of an Award, and waivers or accelerations
thereof, and waivers of performance conditions relating to an Award,
based in each case on such considerations as the Committee shall
determine), and all other matters to be determined in connection with
an Award;
(v) to determine whether, and to what extent, the
right of a Participant to exercise or receive a grant or settlement of
any Award, and the timing thereof, may be subject to such performance
conditions as may be specified by the Committee. The Committee may use
such business criteria and other measures of performance as it may deem
appropriate in establishing any performance conditions, and may
exercise its discretion to reduce or increase the amounts payable under
any Award subject to performance conditions;
(vi) to determine whether, to what extent, and under
what circumstances an Award may be settled or the exercise price of an
Award may be cancelled, forfeited, exchanged, or surrendered;
(vii) to determine whether, to what extent, and under
what circumstances an Award will be deferred either automatically, at
the election of the Committee, or at the election of the Participant,
and whether to create trusts and deposit Stock or other property
therein;
(viii) to prescribe the form of each Award Agreement,
which need not be identical for each Participant;
(ix) to adopt, amend, suspend, waive, and rescind
such rules and regulations and appoint such agents as the Committee may
deem necessary or advisable to administer the Plan;
(x) to correct any defect or supply any omission or
reconcile any inconsistency in the Plan and to construe and interpret
the Plan and any Award, rules and regulations, Award Agreement, or
other instrument hereunder; and
(xi) to make all other decisions and determinations
as may be required under the terms of the Plan or as the Committee may
deem necessary or advisable for the administration of the Plan.
Other provisions of the Plan notwithstanding, the Board may perform any function
of the Committee under the Plan, including without limitation for the purpose of
ensuring that transactions under the Plan by Participants who are then subject
to Section 16 of the Exchange Act in respect of the Company are exempt under
Rule 16b-3. In any case in which the Board is performing a function of the
Committee under the Plan, each reference to the Committee herein shall be deemed
to refer to the Board.
B-3
<PAGE>
(b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. At any time
that a member of the Committee is not a Non-Employee Director as defined in Rule
16b-3, any action of the Committee relating to an Award granted or to be granted
to a Participant who is then subject to Section 16 of the Exchange Act in
respect of the Company may be taken either (i) by a subcommittee, designated by
the Committee, composed solely of two or more members who are Non-Employee
Directors, or (ii) by the Committee but with each such member who is not a
Non-Employee Director abstaining or recusing himself or herself from such
action; PROVIDED, HOWEVER, that, upon such abstention or recusal, the Committee
remains composed solely of two or more members who are Non-Employee Directors.
Such action, authorized by such a subcommittee or by the Committee upon the
abstention or recusal of such non-qualifying member(s), shall be the action of
the Committee for purposes of the Plan. Any action of the Committee with respect
to the Plan shall be final, conclusive, and binding on all persons, including
the Company, Subsidiaries, Affiliates, Participants, any person claiming any
rights under the Plan from or through any Participant, and stockholders. The
express grant of any specific power to the Committee, and the taking of any
action by the Committee, shall not be construed as limiting any power or
authority of the Committee. The Committee may delegate to officers or managers
of the Company or any Subsidiary the authority, subject to such terms as the
Committee shall determine, to perform administrative functions and such other
functions as the Committee may determine, to the extent permitted under
applicable law, and in the case of a Participant then subject to Section 16 of
the Exchange Act with respect to the Company, to the extent that such delegation
will not result in the loss of an exemption under Rule 16b-3(d)(1).
(c) LIMITATION OF LIABILITY. Each member of the Committee
shall be entitled to, in good faith, rely or act upon any report or other
information furnished to him or her by any officer or other employee of the
Company or any Subsidiary or Affiliate, the Company's independent certified
public accountants, or other professional retained by the Company to assist in
the administration of the Plan. No member of the Committee, nor any officer or
employee of the Company acting on behalf of the Committee, shall be personally
liable for any action, determination, or interpretation taken or made in good
faith with respect to the Plan, and all members of the Committee and any officer
or employee of the Company or its Subsidiaries acting on their behalf shall, to
the extent permitted by law, be fully indemnified and protected by the Company
with respect to any such action, determination, or interpretation.
