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, 2000
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 11, 2000 was 17,739,640 shares of Class A Common Stock, $.01
par value, and 450,967 shares of Class B Common Stock, $.01 par value.
This Form 10-Q contains 35 pages.
The Index to Exhibits appears on page 34.
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
Form 10-Q Report for the Quarter Ended March 31, 2000
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition as of
March 31, 2000 (unaudited) and September 30, 1999 3
Consolidated Statements of Operations (unaudited)
for the Three and Six Months Ended March 31, 2000
and March 31, 1999 4
Consolidated Statement of Stockholders' Equity
(unaudited) for the Six Months Ended March 31, 2000 5
Consolidated Statements of Cash Flows (unaudited)
for the Six Months Ended March 31, 2000
and March 31, 1999 6
Condensed Notes to Consolidated Financial
Statements (unaudited) 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 30
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 32
</TABLE>
2
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
March 31, 2000 September 30,
(Unaudited) 1999
- -------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C>
ASSETS
Cash $ 38,226 $ 26,123
Federal Home Loan Bank overnight deposits 100,211 50,412
Securities purchased under agreements to resell - 150,000
Tax certificates (net of reserves of $1,081 at March 31, 2000 and
$1,168 at September 30, 1999) 9,503 14,815
Investments held to maturity (market value of approximately
$4,910 at March 31, 2000 and $4,984 at September 30, 1999) 5,062 5,058
Investments available for sale, at market 17,191 20,001
Mortgage-backed securities, held to maturity (market value
of approximately $233,569 at March 31, 2000
and $198,785 at September 30, 1999) 238,942 202,839
Mortgage-backed securities available for sale, at market 131,558 144,385
Loans receivable, net 3,203,199 2,899,231
Mortgage loans held for sale (market value of approximately $355,939
at March 31, 2000 and $403,785 at September 30, 1999) 355,826 403,635
Other interest earning assets 57,676 54,927
Office properties and equipment, net 15,635 15,644
Real estate owned 2,516 3,548
Accrued interest receivable 25,663 24,768
Mortgage servicing rights, net 7,000 7,820
Goodwill, net 30,688 31,465
Prepaid expenses and other assets 28,559 23,800
---------- ----------
Total assets $4,267,455 $4,078,471
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $2,438,580 $2,279,798
Securities sold under agreements to repurchase 6,680 31,701
Advances from Federal Home Loan Bank 1,151,426 1,096,447
Senior notes 200,000 200,000
Company obligated mandatorily redeemable trust preferred securities of
subsidiary trusts holding solely junior subordinated deferrable interest
debentures of BankUnited 214,593 218,500
Interest payable (primarily on deposits and advances from Federal Home
Loan Bank) 9,241 10,205
Advance payments by borrowers for taxes and insurance 11,518 19,616
Accrued expenses and other liabilities 39,788 32,067
---------- ----------
Total liabilities 4,071,826 3,888,334
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY:
Preferred stock, Series B and Series 9%, $0.01 par value.
Authorized shares - 10,000,000; issued shares -992,938 and
992,938 at March 31, 2000 and September 30, 1999; outstanding
shares-991,938 and 992,938 at March 31, 2000 and September 30, 1999 10 10
Class A Common Stock, $0.01 par value. Authorized shares--30,000,000;
issued shares - 18,071,283 at March 31, 2000 and 18,049,430 at
September 30, 1999; outstanding shares - 17,738,283 at March 31, 2000
and 17,866,430 at September 30, 1999 181 180
Class B Common Stock, $.01 par value. Authorized shares - 3,000,000;
issued and outstanding shares - 450,967 and 458,467 at March 31, 2000
and September 30, 1999 5 5
Additional paid-in capital 181,558 181,335
Retained earnings 21,927 14,081
Treasury stock (2,801) (1,684)
Accumulated other comprehensive loss, net of tax (5,251) (3,790)
---------- ----------
Total stockholders' equity 195,629 190,137
---------- ----------
Total liabilities and stockholders' equity $4,267,455 $4,078,471
========== ==========
</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)
2000 1999 2000 1999
----------- ----------- ----------- ------------
(in thousands, except earnings per share)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 63,601 $ 40,286 $ 124,276 $ 91,123
Interest on mortgage-backed securities 6,155 3,081 12,240 7,154
Interest on short-term investments 287 2,813 852 3,661
Interest and dividends on long-term investments
and other earning assets 1,594 2,073 3,221 4,460
----------- ----------- ----------- -----------
Total interest income 71,637 48,253 140,589 106,398
----------- ----------- ----------- -----------
Interest expense:
Interest on deposits 29,620 26,869 57,839 54,535
Interest on borrowings 17,159 14,540 33,421 29,642
Preferred dividends of trust subsidiaries 5,220 5,289 10,502 10,577
----------- ----------- ----------- -----------
Total interest expense 51,999 46,698 101,762 94,754
----------- ----------- ----------- -----------
Net interest income before provision for loan losses 19,638 1,555 38,827 11,644
Provision for loan losses 1,000 6,336 2,200 6,736
----------- ----------- ----------- -----------
Net interest income (expense) after provision
for loan losses 18,638 (4,781) 36,627 4,908
----------- ----------- ----------- -----------
Non-interest income:
Service fees, net 994 998 1,937 2,076
Other 576 211 940 426
----------- ----------- ----------- -----------
Total non-interest income 1,570 1,209 2,877 2,502
----------- ----------- ----------- -----------
Non-interest expenses:
Employee compensation and benefits 5,222 4,397 10,094 7,511
Occupancy and equipment 1,998 2,599 4,145 4,240
Insurance 264 417 674 797
Professional fees - legal and accounting 911 774 1,798 1,356
Telecommunication and data processing 781 728 1,424 1,392
Loan servicing expense 1,454 1,519 2,947 3,481
Real estate owned operations (82) (65) (191) (44)
Advertising and promotion expense 1,256 201 1,970 578
Amortization of goodwill 389 383 777 767
Other operating expenses 1,560 2,983 3,103 4,080
----------- ----------- ----------- -----------
Total non-interest expenses 13,753 13,936 26,741 24,158
----------- ----------- ----------- -----------
Income (loss) before income taxes, extraordinary
item and preferred stock dividends 6,455 (17,508) 12,763 (16,748)
Provision (benefit) for income taxes 2,635 (6,578) 5,214 (6,214)
----------- ----------- ----------- -----------
Income (loss) before extraordinary item 3,820 (10,930) 7,549 (10,534)
Extraordinary item, net of taxes 261 - 692 -
----------- ----------- ----------- -----------
Income (loss) before preferred stock dividends 4,081 (10,930) 8,241 (10,534)
Preferred stock dividends 198 196 395 384
----------- ----------- ----------- -----------
Net income (loss) $ 3,883 $ (11,126) $ 7,846 $ (10,918)
=========== =========== =========== ===========
Earnings (Loss) Per Share:
Basic
Net income (loss) before extraordinary item $ 0.20 $ (0.61) $ 0.39 $ (0.60)
Extraordinary item, net of taxes 0.01 - 0.04 -
----------- ----------- ----------- -----------
Net income (loss) $ 0.21 $ (0.61) $ 0.43 $ (0.60)
=========== =========== =========== ===========
Diluted
Net income (loss) before extraordinary item $ 0.20 $ (0.61) $ 0.38 $ (0.60)
Extraordinary item, net of taxes 0.01 - 0.04 -
----------- ----------- ----------- -----------
Net income (loss) $ 0.21 $ (0.61) $ 0.42 $ (0.60)
=========== =========== =========== ===========
Weighted average number of common shares outstanding during the period:
Basic 18,189 18,255 18,247 18,222
=========== =========== =========== ===========
Diluted 18,726 18,255 18,851 18,222
=========== =========== =========== ===========
</TABLE>
SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Six Months Ended March 31, 2000
-------------------------------------------------------------------------------------
(Unaudited)
Accumulated
Other
Preferred Common Paid-in Retained Treasury Comprehensive
Stock Stock Capital Earnings Stock Loss Total
-------- --------- --------- --------- --------- --------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1999 $ 10 $ 185 $ 181,335 $ 14,081 $ (1,684) $ (3,790) $190,137