4. ELIGIBILITY.
(a) GENERALLY. Executive officers, officers, directors and
employees of the Company, including employees of the Company's Subsidiaries and
Affiliates who are responsible for or contribute to the management, growth
and/or profitability of the business of the Company or its Subsidiaries are
eligible to be granted Awards under the Plan.
(b) ANNUAL PER-PERSON LIMITATION. Subject to adjustment as
hereinafter provided in Sections 5(a) and 5(d), in each calendar year during any
part of which the Plan is in effect, a Participant may be granted Stock Options
relating to no more than 95,000 shares of Stock.
5. STOCK SUBJECT TO THE PLAN; ADJUSTMENT.
(a) NUMBER OF SHARES. Subject to adjustment as hereinafter
provided, the number of shares of Common Stock for which Options may be granted
under the Plan shall be 1,350,000, and the number of shares of Common Stock
which may be issued in connection with Stock Bonuses, Stock Awards, Restricted
Stock and Restricted Stock Units in lieu of cash or other Stock-Based Awards
shall be 700,000, provided however that to the extent that the total number of
shares of Common Stock does not exceed 2,050,000 the Committee may reallocate
the split between the number of shares of Common Stock for which Options may be
granted and the number of shares of Common Stock which may be issued in
connection with Stock Bonuses, Stock Awards, Restricted Stock and Restricted
Stock Units in lieu of cash or other Stock-Based Awards. Additionally, subject
to adjustment as hereinafter provided the number of shares of Noncumulative
Convertible Preferred Stock, Series B for which Options may be granted and which
may be
B-4
<PAGE>
issued in connection with Stock Bonuses, Stock Awards, Restricted Stock and
Restricted Stock Units in lieu of cash or other Stock-Based Awards shall be
650,000.
(b) MANNER OF COUNTING SHARES. If any shares subject to an
Award are forfeited, cancelled, exchanged, or surrendered or such Award
otherwise terminates without a distribution of shares to the Participant such
number of shares will again be available for Awards under the Plan. The
Committee may make determinations and adopt regulations for the counting of
shares relating to any Awards to ensure appropriate counting, avoid double
counting (in the case of tandem or substitute awards), and provide for
adjustments in any case in which the number of shares actually distributed
differs from the number of shares previously counted in connection with such
Award.
(c) TYPE OF SHARES DISTRIBUTABLE. Any shares of Stock
distributed pursuant to an Award may consist, in whole or in part, of authorized
and unissued shares or treasury shares, including shares acquired by purchase in
the open market or in private transactions.
(d) ADJUSTMENTS. In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of cash,
Stock, or other property) which is special, large, and non-recurring,
recapitalization, stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Participants under the Plan, then the Committee shall make such
equitable changes or adjustments as it deems appropriate and, in such manner as
it may deem equitable, adjust any or all of (i) the number and kind of shares of
Stock which may thereafter be issued in connection with Awards, (ii) the number
of and kind of shares of Stock issued or issuable in respect of outstanding
Awards or, if deemed appropriate, make provisions for payment of cash or other
property with respect to any outstanding Award, (iii) the per-person limit,
number and kind of shares subject to Options which may be granted pursuant to
Section 4(b) and (iv) the exercise price, grant price, or purchase price
relating to any Award; provided, however, in each case that, with respect to
ISOs, such adjustment shall be made in accordance with Section 424(h) of the
Code, unless the Committee determines otherwise. In addition, the Committee is
authorized to make adjustments in the terms and conditions of, and the criteria
and performance objectives included in Awards, in recognition of unusual or
non-recurring events (including, without limitation, events described in the
preceding sentence, as well as acquisitions and dispositions of businesses and
assets) affecting the Company or any Subsidiary, or business unit, or the
financial statements thereof, or in response to changes in applicable laws,
regulations, accounting principles, tax rates and regulations, or business
conditions or in view of the Committee's assessment of the business strategy of
the Company, a Subsidiary, or business unit thereof, performance of comparable
organizations, economic and business conditions, personal performance of a
Participant, and any other circumstances deemed relevant.
6. SPECIFIC TERMS OF AWARDS.
(a) GENERAL. Awards may be granted on the terms and conditions
set forth in this Section 6. In addition, the Committee may impose on any Award
or the exercise thereof, at the date of grant or thereafter (subject to Section
9(e)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
regarding forfeiture of Awards or continued exercisability of Awards in the
event of termination of employment by the Participant.