Comprehensive income:
Net income - - - 8,241 - - 8,241
Dividends declared on preferred stock - - - (395) - - (395)
Other comprehensive loss, net of tax - - - - - (1,461) (1,461)
--------
Total comprehensive income 6,385
Stock issued through the
exercise of options, restricted
stock grants, directors'
compensation and employee
stock grants - 1 189 - - - 190
Treasury stock acquired - - - - (1,117) - (1,117)
Common stock issued through
preferred stock dividends - - 34 - - - 34
------ ------- ------- ------- ------- ------ ------
Balance, March 31, 2000 $ 10 $ 186 $ 181,558 $ 21,927 $ (2,801) $ (5,251) $195,629
======= ======== ======== ======== ======== ======== =======
</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,
---------------------------------
2000 1999
--------- -----------
(Unaudited; in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 8,241 $ (10,534)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Provision for loan losses 2,200 6,736
Provision for losses on tax certificates - 1,150
Depreciation and amortization 1,542 1,201
Amortization of fees, discounts and premiums 2,210 21,379
Amortization of mortgage servicing rights 820 568
Amortization of goodwill 777 767
Amortization of issuance costs on senior notes 368 102
Net loss on sales of loans and mortgage-backed securities - 8
Net gain on the sale of real estate owned (398) (71)
Extraordinary gain on repurchase of trust preferred securities (1,105) -
Loans originated for sale - (140,399)
Proceeds from sale of loans - 23,307
(Increase) decrease in accrued interest receivable (895) 7,520
(Decrease) increase in interest payable on deposits and FHLB advances (964) 1,887
Increase (decrease) in accrued taxes 1,587 (6,704)
Decrease in other liabilities 6,656 2,631
(Increase) decrease in prepaid expenses and other assets (4,759) 6,879
Purchase of mortgage servicing rights - (480)
Other, net 2,518 805
--------- -----------
Net cash provided by (used in) operating activities 18,798 (83,248)
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in loans (266,072) 196,540
Purchase of investment securities (1,413) (1,009)
Purchase of mortgage-backed securities (49,824) (116,504)
Purchase of other interest-earning assets (21,099) (24,749)
Proceeds from repayments of investment securities 1,750 12,750
Proceeds from repayments of mortgage-backed securities 25,345 112,785
Proceeds from repayments of other interest-earning assets 18,350 24,885
Proceeds from the sale of real estate owned 5,937 1,087
Purchases of office properties and equipment (1,431) (2,890)
Net decrease in tax certificates 5,312 14,051
--------- -----------
Net cash (used in) provided by investing activities (283,145) 216,946
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 158,782 115,299
Net increase (decrease) in Federal Home Loan Bank Advances 54,979 (19)
Net (decrease) increase in other borrowings (25,021) 82,712
Capitalized cost for senior notes (310) (2,069)
Net proceeds from issuance of common stock 47 856
Repurchase of trust preferred securities (2,652) -
Repurchase of common stock (1,117) -
Dividends paid on preferred stock (361) (328)
Decrease in advances from borrowers for taxes and insurance (8,098) (4,236)
--------- -----------
Net cash provided by financing activities 176,249 192,215
--------- -----------
(Decrease) increase in cash and cash equivalents (88,098) 325,913
Cash and cash equivalents at beginning of period 226,535 91,511
--------- -----------
Cash and cash equivalents at end of period $ 138,437 $ 417,424
========== ==========
Supplemental Disclosures:
Interest paid on deposits and borrowings $ 102,726 $ 92,867
========== ==========
Transfer of loans to real estate owned $ 4,848 $ 1,545
========== ==========
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 $ 3,650 $ -
========== ==========
</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 period ended March 31, 2000 are not necessarily indicative of the results
which may be expected for the year ending September 30, 2000. 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, 1999.
Certain prior period amounts have been reclassified to conform to the
March 31, 2000 consolidated financial statements.
7
<PAGE>
2. EARNINGS PER SHARE
------------------
The following tables reconcile basic and diluted earnings (loss) per
share for the three and six months ended March 31, 2000 and 1999.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
-------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
BASIC EARNINGS (LOSS) PER SHARE:
Numerator:
Income (loss) after preferred stock dividends
and before extraordinary item...................... $ 3,622 $ (11,126) $ 7,154 $ (10,918)
Extraordinary item................................. 261 - 692 -
----------- ----------- ----------- -----------
Net income (loss).................................... $ 3,883 $ (11,126) $ 7,846 $ (10,918)
=========== =========== =========== ===========
Denominator:
Weighted average common shares outstanding........... 18,189 18,255 18,247 18,222
=========== =========== =========== ===========
Basic earnings (loss) per share before
extraordinary item................................... $ 0.20 $ (0.61) $ 0.39 $ (0.60)
Basic earnings per share from extraordinary item....... 0.01 - 0.04 -
----------- ----------- ----------- -----------
Basic earnings (loss) per share........................ $ 0.21 $ (0.61) $ 0.43 $ (0.60)
=========== =========== =========== ===========
DILUTED EARNINGS (LOSS) PER SHARE:
Numerator:
Income (loss) after preferred stock dividends
and before extraordinary item...................... $ 3,622 $ (11,126) $ 7,154 $ (10,918)
Plus:
Reduction of preferred stock dividends............. 40 - 81 -
----------- ----------- ----------- -----------
Diluted income (loss) available to common
shareholders before extraordinary item............. 3,662 (11,126) 7,235 (10,918)
Extraordinary item................................. 261 - 692 -
----------- ----------- ----------- -----------
Diluted net income (loss) available to common
shareholders..................................... $ 3,923 $ (11,126) $ 7,927 $ (10,918)
=========== =========== =========== ===========
Denominator:
Weighted average common shares outstanding........... 18,189 18,255 18,247 18,222
Plus:
Number of common shares from the conversion
of options and warrants (1)...................... 94 - 161 -
Number of common shares from the conversion
of dilutive preferred stock (2).................. 443 - 443 -
----------- ----------- ----------- -----------
Diluted weighted average common shares
outstanding........................................ 18,726 18,255 18,851 18,222
=========== =========== =========== ===========
Diluted earnings (loss) per share before
extraordinary item................................... $ 0.20 $ (0.61) $ 0.38 $ (0.60)
Diluted earnings per share from extraordinary item... 0.01 - 0.04 -
----------- ----------- ----------- -----------
Diluted earnings (loss) per share...................... $ 0.21 $ (0.61) $ 0.42 $ (0.60)
=========== =========== =========== ===========
</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
per share because of their antidilutive effect.
(2) For the three and six months ended March 31, 1999, there were 356,000
and 349,000 common stock equivalent shares, respectively, of
convertible preferred stock outstanding that were not included in the
computation of diluted earnings per share because of their antidilutive
effect.
8
<PAGE>
3. 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. At September 30, 1999, BankUnited had purchased 183,000
shares of its Class A Common Stock. During the six month period ended March 31,
2000, BankUnited purchased an additional 150,000 shares of its Class A Common
Stock on the open market at a cost of $1.1 million, for a total treasury
position of 333,000 shares at a cost of $2.8 million.
In May 1999, BankUnited's Board of Directors authorized the purchase of
shares of its 9% Noncumulative Perpetual Preferred Stock (the "9% Preferred
Stock") on the open market as deemed appropriate and, if the market is
appropriate, the retirement of the 9% Preferred Stock. During the six month
period ended March 31, 2000, BankUnited purchased a total of 1,000 shares of its
9% Preferred Stock on the open market at a cost of $7,250.
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 well-capitalized
minimum, actual and excess regulatory capital levels as of March 31, 2000 were
as follows:
<TABLE>
<CAPTION>
WELL-CAPITALIZED
MINIMUM ACTUAL EXCESS
---------------------- --------------------- ------------------------
% OF % OF % OF
AMOUNT ASSETS AMOUNT ASSETS AMOUNT ASSETS
-------- ------ -------- ------ -------- ------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Core Capital $ 209,319 5.0% $ 328,872 7.9% $ 119,553 2.9%
Tier 1 Risk-Based $ 132,244 6.0% $ 328,872 14.9% $ 196,628 8.9%
Risk-Based Capital $ 220,406 10.0% $ 340,896 15.5% $ 120,490 5.5%
</TABLE>
4. COMPREHENSIVE INCOME (LOSS)
---------------------------
BankUnited's comprehensive income (loss) includes all items which
comprise net income (loss) plus other comprehensive income (loss) which includes
the unrealized holding gains and losses on available for sale securities. For
the three and six months ended March 31, 2000 and 1999, BankUnited's other
comprehensive loss was as follows:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
---------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C>
Other comprehensive loss, net of taxes:
Unrealized holding losses arising
during the period.......................... $ (347) $ (230) $ (1,536) $ (1,198)
Less reclassification adjustment for:
Amortization of unrealized losses on
transferred securities.................. 43 - 75 -
----------- ----------- ----------- ------------
Total other comprehensive loss .................... $ (304) $ (230) $ (1,461) $ (1,198)
============ ============ ============ =============
</TABLE>
9
<PAGE>
5. CONTINGENCIES AND OFF-BALANCE SHEET ACTIVITIES
----------------------------------------------
During March 2000, the Bank entered into five interest rate cap
contracts with a major Wall Street firm, having an aggregate notional amount of
$800.0 million. Each contract requires the counter-party to pay the Bank
quarterly interest payments based on the notional amount and the difference
between the index and the cap rate, if and when the index exceeds the cap rate,
in return for a one-time payment by the Bank. The indices used in these
contracts are the 5-Year Treasury rate adjusted to a constant maturity (the
"5-Year CMT rate"), the 10-Year Treasury rate adjusted to a constant maturity
(the "10-Year CMT rate"), the 5-Year Constant Maturity Swap rate (the "5-Year
CMS rate") and the 10-Year Constant Maturity Swap rate (the "10-Year CMS rate").
The following table sets forth information concerning the interest rate
cap contracts.
<TABLE>
<CAPTION>
NOTIONAL CAP TERMINATION
AMOUNT INDEX RATE DATE
-------------- ------------ ---- --------------
<S> <C> <C> <C> <C>
$100.0 million 5-Year CMT 7.50% March 23, 2002
$100.0 million 10-Year CMT 7.25% March 23, 2002
$100.0 million 5-Year CMS 8.85% March 23, 2003
$400.0 million 10-Year CMS 9.35% March 23, 2003
$100.0 million 10-Year CMS 8.85% March 23, 2003
------------------
$800.0 million
==================
</TABLE>
Additionally, the Bank had an interest rate cap contract with a major
Wall Street firm in a notional amount of $60.0 million, which terminated on
April 23, 2000. The contract required the counter-party to pay the Bank
quarterly interest payments based on the notional amount and the difference
between the "3-Month London Inter Bank Offering Rate" (the "LIBOR rate") and
5.90%, when the LIBOR rate exceeded 5.90%, in return for a one-time payment by
the Bank.
The Bank also has an interest rate cap contract with another major Wall
Street firm in a notional amount of $75.0 million, which will terminate 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 borrowings from the Federal Home Loan Bank ("FHLB"). As of March 31,
2000, the LIBOR rate was 6.29%, the 5-Year CMT rate was 6.32%, the 10-Year CMT
rate was 6.02%, the 5-Year CMS rate was 7.24% and the 10-Year CMS rate was
7.28%.
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.
10
<PAGE>
6. EXTRAORDINARY ITEM
------------------
In November 1999, the Board of Directors of BankUnited authorized the
purchase, from time to time, in the open market, or otherwise, of up to 300,000
shares of trust preferred securities issued by its trust subsidiaries (the
"Trust Preferred Securities").
BankUnited purchased 56,500 Trust Preferred Securities for $1.0 million
during the three months ended March 31, 2000, resulting in total purchases of
156,299 Trust Preferred Securities at a cost of $2.7 million for the six months
ended March 31, 2000. As a result of the early extinguishment of the Trust
Preferred Securities which were acquired, the purchases resulted in
extraordinary gains of $0.3 million, net of $0.1 million in taxes, for the three
months ended March 31, 2000, and $0.7 million, net of $0.4 million in taxes, for
the six months ended March 31, 2000.
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 for the three and six month periods ended March 31, 2000 and 1999.
This discussion and analysis should 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, 1999.
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"). The Bank was founded in 1984 as a savings and
loan association. In 1993, the Bank was converted to a federally chartered
savings bank and became a wholly-owned subsidiary of BankUnited pursuant to a
plan of re-organization approved by the shareholders. BankUnited's principal
business currently consists of the operation of its wholly-owned subsidiary, the
Bank. In addition to managing the business activities of the Bank, BankUnited
invests primarily in U.S. Government and federal agency securities,
mortgage-backed securities and other permitted investments. The Bank's primary
business has traditionally been to attract retail deposits from the general
public and to invest 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 has also invested in other permitted investments. The Bank is
subject to the regulations of certain federal
11
<PAGE>
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, telecommunications and 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.
SECOND QUARTER HIGHLIGHTS
BankUnited reported record net income of $3.9 million for the second
quarter of fiscal 2000, which ended on March 31, 2000. Both basic and diluted
earnings were $0.21 per share. Results for the quarter reflect the significant
improvement of BankUnited's net interest margin for the three months ended March
31, 2000, to 2.01% from 0.13% for the same period ended March 31, 1999. The
prior year period results included the charges incurred by BankUnited in
connection with the restructuring completed during that quarter.
During the second quarter of fiscal 2000, BankUnited launched its web
site, "www.buexpress.com" to widen its reach into the community at reduced cost
and offer the alternative delivery channel of Internet banking services to its
customers. BankUnited's branding campaign, which commenced in the first quarter
of fiscal 2000, was expanded during the second quarter with the launch of an
aggressive advertising component including radio, print and an award-winning
thirty-second television commercial. BankUnited's branch network continued to
grow with the opening of two new branches during the second quarter, bringing
the total opened during the first six months of the fiscal year to three.
BankUnited currently expects to open two additional branches over the remainder
of fiscal 2000.
YEAR 2000
Computer programs which recognize a date using two digits (rather than
four) to define the applicable year may consider a date using "00" as the year
1900 rather than the year 2000, or fail to recognize the year 2000 as a leap
year. This is generally referred to as the "Year 2000 Issue," which may affect
the performance of computer programs, hardware, software and other products with
embedded computer technology that is date sensitive. In preparation for the Year
2000 Issue, BankUnited extensively reviewed, modified and tested its systems
prior to the Year 2000, and has been substantially Year 2000 compliant since
June 30, 1999.
On and after January 1, 2000 and February 29, 2000, BankUnited
conducted extensive tests of its information systems to verify that the systems
correctly recognize the Year 2000 and treat it as a leap year. Additionally,
BankUnited associates have closely monitored computer output for accuracy
subsequent to January 1, 2000 and February 29, 2000. These tests and reviews
have not resulted in any incidents that would materially impact the operation or
financial condition of BankUnited, and BankUnited has not, as of this date,
experienced any significant disruption due to a Year 2000 failure.
12
<PAGE>
Through March 31, 2000, BankUnited incurred approximately $1.9 million
in costs associated with becoming Year 2000 compliant, excluding internal costs.
The costs consisted of approximately $0.7 million for the replacement of
hardware and software, $0.9 million for the write-off of non-compliant hardware
and software and $0.4 million for other incremental costs. BankUnited had
estimated the total costs associated with becoming Year 2000 compliant to be
approximately $2.0 million, exclusive if internal 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.