(b) OPTIONS. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(i) EXERCISE PRICE. Unless otherwise required by
applicable law, the exercise price per share of Stock purchasable under
an Option shall be determined by the Committee; provided, however,
that, except as provided in Section 7(a), such exercise price shall be
not less than the Fair Market Value of a share on the date of grant of
such Option.
B-5
<PAGE>
(ii) TIME AND METHOD OF EXERCISE. The Committee shall
determine at the date of grant or thereafter the time or times at which
an Option may be exercised in whole or in part, the methods by which
such exercise price may be paid or deemed to be paid, the form of such
payment, including, without limitation, cash, Stock, other Awards,
notes or other property, and the methods by which Stock will be
delivered or deemed to be delivered to Participants (including, without
limitation, deferral of delivery of shares under a deferral
arrangement).
(iii) ISOS. The terms of any ISO granted under the
Plan shall comply in all respects with the provisions of Section 422 of
the Code.
(c) RESTRICTED STOCK. The Committee is authorized to grant
Restricted Stock or Restricted Stock Units ("RSU") to Participants on the
following terms and conditions:
(i) ISSUANCE AND RESTRICTIONS. Restricted Stock and
RSU shall be subject to such restrictions on transferability and other
restrictions, if any, as the committee may impose at the date of grant or
thereafter, which restrictions may lapse separately or in combination at such
times, under such circumstance, in such installments, or otherwise, as the
Committee may determine. Except to the extent restricted under the Award
Agreement relating to the Restricted Stock or RSU, a Participant granted
Restricted Stock or RSU shall have all of the rights of a stockholder including,
without limitation, the right to vote Restricted Stock and the right to receive
dividends thereon.
(ii) FORFEITURE. Except as otherwise determined by
the Committee, at the date of grant or thereafter, upon termination of
employment (as determined under criteria established by the Committee) during
the applicable restriction period, Restricted Stock or RSU, and any accrued but
unpaid dividend(s) that is or are then subject to a risk of forfeiture shall be
forfeited; provided, however, that the Committee may provide, by rule or
regulation or in any Award Agreement, or may determine in any individual case,
that restrictions or forfeiture conditions relating to Restricted Stock or RSU
will be waived in whole or in part in the event of terminations resulting from
specified causes, and the Committee may in other cases waive in whole or in part
the forfeiture of Restricted Stock.
(iii) CERTIFICATES FOR STOCK. Restricted Stock or RSU
granted under the Plan may be evidenced in such manner as the Committee shall
determine. If certificates representing Restricted Stock are registered in the
name of the participant, such certificates shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such
Restricted Stock, the Company shall retain physical possession of the
certificate, and the Company may require the Participant to deliver a stock
power, endorsed in blank, relating to the Restricted Stock. Upon expiration of
the deferral period specified for RSU by the Committee (or, if permitted by the
Committee, as elected by the participant) the stock underlying such RSU shall be
delivered.
(iv) DIVIDENDS. Dividends paid on Restricted Stock or
RSU shall be either paid at the dividend payment date in cash or in shares of
unrestricted Stock having a Fair Market Value equal to the amount of such
dividends, or the payment of such dividends shall be deferred or the amount or
value thereof automatically reinvested in additional Restricted Stock, RSU,
other Awards, or other investment vehicles, as the Committee shall determine or
permit the Participant to elect. Stock distributed in connection with a Stock
split or Stock dividend, and other property distributed as a dividend, shall be
subject to restrictions and a risk of forfeiture to the same extent as the
Restricted Stock or RSU with respect to which such Stock or other property has
been distributed.
(d) STOCK BONUSES AND STOCK AWARDS IN LIEU OF CASH AWARDS. The
Committee is authorized to grant Stock as a bonus, or to grant other Awards, in
lieu of Company commitments to pay cash under other plans or compensatory
arrangements. Stock or Awards granted hereunder shall have such other terms as
shall be determined by the Committee.
(e) OTHER STOCK-BASED AWARDS. The Committee is authorized,
subject to limitations under applicable law, to grant to Participants such other
Awards that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Stock or other securities,
as deemed by the Committee to
B-6
<PAGE>
be consistent with the purposes of the Plan, including, without limitation,
rights convertible or exchangeable into Stock or such securities, purchase
rights for Stock or such other securities, and Awards with value or payment
contingent upon performance of the Company, or a Subsidiary, or upon any other
factor or performance condition designated by the Committee. The Committee is
authorized to make cash awards pursuant to this Section 6(f) as an element of or
supplement to any other Award under the Plan.
7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
(a) STAND-ALONE, ADDITIONAL, TANDEM AND SUBSTITUTE AWARDS.
Awards granted under the Plan may, in the discretion of the Committee, be
granted either alone or in addition to, in tandem with, or in exchange or
substitution for, any other Award granted under the Plan or any award granted
under any other plan of the Company, any Subsidiary or Affiliate, or any
business entity to be acquired by the Company or a Subsidiary or Affiliate, or
any other right of a Participant to receive payment from the Company or any
Subsidiary or Affiliate. Awards may be granted in addition to or in tandem with
such other Awards or awards and may be granted either as of the same time as or
a different time from the grant of such other Awards or awards. The per share
exercise price of any Option, or purchase price of any other Award conferring a
right to purchase Stock which is granted, in connection with the substitution of
awards granted under any other plan of the Company or any Subsidiary or
Affiliate or any business entity to be acquired by the Company or any Subsidiary
or Affiliate, shall be determined by the Committee, in its discretion.
(b) TERMS OF AWARDS. The term of each Award shall be for such
period as may be determined by the Committee; provided, however, that in no
event shall the term of any ISO exceed a period of ten years from the date of
its grant (or such shorter period as may be applicable under Section 422 of the
Code).
(c) FORM OF PAYMENT UNDER AWARDS. Subject to the terms of the
Plan and any applicable Award Agreement, payments to be made by the Company upon
the grant, maturation, or exercise of an Award may be made in such forms as the
Committee shall determine at the date of grant or thereafter, including, without
limitation, cash, Stock, or other property, and may be made in a single payment
or transfer, in installments, or on a deferred basis. The Committee may make
rules relating the installment or deferred payments with respect to Awards,
including the rate of interest to be credited with respect to such payments.
(d) RULE 16B-3 COMPLIANCE.
(i) SIX-MONTH HOLDING PERIOD. Unless a Participant
could otherwise dispose of equity securities, including derivative
securities, acquired under the Plan without incurring liability under
Section 16(b) of the Exchange Act, equity securities acquired under the
Plan must be held for a period of six months following the date of such
acquisition, provided that this condition shall be satisfied with
respect to a derivative security if at least six months elapse from the
date of acquisition of the derivative security to the date of
disposition of the derivative security (other than upon exercise or
conversion) or its underlying equity security.
(ii) OTHER COMPLIANCE PROVISIONS. With respect to a
Participant who is then subject to Section 16 of the Exchange Act in
respect of the Company, the Committee shall implement transactions
under the Plan and administer the Plan in a manner that will ensure
that each transaction by such a Participant is exempt from liability
under Rule 16b-3, except that such a Participant may be permitted to
engage in a non-exempt transaction under the Plan if written notice has
been given to the Participant regarding the non-exempt nature of such
transaction. Unless otherwise specified by the Participant, equity
securities, including derivative securities, acquired under the Plan
which are disposed of by a Participant shall be deemed to be disposed
of in the order acquired by the Participant.
8. CHANGE IN CONTROL PROVISIONS.
(a) ACCELERATION UPON CHANGE IN CONTROL. In the event of a
"Change in Control," as defined in this Section:
B-7
<PAGE>
(i) any Award carrying a right to exercise that was
not previously exercisable and vested shall become fully exercisable
and vested; and
(ii) the restrictions, deferral limitations, and
forfeiture conditions applicable to any other Award granted under the
Plan shall lapse and such Awards shall be deemed fully vested, and any
performance conditions imposed with respect to Awards shall be deemed
to be fully achieved; provided, however, that, the Board may determine,
by entry of a resolution prior to the occurrence of a Change in
Control, that a Change in Control will not result in some or all of the
consequences specified in (i) or (ii) or will not result in such
consequences for specified Participants.