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. For the six months ended March
31, 2000 and 1999, principal repayments on loans and mortgage-backed securities
and proceeds from maturities of other securities totaled $298.3 million and
$930.3 million, respectively. This comparison reflects the significant
acceleration of prepayments experienced by BankUnited on certain mortgage loans
and mortgage backed securities, which began in the quarter ended June 30, 1998
and continued through the quarter ended March 31, 1999 due to the decrease in
long-term interest rates. Since the quarter ended June 30, 1999, rising
long-term interest rates have caused the volume of mortgage loan refinancing to
decrease, slowing the prepayment rate of BankUnited's loan portfolio.
BankUnited's primary use of funds in its financing activities has been
the repayment of FHLB advances and other borrowings. Net cash provided by
financing activities during the six months ended March 31, 2000 was $176.2
million compared to $192.2 million for the six months ended March 31, 1999. The
overall decrease in the sources of funds resulted from the reduction in the
level of other borrowings.
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, 2000, BankUnited's loan originations totaled $508.3 million, loan
purchases totaled $5.5 million and purchases of mortgage-backed securities and
other securities totaled $72.3 million. For the same period in 1999,
BankUnited's loan originations totaled $283.1 million, loan purchases totaled
$433.0 million and purchases of mortgage-backed securities and other securities
totaled $142.3 million. The decrease in loan purchases during the six months
ended March 31, 2000 is the result of 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 deposits plus short-term borrowings (the "liquidity ratio"). The
Bank's liquidity ratio was 5.02% and 6.96% as of March 31, 2000 and September
30, 1999, 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,
2000, the Bank was in compliance with all capital requirements and met the
definition of a "well capitalized" institution under applicable federal
regulations. See "Note 3 - Capital."
13
<PAGE>
ASSET QUALITY
Non-performing assets as of March 31, 2000 were $23.6 million, which
represents a decrease of $4.7 million, or 16.6%, from $28.3 million as of
September 30, 1999. The decrease in non-performing assets primarily resulted
from a decrease in non-accrual loans of $3.4 million, and a decrease in real
estate owned of $1.0 million. Non-accrual loans decreased due to a $1.0 million
decrease in one-to-four family residential loan delinquencies and a $3.2 million
decrease in commercial mortgage loan delinquencies, offset by a $0.8 million
increase in non- mortgage commercial loan delinquencies. Included in the
decrease in non-accrual loans is a reduction due to $1.1 million in loan
charge-offs. The decrease in real estate owned ("REO") was due to the sale of
REO properties aggregating $5.9 million offset by transfers of loans to REO of
$4.8 million. Non-performing assets as a percentage of total assets decreased
from 0.69% as of September 30, 1999 to 0.55% as of March 31, 2000 due to the
decrease 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, 2000 and September 30, 1999.
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
2000 1999
----------- -----------
(dollars in thousands)
<S> <C> <C>
Non-accrual loans $ 18,025 $ 21,428
Restructured loans 884 962
Loans past due 90 days and still accruing (1) 429 693
----------- -----------
Total non-performing loans 19,338 23,083
Non-accrual tax certificates 1,731 1,703
Real estate owned 2,516 3,548
----------- -----------
Total non-performing assets $ 23,585 $ 28,334
=========== ===========
Allowance for losses on tax certificates $ 1,131 $ 1,168
Allowance for loan losses 13,229 12,107
----------- -----------
Total allowance $ 14,360 $ 13,275
=========== ===========
Non-performing assets as a percentage of
total assets 0.55% 0.69%
Non-performing loans as a percentage of
total loans 0.54% 0.70%
Allowance for loan losses as a percentage of
total loans 0.37% 0.36%
Allowance for loan losses as a percentage of
non-performing loans 68.41% 52.45%
Net charge offs as a percentage of average
total loans 0.06% 0.06%
</TABLE>
- ----------------
(1) Consists primarily of loans guaranteed by the Federal Housing
Authority ("FHA") acquired in the acquisition of Suncoast Savings and Loan
Association, FSA.
14
<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. The
provision for loan losses for the three months ended March 31, 2000 was $1.0
million as compared to $6.3 million for the three months ended March 31, 1999.
The provision for loan losses for the six months ended March 31, 2000 was $2.2
million as compared to $6.7 million for the six months ended March 31, 1999.
BankUnited's allowance for loan losses has increased by a net amount of $1.1
million from $12.1 million as of September 30, 1999 to $13.2 million as of March
31, 2000. 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, 2000 and 1999.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
------------------------------- ------------------------------
2000 1999 2000 1999
------------- ------------- ------------- ------------
(in thousands)
<S> <C> <C> <C> <C>
Balance at beginning of period................... $ 12,486 $ 6,594 $ 12,107 $ 6,128
Provision...................................... 1,000 6,336 2,200 6,736
Loans charged off.............................. (303) (596) (1,143) (698)
Recoveries..................................... 46 8 65 176
------------ ------------ ------------- -------------
Balance at end of period......................... $ 13,229 $ 12,342 $ 13,229 $ 12,342
============= ============= ============= =============
</TABLE>
The following table sets forth BankUnited's allocation of the allowance
for loan losses by category as of March 31, 2000 and 1999
<TABLE>
<CAPTION>
AS OF MARCH 31,
------------------------------
2000 1999
------------- -------------
(in thousands)
<S> <C> <C>
One-to-four family................................................ $ 4,012 $ 4,869
Multi-family...................................................... 557 347
Commercial real estate............................................ 2,181 4,411
Construction...................................................... 227 87
Land.............................................................. 1,064 842
Commercial business and consumer.................................. 3,877 1,784
Unallocated....................................................... 1,311 2
----------- -----------
Total allowance................................................ $ 13,229 $ 12,342
============ ============
</TABLE>
15
<PAGE>
LOAN PORTFOLIO
The following table sets forth the composition of BankUnited's loan
portfolio, including loans held for sale, at March 31, 2000 and September 30,
1999.
<TABLE>
<CAPTION>
MARCH 31, 2000 SEPTEMBER 30, 1999
--------------------------- --------------------------
PERCENT PERCENT
OF OF
AMOUNT TOTAL AMOUNT TOTAL
-------------- ----------- ------------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Mortgage loans:
One-to-four family................................ $ 3,206,394 90.2% $ 3,010,427 91.1%
Multi-family...................................... 33,145 0.9 30,057 0.9
Commercial real estate............................ 143,930 4.0 141,090 4.3
Construction...................................... 18,897 0.5 15,425 0.5
Land.............................................. 28,518 0.8 23,659 0.7
-------------- ----------- ------------- -----------
Total mortgage loans............................ 3,430,884 96.4 3,220,658 97.5
-------------- ----------- ------------- -----------
Other loans:
Commercial........................................ 77,302 2.2 48,173 1.5
Consumer.......................................... 50,451 1.4 33,878 1.0
-------------- ----------- ------------- -----------
Total other loans............................... 127,753 3.6 82,051 2.5
-------------- ----------- ------------- -----------
Total loans................................... 3,558,637 100.0 3,302,709 100.0
Unearned discounts, premiums and
deferred loan fees, net......................... 13,617 0.4 12,264 0.4
Allowance for loan losses......................... (13,229) (0.4) (12,107) (0.4)
-------------- ----------- ------------- -----------
Total loan portfolio................................. $ 3,559,025 100.0% $ 3,302,866 100.0%
============== =========== ============= ===========
</TABLE>
16
<PAGE>
SECURITIES PORTFOLIO
The following tables set forth the amortized cost and estimated fair
value of mortgage-backed securities and other securities available for sale and
held to maturity at March 31, 2000 and September 30, 1999.
<TABLE>
<CAPTION>
MARCH 31, 2000
------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------------- ------------- ------------- --------------
(in thousands)
<S> <C> <C> <C> <C>
Available-for-sale:
Mortgage-backed securities:
GNMA mortgage-backed securities................. $ 30,370 $ 104 $ (670) $ 29,804
FNMA mortgage-backed securities................. 4,890 15 (169) 4,736
FHLMC mortgage-backed securities................ 14,914 34 (326) 14,622
Collateralized mortgage obligations............. 81,948 55 (2,356) 79,647
Mortgage pass-through certificates.............. 2,759 - (10) 2,749
-------------- ------------- ------------- --------------
Total mortgage-backed securities.............. 134,881 208 (3,531) 131,558
-------------- ------------- ------------- --------------
Other securities:
U.S. government agency securities............. 850 4 - 854
Equity securities............................. 2,905 - (622) 2,283
Trust preferred securities of
other issuers............................... 16,320 - (2,266) 14,054
-------------- ------------- ------------- --------------
Total other securities...................... 20,075 4 (2,888) 17,191
-------------- ------------- -------------- --------------
Total available-for-sale.......................... $ 154,956 $ 212 $ (6,419) $ 148,749
============== ============= ============== ==============
Held-to-maturity:
Mortgage-backed securities:
GNMA mortgage-backed securities................. $ 88,227 $ 394 $ (690) $ 87,931
FNMA mortgage-backed securities................. 1,816 - (62) 1,754
FHLMC mortgage-backed securities................ 70,145 - (2,675) 67,470
Collateralized mortgage obligations............. 57,266 - (2,330) 54,936
Mortgage pass-through certificates.............. 21,488 22 (32) 21,478
-------------- ------------- -------------- --------------
Total mortgage-backed securities.............. 238,942 416 (5,789) 233,569
-------------- ------------- ------------- --------------
Other securities:
U.S. government agency securities............. 5,001 - (152) 4,849
State of Israel bonds......................... 61 - - 61
-------------- ------------- ------------- --------------
Total other securities...................... 5,062 - (152) 4,910
-------------- ------------- ------------- --------------
Total held-to-maturity............................ $ 244,004 $ 416 $ (5,941) $ 238,479
============== ============= ============= ==============
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------------- ------------- ------------- --------------
(in thousands)
<S> <C> <C> <C> <C>
Available-for-sale:
Mortgage-backed securities:
GNMA mortgage-backed securities................. $ 32,543 $ 179 $ (391) $ 32,331
FNMA mortgage-backed securities................. 5,396 40 (116) 5,320
FHLMC mortgage-backed securities................ 16,949 11 (110) 16,850
Collateralized mortgage obligations............. 88,268 92 (1,552) 86,808
Mortgage pass-through certificates.............. 3,072 4 - 3,076
-------------- ------------- ------------- --------------
Total mortgage-backed securities.............. 146,228 326 (2,169) 144,385
-------------- ------------- ------------- --------------
Other securities:
U.S. Treasury securities...................... 503 1 - 504
U.S. government agency securities............. 2,104 15 (8) 2,111
Equity securities............................. 2,905 - (199) 2,706
Trust preferred securities of
other issuers............................... 16,327 - (1,647) 14,680
-------------- ------------- ------------- --------------
Total other securities...................... 21,839 16 (1,854) 20,001
-------------- ------------- ------------- --------------
Total available-for-sale.......................... $ 168,067 $ 342 $ (4,023) $ 164,386
============== ============= ============= ==============
Held-to-maturity:
Mortgage-backed securities:
GNMA mortgage-backed securities................. $ 39,244 $ 59 $ (168) $ 39,135
FNMA mortgage-backed securities................. 1,915 - (23) 1,892
FHLMC mortgage-backed securities................ 72,566 2 (1,202) 71,366
Collateralized mortgage obligations............. 63,189 - (2,740) 60,449
Mortgage pass-through certificates.............. 25,925 45 (27) 25,943
-------------- ------------- ------------- --------------
Total mortgage-backed securities.............. 202,839 106 (4,160) 198,785
-------------- ------------- ------------- --------------
Other securities:
U.S. government agency securities............. 4,997 - (74) 4,923
State of Israel bonds......................... 61 - - 61
-------------- ------------- ------------- --------------
Total other securities...................... 5,058 - (74) 4,984
-------------- ------------- ------------- --------------
Total held-to-maturity............................ $ 207,897 $ 106 $ (4,234) $ 203,769
============== ============= ============= ==============
</TABLE>
18
<PAGE>
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM SEPTEMBER 30, 1999 TO MARCH 31,
2000 AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2000
AND 1999.
FINANCIAL CONDITION
ASSETS
Total assets remained relatively constant from September 30, 1999 to
March 31, 2000, which is consistent with BankUnited's expectations that assets
will not grow significantly during the 2000 fiscal year.
BankUnited's short-term investments, primarily consisting of Federal
Home Loan Bank ("FHLB") overnight deposits and securities purchased under
agreements to resell, decreased by $100.2 million, or 50.0%, to $100.2 million
at March 31, 2000, from $200.4 million at September 30, 1999 primarily due to
the maturity of securities purchased under agreements to resell.
BankUnited's investment in tax certificates decreased by $5.3 million,
or 35.8%, to $9.5 million at March 31, 2000, from $14.8 million at September 30,
1999, as a result of certificate redemptions and repayments and the decision to
no longer invest in this type of instrument.
Mortgage-backed securities held-to-maturity increased by $36.1 million,
or 17.8%, to $238.9 million at March 31, 2000, from $202.8 million at September
30, 1999 due primarily to purchases of $49.8 million, offset by repayments and
amortization of premiums.
Mortgage-backed securities available-for-sale decreased by $12.8
million, or 8.9%, to $131.6 million at March 31, 2000, from $144.4 million at
September 30, 1999, due primarily to repayments and amortization of $11.3
million, and also due to a reduction of $1.5 million in the market value of the
underlying securities.
BankUnited's loans receivable, net (including loans held for sale)
increased $0.3 billion, or 9.1%, from $3.3 billion at September 30, 1999 to $3.6
billion at March 31, 2000. Mortgage loan purchases of $5.5 million and loan
originations of $508.3 million were offset by repayments of $255.1 million (net
of accretion of discount and amortization of premium). BankUnited classified all
of the residential loans originated and purchased during the first half of
fiscal 2000 as loans receivable, net.
LIABILITIES
Deposits increased by $158.8 million from September 30, 1999 to March
31, 2000 due to an increase in savings and certificates of deposit of $11.4
million and $155.7 million, respectively. Interest-bearing checking accounts
decreased $24.0 million, offset, in part, by an increase in non-interest-bearing
checking accounts of $15.7 million. This change in the deposit mix resulted in
an increase in BankUnited's cost of interest-bearing deposits to 4.91% for the
six months ended March 31, 2000 from 4.64% for the six months ended September
30, 1999.
19
<PAGE>
Securities sold under agreements to repurchase decreased by $25.0
million, or 78.9%, to $6.7 million at March 31, 2000 from $31.7 million at
September 30, 1999. This decrease resulted from the maturity of the agreements.
Trust preferred securities decreased $3.9 million, or 1.8%, to $214.6
million at March 31, 2000, from $218.5 million at September 30, 1999. See
"Results of Operations - Extraordinary Item."
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. At September 30, 1999, BankUnited had purchased 183,000
shares of its Class A Common Stock. During the six month period ended March 31,
2000, BankUnited purchased an additional 150,000 shares of its Class A Common
Stock on the open market at a cost of $1.1 million, for a total treasury
position of 333,000 shares at a total cost of $2.8 million.
In May 1999, the Board of Directors of BankUnited authorized the
purchase of shares of the 9% Preferred Stock on the open market, as deemed
appropriate and, if the market is appropriate, the retirement of the 9%
Preferred Stock. During the six month period ended March 31, 2000, BankUnited
purchased 1,000 shares of its 9% Preferred Stock on the open market at a cost of
$7,250.
RESULTS OF OPERATIONS
GENERAL
Net income after preferred stock dividends increased to $3.9 million
for the three months ended March 31, 2000, compared to a net loss of $11.1
million for the three months ended March 31, 1999, and to $7.8 million for the
six months ended March 31, 2000, from a net loss of $10.9 million for the six
months ended March 31, 1999. The increase in net income after preferred stock
dividends for the three and six months ended March 31, 2000, as compared to the
prior year periods was primarily attributable to the effects of BankUnited's
restructuring during the first and the second quarters of fiscal 1999. As a
result of the restructuring, special charges totalling $15.1 million
significantly reduced BankUnited's net income for the three and six month
periods ended March 31, 1999. See "Managements' Discussion and
Analysis-Restructuring" in BankUnited's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999, for more information regarding the restructuring
charges.