(b) "CHANGE IN CONTROL" DEFINED. For purposes of the Plan, a
"Change in Control" shall have occurred if:
(i) any "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than the Company; any
trustee or other fiduciary holding securities under an employee benefit
plan of the Company; any corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions
as their ownership of stock of the Company; or any person or group of
persons who as of the date of approval of this Plan by the Board of
Directors of the Company owns, directly or indirectly 10% or more of
the combined voting power of the securities of the Company), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's
then outstanding voting securities;
(ii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation, other than
(A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or parent entity) 50%
or more of the combined voting power of the voting securities of the
Company or such surviving or parent entity outstanding immediately
after such merger or consolidation, or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined) acquired 50%
or more of the combined voting power of the Company's then outstanding
securities; or
(iii) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets (or any transaction having a similar effect).
9. GENERAL PROVISIONS.
(a) COMPLIANCE WITH LEGAL AND EXCHANGE REQUIREMENTS. The
Company shall not be obligated to take any action under the Plan and any Award
Agreement, unless and until it is satisfied that all applicable federal and
state laws, rules and regulations, and approvals by any regulatory or
governmental agency have been complied with or obtained. The Company, in its
discretion, may postpone the issuance or delivery of Stock under any Award until
completion of such stock exchange listing or registration or qualification of
such Stock or other required action under any state, federal or foreign law,
rule or regulation as the Company may consider appropriate, and may require any
Participant to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of Stock in
compliance with applicable laws, rules and regulations.
(b) NONTRANSFERABILILTY. Except as otherwise provided in this
Section 9(b), Awards shall not be transferable by a Participant other than by
will or the laws of descent and distribution or pursuant to a designation of a
Beneficiary, and Awards shall be exercisable during the lifetime of a
Participant only by such Participant or his guardian or legal representative. In
addition, except as otherwise provided in this Section 9(b), no rights under the
Plan
B-8
<PAGE>
may be pledged, mortgaged, hypothecated, or otherwise encumbered, or subject to
the claims of creditors. The foregoing notwithstanding, the Committee may, in
its sole discretion, provide that Awards (or rights or interests therein) other
than ISOs shall be transferable, including but not limited to permitting
transfers to a Participant's immediate family members (I.E., spouse, children,
or grandchildren, as well as the Participant), to trusts for the benefit of such
family members or other transfers deemed by the Committee to be not inconsistent
with the purposes of the Plan.
(c) NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor any
action taken thereunder shall be construed as giving any Participant the right
to be retained in the employ or service of the Company or any of its
Subsidiaries or Affiliates, nor shall it interfere in any way with the right of
the Company or any of its Subsidiaries or Affiliates to terminate any
Participant's employment or services at any time.
(d) TAXES. The Company or any Subsidiary or Affiliate is
authorized to withhold from any Award granted, any payment relating to an Award
under the Plan, including from a distribution of Stock, or any payroll or other
payment to a Participant, amounts of withholding and other taxes due in
connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations.
(e) CHANGES TO THE PLAN AND AWARDS. The Board may amend,
alter, suspend, discontinue, or terminate the Plan or the Committee's authority
to grant Awards under the Plan without the consent of stockholders or
Participants, except that any such amendment, alteration, suspension,
discontinuation, or termination shall be subject to the approval of the
Company's stockholders within one year after such Board action if such
stockholder approval is required by any federal law or regulation or the rules
of any stock exchange or automated quotation system on which the Stock may then
be listed or quoted; provided, however, that, without the consent of an affected
Participant, no amendment, alteration, suspension, discontinuations, or
termination oft he Plan may materially adversely affect the rights of such
Participant under any Award theretofore granted to him or her. The Committee may
waive any conditions or rights under, or amend, alter, suspend, discontinue, or
terminate any Award theretofore granted and any Award Agreement relating
thereto: provided, however, that, without the consent of an affected
Participant, no such amendment, alteration, suspension, discontinuation, or
termination of any Award may materially adversely affect the rights of such
Participant under such Awards. Following the occurrence of a Change in Control,
the Board may not terminate this Plan or amend this Plan in any manner adverse
to Participants.
(f) NO RIGHT TO AWARDS; NO STOCKHOLDER RIGHTS. No Participant
or employee shall have any claim to be granted any Award under the Plan, and
there is no obligation for uniformity of treatment of Participants and
employees. No Award shall confer on any Participant any of the rights of a
stockholder of the Company unless and until Stock is duly issued or transferred
to the Participant in accordance with the terms of the Award.