NET INTEREST INCOME
Net interest income before provision for loan losses was $19.6 million
for the three months ended March 31, 2000, as compared to $1.6 million for the
same prior year period, and $38.8 million for the six months ended March 31,
2000, as compared to $11.6 million for the same prior year period.
The increases in net interest income before provision for loan losses
were primarily the result of the improved net interest margin, which increased
to 2.01% and 2.04% for the three and six months ended March 31, 2000,
respectively, from 0.13% and 0.65% for the same prior year periods.
20
<PAGE>
For the three months ended March 31, 2000, the increase in the net
interest margin was due to an increase in the yield on interest-earning assets
to 7.32%, from 5.30% for the same period in 1999, primarily attributable to the
higher yields in fiscal 2000 on the loans originated by BankUnited and the
effect of a $14.8 million restructuring charge in the second quarter of fiscal
1999 related to the One-Year CMT portfolio and a related security, offset by a
15 basis point increase in the cost of interest-bearing liabilities to 5.46%
from 5.31% for the same period in 1999.
For the six months ended March 31, 2000, the increase in the net
interest margin was due to an increase in the yield on interest-earning assets
to 7.29%, from 5.89% for the same prior year period, primarily due to the higher
yields in fiscal 2000 on loans originated by BankUnited, the effect of the
accelerated amortization of purchase premiums recorded in the first quarter of
fiscal 1999 and a $14.8 million restructuring charge in the second quarter of
fiscal 1999, offset by a 2 basis point increase in the cost of interest-bearing
liabilities to 5.41% from 5.39% for the same prior year period.
Interest income increased by $23.3 million, or 48.2%, to $71.6 million
for the three months ended March 31, 2000, compared to $48.3 million for the
same prior year period. For the six months ended March 31, 2000, interest income
increased by $34.2 million, or 32.1%, to $140.6 million, compared to $106.4
million for the same prior year period.
The results of operations for the three and six months ended March 31,
2000 reflect a reduction in the net amortization of premiums/discounts on
purchased loans and mortgage-backed securities compared to the three and six
month periods ended March 31, 1999. The amortization of premiums, net of
discounts and deferred origination costs, decreased from $15.0 million for the
three months ended March 31, 1999, to $1.0 million for the three months ended
March 31, 2000, and decreased from $21.1 million for the six months ended March
31, 1999, to $2.0 million for the six months ended March 31, 2000. The decrease
in premium amortization was a result of the lower level of loan prepayments
experienced in the first and second quarters of fiscal 2000, compared to the
same quarters in fiscal 1999. See "Results of Operations - Analysis of Net
Interest Income."
Interest expense increased by $5.3 million, or 11.4%, to $52.0 million
for the three months ended March 31, 2000, from $46.7 million for the same prior
year period, and by $7.0 million, or 7.4%, to $101.8 million for the six months
ended March 31, 2000, from $94.8 million for the same prior year period. The
increase reflects an increase in the average balance for interest-bearing
deposits during the three and six months ended March 31, 2000. Average
interest-bearing deposits increased by $0.1 billion, or 4.4%, to $2.4 billion
for the three months ended March 31, 2000, from $2.3 billion for the same prior
year period, and by $0.2 billion, or 9.1%, to $2.4 billion for the six months
ended March 31, 2000, from $2.2 billion for the same prior year period. Interest
expense also increased as a result of the issuance and sale of $200.0 million of
the Bank's Senior Notes during the second quarter of fiscal 1999. For the three
months ended March 31, 2000, the average rate paid on interest-bearing
liabilities increased 15 basis points to 5.46%, from 5.31% for the same prior
year period. For the six months ended March 31, 2000, the average rate paid on
interest-bearing liabilities increased slightly to 5.41%, from 5.39% for the
same prior year period.
21
<PAGE>
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 table sets 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 1999 as a result of
high loan prepayments and the restructuring charge incurred in the second
quarter of fiscal 1999. See "Managements' Discussion and Analysis -
Restructuring" in BankUnited's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999, for more information regarding the restructuring charge.
All yield and rate information is calculated on an annualized basis by dividing
the annualized income or expense item for the period by the average balances
during the period of the appropriate balance sheet item. Net interest margin is
calculated by dividing net interest income by average interest-earning assets.
Non-accrual loans are included in asset balances for the appropriate period,
whereas recognition of interest on such loans is discontinued and any remaining
accrued interest receivable is reversed, in conformity with federal regulations.
The yields and net interest margins appearing in the following table have been
calculated on a pre-tax basis.
22
<PAGE>
YIELDS EARNED AND RATES PAID
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------------------------------------------------------
2000 1999
----------------------------------------- -----------------------------------------
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) $ 3,463,834 $ 63,601 7.35% $2,983,169 $ 40,286 5.40%
Mortgage-backed securities
and collateralized mortgage
obligations 351,453 6,155 7.01 315,977 3,081 3.90
Short-term investments (2) 12,629 287 8.99 228,023 2,813 4.94
Tax certificates 12,168 169 5.56 30,726 507 6.60
Long-term investments and
FHLB stock 73,114 1,425 7.82 86,753 1,566 7.30
----------- ----------- --------- ----------- ----------- ---------
Total interest-earning assets $ 3,913,198 $ 71,637 7.32% $ 3,644,648 $ 48,253 5.30%
----------- ----------- --------- ----------- ----------- ---------
Interest-bearing liabilities:
NOW/money market $ 264,356 $ 1,631 2.48% $ 285,347 $ 2,067 2.94%
Savings 372,522 4,361 4.71 371,438 4,052 4.42
Certificates of deposit 1,754,050 23,628 5.42 1,619,494 20,750 5.20
Trust preferred securities 215,192 5,220 9.70 218,500 5,289 9.68
Senior notes 200,000 2,857 5.71 128,889 1,902 5.90
FHLB advances and other
borrowings 1,000,501 14,302 5.66 923,691 12,638 5.47
----------- ----------- --------- ----------- ----------- ---------
Total interest-bearing
liabilities $ 3,806,621 $ 51,999 5.46% $ 3,547,359 $ 46,698 5.31%
----------- ----------- --------- ----------- ----------- ---------
Excess of interest-earning assets
over interest-bearing liabilities $ 106,577 $ 97,289
=========== ===========
Net interest income $ 19,638 $ 1,555
=========== ===========
Interest rate spread 1.86% (0.01)%
========= ========
Net interest margin 2.01% 0.13 %
========= ========
Ratio of interest-earning assets to
interest-bearing liabilities 102.80% 102.74%
=========== ===========
</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 $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
premium 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.
23
<PAGE>
YIELDS EARNED AND RATES PAID
<TABLE>
<CAPTION>
Six Months Ended March 31,
---------------------------------------------------------------------------------------
2000 1999
----------------------------------------- -----------------------------------------
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) $ 3,398,412 $ 124,276 7.31% $3,011,950 $ 91,123 6.05%
Mortgage-backed securities
and collateralized mortgage
obligations 352,418 12,240 6.95 328,240 7,154 4.36
Short-term investments (2) 22,934 852 7.31 146,236 3,661 4.95
Tax certificates 12,985 427 6.57 33,666 1,135 6.74
Long-term investments and
FHLB stock 72,048 2,794 7.75 91,025 3,325 7.32
----------- ----------- --------- ----------- ----------- ---------
Total interest-earning assets $ 3,858,797 $ 140,589 7.29% $ 3,611,117 $ 106,398 5.89%
----------- ----------- --------- ----------- ----------- ---------
Interest-bearing liabilities:
NOW/money market $ 265,739 $ 3,425 2.58% $ 262,906 $ 3,896 2.97%
Savings 369,858 8,542 4.62 343,344 7,753 4.53
Certificates of deposit 1,719,932 45,872 5.33 1,620,185 42,886 5.31
Trust preferred securities 216,679 10,502 9.69 218,500 10,577 9.68
Senior notes 200,000 5,758 5.76 63,736 1,902 5.97
FHLB advances and other
borrowings 975,444 27,663 5.58 1,004,147 27,740 5.46
----------- ----------- --------- ----------- ----------- ---------
Total interest-bearing
liabilities $ 3,747,652 $ 101,762 5.41% $ 3,512,818 $ 94,754 5.39%
----------- ----------- --------- ----------- ----------- ---------
Excess of interest-earning assets
over interest-bearing liabilities $ 111,145 $ 98,299
=========== ===========
Net interest income $ 38,827 $ 11,644
=========== ===========
Interest rate spread 1.88% 0.50%
========= =========
Net interest margin 2.04% 0.65%
========= =========
Ratio of interest-earning assets to
interest-bearing liabilities 102.97% 102.80%
=========== ===========
</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
premium 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.
24
<PAGE>
RATE/VOLUME ANALYSIS
The following tables present, 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,
-------------------------------------------------------------
2000 vs. 1999
-------------------------------------------------------------
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 $ 7,041 $ 14,157 $ 2,117 $ 23,315
Mortgage-backed securities and
collateralized mortgage obligations 346 2,453 275 3,074
Short-term investments (1) (2,687) 2,337 (2,176) (2,526)
Tax certificates (306) (80) 48 (338)
Long-term investments and
FHLB stock (262) 100 21 (141)
-------- --------- -------- --------
Total interest-earning assets 4,132 18,967 285 23,384
-------- --------- -------- --------
Interest expense attributable to:
NOW/money market (153) (324) 41 (436)
Savings 12 262 35 309
Certificates of deposit 1,738 892 248 2,878
Trust preferred securities (80) 11 - (69)
Senior notes 1,049 (61) (33) 955
FHLB advances and other
borrowings 1,063 426 175 1,664
-------- --------- -------- --------
Total interest-bearing liabilities 3,629 1,206 466 5,301
-------- --------- -------- --------
Increase in net interest income $ 503 $ 17,761 $ (181) $ 18,083
======== ========= ======== ========
</TABLE>
- ------------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and
certificates of deposit.
25
<PAGE>
RATE/VOLUME ANALYSIS
<TABLE>
<CAPTION>
Six Months Ended March 31,
---------------------------------------------------------------
2000 vs. 1999
---------------------------------------------------------------
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 $ 12,654 $ 18,371 $ 2,128 $ 33,153
Mortgage-backed securities and
collateralized mortgage obligations 527 4,247 312 5,086
Short-term investments (1) (3,104) 1,752 (1,457) (2,809)
Tax certificates (697) (29) 18 (708)
Long-term investments and
FHLB stock (745) 189 25 (531)
-------- --------- -------- --------
Total interest-earning assets 8,635 24,530 1,026 34,191
-------- --------- -------- --------
Interest expense attributable to:
NOW/money market 42 (518) 5 (471)
Savings 600 155 34 789
Certificates of deposit 2,648 208 130 2,986
Trust preferred securities (88) 13 - (75)
Senior notes 4,066 (67) (143) 3,856
FHLB advances and other
borrowings (797) 585 135 (77)
-------- --------- -------- --------
Total interest-bearing liabilities 6,471 376 161 7,008
-------- --------- -------- --------
Increase in net interest income $ 2,164 $ 24,154 $ 865 $ 27,183
======== ========= ======== ========
</TABLE>
- ------------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and
certificates of deposit.
26
<PAGE>
PROVISION FOR LOAN LOSSES
The provision for loan losses decreased by $5.3 million, or 84.1%, to
$1.0 million for the three months ended March 31, 2000, compared to $6.3 million
for the same prior year period, and by $4.5 million, or 67.2%, to $2.2 million
for the six months ended March 31, 2000, compared to $6.7 million for the same
prior year period. These decreases were the result of a $6.3 million provision
made in the second quarter of fiscal 1999 based on management's rigorous review
of BankUnited's loan portfolio. See "Managements' Discussion and Analysis -
Results of Operations - Provision for Loan Losses" in BankUnited's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1999, for more information
regarding management's review.
NON-INTEREST EXPENSES
Non-interest expenses remained relatively stable at $13.8 million for
the three months ended March 31, 2000, compared to $13.9 million for the same
prior year period. Non-interest expenses for the three months ended March 31,
2000, included increased expenses for employee compensation and benefits
expenses and advertising and promotion expenses, and for the three months ended
March 31, 1999, included restructuring charges of $2.1 million related to the
additional provision for tax certificate losses and other miscellaneous charges.
See "Managements' Discussion and Analysis - Restructuring" in BankUnited's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999, for more
information regarding the restructuring charge. Total non-interest expenses, as
a percentage of average assets, decreased from 1.53% for the three months ended
March 31, 1999, to 1.36% for the same period in 2000.
Non-interest expenses increased by $2.5 million, or 10.3%, to $26.7
million for the six months ended March 31, 2000, compared to $24.2 million for
the same prior year period. The increase in expenses is attributable to the
growth BankUnited has experienced, including the additional costs relating to
the branding campaign launched by the Bank during the first quarter of fiscal
2000, as well as the hiring of additional associates in the key sales areas of
business banking and private banking offset by the effect of the restructuring
charge incurred during the second quarter of fiscal 1999. Total non-interest
expenses, as a percentage of average assets, increased from 1.29% for the six
months ended March 31, 1999, to 1.34% for the same period in 2000 as a result of
the additional charges. See "Managements' Discussion and Analysis -
Restructuring" in BankUnited's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999, for more information regarding the restructuring charge.
INCOME TAXES
The income tax provision increased by $9.2 million, or 139.4%, to a net
expense of $2.6 million for the three months ended March 31, 2000, compared to a
net benefit of $6.6 million for the prior year period. For the six months ended
March 31, 2000, the income tax provision increased by $11.4 million, or 183.9%,
to a net expense of $5.2 million, compared to a net benefit of $6.2 million for
the same prior year period. These increases were due to the higher pre-tax
earnings during the three and six months ended March 31, 2000, as compared to
the prior year period.
EXTRAORDINARY ITEM
In November 1999, the Board of Directors of BankUnited authorized the
purchase, from time to time, in the open market, or otherwise, of up to 300,000
shares of the Trust Preferred Securities. During the three months ended March
31, 2000, BankUnited purchased 56,500 shares of the Trust Preferred Securities.
The Trust Preferred
27
<PAGE>
Securities were purchased at a cost of $1.0 million resulting in an
extraordinary gain as a result of the early extinguishment of the Trust
Preferred Securities in the amount of $0.3 million, net of $0.1 million in
taxes.
During the six months ended March 31, 2000, BankUnited purchased
156,299 shares of the Trust Preferred Securities. The Trust Preferred Securities
were purchased at a cost of $2.7 million resulting in an extraordinary gain as a
result of the early extinguishment of the Trust Preferred Securities in the
amount of $0.7 million, net of $0.4 million in taxes.
28
<PAGE>
SELECTED FINANCIAL DATA
The following table presents a five-quarter summary of selected
financial information.