(g) UNFUNDED STATUS OF AWARDS AND TRUSTS. The Plan is intended
to constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant pursuant to an Award,
nothing contained in the Plan or any Award shall give any such Participant any
rights that are greater than those of a general creditor of the Company;
provided, however, that the Committee may authorize the creation of trusts or
make other arrangements to meet the Company's obligations under the Plan to
deliver cash, Stock, other Awards, or other property pursuant to any Award,
which trusts or other arrangements shall be consistent with the "unfunded"
status of the Plan unless the Committee otherwise determines with the consent of
each affected Participant. If an to the extent authorized by the Committee, the
Company may deposit into such a trust Stock or other assets for delivery to the
Participant in satisfaction of the Company's obligations under any Award. If so
provided by the Committee, upon such a deposit of Stock or other assets for the
benefit of a Participant, there shall be substituted for the rights of the
Participant to receive delivery of Stock and other payments under the Plan a
right to receive the assets of the trust (to the extent that the deposited Stock
or other assets represented the full amount of the Company's obligation under
the Award at the date of deposit). The trustee of the trust may be authorized to
dispose of trust assets and reinvest the proceeds in alternative investments,
subject to such terms and conditions as the Committee may specify and in
accordance with applicable law.
B-9
<PAGE>
(h) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the
Plan by the Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including without limitation, the granting of stock options and other awards
otherwise than under the Plan, and such arrangements may be either applicable
generally or only in specific cases.
(i) NO FRACTIONAL SHARES. No fractional shares of Stock shall
be issued or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, other Awards, or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(j) GOVERNING LAW. The validity, construction, and effect of
the Plan, any rules and regulations relating to the Plan, and any Award
Agreement shall be determined in accordance with the laws of the state of
Florida, without giving effect to principles of conflicts of laws, and
applicable federal law.
(k) EFFECTIVE DATE AND APPROVAL DATE; PLAN TERMINATION. The
Plan shall become effective upon approval by the Board of Directors (the
"Effective Date"), provided, however, that the Plan shall be subject to the
subsequent approval by the affirmative votes of the holders of a majority of
voting securities present in person or represented by proxy, and entitled to
vote on the subject matter, at a meeting of Company stockholders duly held in
accordance with the Florida Corporation Code, or any adjournment thereof in
accordance with applicable provisions of the Florida Corporation Code, such
stockholder approval to be obtained not later than one year after the Effective
Date (the "Approval Date"). Any Awards granted under the Plan prior to such
approval of stockholders shall be subject to such approval and in the absence of
such approval, such Awards shall be null and void. Unless earlier terminated by
the Board, the Plan will terminate at such time as the Company has no further
obligations with respect to any Award granted under the Plan; provided,
however, that ISOs may not be granted later than 10 years after the Effective
Date.
(l) TITLE AND HEADINGS. The titles and headings of the
sections in the Plan are for convenience of reference only. In the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control.
B-10
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BANK UNITED, FSB FOR THE SIX MONTHS ENDED MARCH 31, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 27,296
<INT-BEARING-DEPOSITS> 20,128
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 308,096
<INVESTMENTS-CARRYING> 458,554
<INVESTMENTS-MARKET> 458,697
<LOANS> 2,948,720
<ALLOWANCE> 12,342
<TOTAL-ASSETS> 3,918,701
<DEPOSITS> 2,240,123
<SHORT-TERM> 183,860
<LIABILITIES-OTHER> 46,515
<LONG-TERM> 1,259,947
0
10
<COMMON> 184
<OTHER-SE> 188,062
<TOTAL-LIABILITIES-AND-EQUITY> 3,918,701
<INTEREST-LOAN> 91,123
<INTEREST-INVEST> 15,275
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 106,398
<INTEREST-DEPOSIT> 54,535
<INTEREST-EXPENSE> 94,754
<INTEREST-INCOME-NET> 11,644
<LOAN-LOSSES> 6,736
<SECURITIES-GAINS> (8)
<EXPENSE-OTHER> 24,158
<INCOME-PRETAX> (16,748)
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,748)
<EPS-PRIMARY> (0.60)
<EPS-DILUTED> (0.60)
<YIELD-ACTUAL> 0.65
<LOANS-NON> 24,688
<LOANS-PAST> 1,986
<LOANS-TROUBLED> 1,129
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,128
<CHARGE-OFFS> 698
<RECOVERIES> 176
<ALLOWANCE-CLOSE> 12,342
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