<TABLE>
<CAPTION>
AT OR FOR THE THREE MONTHS ENDED
--------------------------------------------------------------------------
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
2000 1999 1999 1999 1999(1)
------------- -------------- ------------- ------------- -------------
(Unaudited; dollars in thousands, except earnings per share)
<S> <C> <C> <C> <C> <C>
Operations data:
Net interest income........................... $ 19,638 $ 19,189 $ 18,500 $ 15,891 $ 1,555
Provision for loan losses..................... 1,000 1,200 753 450 6,336
Non-interest income........................... 1,570 1,307 1,109 1,189 1,209
Non-interest expense.......................... 13,753 12,988 13,100 11,135 13,936
Provision (benefit) for income taxes.......... 2,635 2,579 2,147 2,164 (6,578)
Extraordinary item, net of taxes.............. 261 431 - - -
Net income (loss)............................. 3,883 3,963 3,412 3,139 (11,126)
Per common share data:
Net income (loss) before extraordinary item:
Basic....................................... $ 0.20 $ 0.19 $ 0.19 $ 0.17 $ (0.61)
Diluted..................................... $ 0.20 $ 0.19 $ 0.18 $ 0.17 $ (0.61)
Net income (loss) after extraordinary item:
Basic....................................... $ 0.21 $ 0.22 $ 0.19 $ 0.17 $ (0.61)
Diluted..................................... $ 0.21 0.21 $ 0.18 $ 0.17 $ (0.61)
Weighted average number of common shares outstanding:
Basic..................................... 18,189 18,304 18,392 18,413 18,255
Diluted................................... 18,726 18,975 19,269 19,195 18,255
Financial condition data:
Loans receivable, net (2)..................... $ 3,559,025 $ 3,408,988 $ 3,302,866 $ 3,120,658 $ 2,936,378
Total assets.................................. 4,267,455 4,031,988 4,078,471 3,932,725 3,918,701
Deposits...................................... 2,438,580 2,360,942 2,279,798 2,228,745 2,240,123
Borrowings.................................... 1,358,106 1,216,426 1,328,148 1,242,169 1,225,307
Company obligated mandatorily redeemable
trust preferred securities of subsidiary trusts
holding solely junior subordinated deferrable
interest debentures of BankUnited........... 214,593 216,006 218,500 218,500 218,500
Stockholders' equity.......................... 195,629 191,991 190,137 188,379 188,256
Book value per common share................... $ 10.24 $ 10.04 $ 9.88 $ 9.74 $ 9.76
Tangible book value per common share.......... $ 8.55 $ 8.33 $ 8.16 $ 8.01 $ 8.01
Performance ratios:
Return on average tangible common equity...... 10.19% 10.54% 9.17% 8.49% (27.93)%
Return on average assets...................... 0.40% 0.42% 0.38% 0.36% (1.15)%
Net interest yield on earning assets.......... 2.01% 2.06% 2.05% 1.76% 0.13 %
Net interest spread........................... 1.86% 1.90% 1.89% 1.62% (0.01)%
Efficiency ratio.............................. 62.04% 60.87% 64.81% 62.58% NM
NM=Not Meaningful
</TABLE>
- --------------
(1) The results of operations for the three months ended March 31, 1999
includes the effect of BankUnited's 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.
(2) Includes loans held for sale.
29
<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, 1999, 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, 2000, which related to risks
associated with investments and mortgage-backed securities.
RISKS ASSOCIATED WITH CHANGING INTEREST RATES. As a financial
intermediary, BankUnited invests in various types of interest-earning assets
(primarily loans, mortgage-backed securities, and investment securities) which
are funded largely by interest-bearing liabilities (primarily deposits, FHLB
advances, senior notes, and trust preferred securities). Such financial
instruments have varying levels of sensitivity to changes in market interest
rates which creates interest rate risk for the Bank. Accordingly, BankUnited's
net interest income, the most significant component of its net income, is
subject to substantial volatility due to changes in interest rates or market
yield curves, particularly if there are differences, or gaps, in the repricing
frequencies of its interest- earning assets and the interest-bearing liabilities
which fund them. BankUnited monitors such interest rate gaps and seeks to manage
its interest rate risk by adjusting the repricing frequencies of its
interest-earning assets and interest-bearing liabilities. Additionally,
BankUnited utilizes, on a limited basis, derivative financial instruments
designed to reduce the interest rate risks associated with its interest-earning
assets and interest- bearing liabilities. Specifically, interest rate cap
contracts with an aggregate notional amount of $800.0 million were acquired by
the Bank in March 2000, to reduce its exposure to the increased funding costs
that would likely result in an increasing interest rate environment. See Note 5
- - "Contingencies and Off-Balance Sheet Activities" for a description of the
interest rate cap contracts.
Another measure used by BankUnited to reduce its exposure to interest
rate risk, is borrowing under the "knockout" advance program offered by the
FHLB. In general, a knockout advance is structured as a fixed rate advance that
the FHLB may convert to a floating rate indexed to the 3-month LIBOR rate if, at
the end of any given quarter after the first year, the 3-month LIBOR rate equals
or exceeds an agreed upon threshold rate. Should a particular advance be
converted by the FHLB, its rate will reset quarterly for the remainder of its
term.
During the quarter ended March 31, 2000, BankUnited borrowed a total of
$200 million in knockout advances, each with a 10-year term. The initial rates
on these advances range from 5.85% to 6.50% while the threshold rates range from
8.50% to 9.25%. BankUnited has chosen to borrow under the knockout advance
program because, as long as these advances remain unconverted by the FHLB, the
stability of BankUnited's net interest margin will be enhanced.
However, if the 3-month LIBOR rate were to rise so as to allow the FHLB
to convert one or more of BankUnited's knockout advances, the funding costs
associated with the converted advance would become higher and more volatile,
negatively impacting BankUnited's net interest margin. Alternatively, if the
3-month LIBOR rate were to fall, BankUnited would not benefit from the decrease
as the interest rates on the advances would remain at their present level.
30
<PAGE>
RISKS ASSOCIATED WITH INVESTMENTS AND MORTGAGE-BACKED SECURITIES.
BankUnited purchases fixed and adjustable rate mortgage-backed securities and
other securities for liquidity, yield and risk management purposes. Changes in
market interest rates associated with BankUnited's investments and
mortgage-backed securities could have a material adverse effect on BankUnited's
carrying value of its securities. Such changes in the carrying value of
mortgage-backed securities and other securities classified as available-for-sale
would be reflected, net of taxes, as a component of stockholders' equity. See
Note 4 - "Comprehensive Income" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Securities Portfolio."
31
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits.
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
BankUnited filed no reports on Form 8-K during the
quarter for which this report is filed.
32
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
BANKUNITED FINANCIAL CORPORATION
By: /s/ Humberto Lopez
-------------------------------------
Humberto Lopez
Executive Vice President
and Chief Financial Officer
Date: May 15, 2000
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
Form 10-Q for the Quarter Ended March 31, 2000
INDEX TO EXHIBITS
Sequentially
Exhibit No. Numbered Page
- ----------- -------------
27.1 Financial Data Schedule................
34
<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, 2000
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 38,226
<INT-BEARING-DEPOSITS> 100,211
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 148,749
<INVESTMENTS-CARRYING> 253,507
<INVESTMENTS-MARKET> 247,982
<LOANS> 3,572,254
<ALLOWANCE> 13,229
<TOTAL-ASSETS> 4,267,455
<DEPOSITS> 2,438,580
<SHORT-TERM> 231,680
<LIABILITIES-OTHER> 60,527
<LONG-TERM> 1,341,019
0
10
<COMMON> 186
<OTHER-SE> 195,433
<TOTAL-LIABILITIES-AND-EQUITY> 4,267,405
<INTEREST-LOAN> 124,276
<INTEREST-INVEST> 16,313
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 140,589
<INTEREST-DEPOSIT> 57,839
<INTEREST-EXPENSE> 101,762
<INTEREST-INCOME-NET> 38,827
<LOAN-LOSSES> 2,200
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 26,741
<INCOME-PRETAX> 12,763
<INCOME-PRE-EXTRAORDINARY> 7,549
<EXTRAORDINARY> 692
<CHANGES> 0
<NET-INCOME> 7,846
<EPS-BASIC> 0.43
<EPS-DILUTED> 0.42
<YIELD-ACTUAL> 2.04
<LOANS-NON> 18,025
<LOANS-PAST> 429
<LOANS-TROUBLED> 884
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12,107
<CHARGE-OFFS> 1,143
<RECOVERIES> 65
<ALLOWANCE-CLOSE> 13,229
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
