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 December 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 February 11, 2000 was 17,731,068 shares of Class A Common Stock,
$.01 par value, and 458,467 shares of Class B Common Stock, $.01 par value.
This Form 10-Q contains 29 pages.
The Index to Exhibits appears on page 28.
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
Form 10-Q Report for the Quarter Ended December 31, 1999
INDEX
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PAGE NO.
--------
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition as of
December 31, 1999 (unaudited) and September 30, 1999 3
Consolidated Statements of Operations (unaudited)
for the Three Months Ended December 31, 1999
and December 31, 1998 4
Consolidated Statements of Stockholders' Equity
(unaudited) for the Three Months Ended December 31,
1999 5
Consolidated Statements of Cash Flows (unaudited)
for the Three Months Ended December 31, 1999
and December 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 25
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 26
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 26
</TABLE>
2
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31, 1999 SEPTEMBER 30,
(UNAUDITED) 1999
- -------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
ASSETS
Cash $ 24,797 $ 26,123
Federal Home Loan Bank overnight deposits 48,466 50,412
Securities purchased under agreements to resell -- 150,000
Tax certificates (net of reserves of $1,167 at December 31, 1999 and
$1,168 at September 30, 1999) 13,840 14,815
Investments held to maturity (market value of approximately
$4,937 at December 31, 1999 and $4,984 at September 30, 1999) 5,060 5,058
Investments available for sale, at market 18,283 20,001
Mortgage-backed securities, held to maturity (market value
of approximately $210,084 at December 31, 1999
and $198,785 at September 30, 1999) 215,186 202,839
Mortgage-backed securities available for sale, at market 136,208 144,385
Loans receivable, net 3,032,534 2,899,231
Mortgage loans held for sale (market value of approximately $376,498
at December 31, 1999 and $403,785 at September 30, 1999) 376,454 403,635
Other interest earning assets 50,676 54,927
Office properties and equipment, net 15,759 15,644
Real estate owned 5,179 3,548
Accrued interest receivable 24,919 24,768
Mortgage servicing rights, net 7,410 7,820
Goodwill, net 31,077 31,465
Prepaid expenses and other assets 26,140 23,800
----------- -----------
Total assets $ 4,031,988 $ 4,078,471
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $ 2,360,942 $ 2,279,798
Securities sold under agreements to repurchase 5,000 31,701
Advances from Federal Home Loan Bank 1,011,426 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 216,006 218,500
Interest payable (primarily on deposits and advances from Federal Home
Loan Bank) 12,537 10,205
Advance payments by borrowers for taxes and insurance 7,407 19,616
Accrued expenses and other liabilities 26,679 32,067
----------- -----------
Total liabilities 3,839,997 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 December 31, 1999 and
September 30, 1999; outstanding shares-991,938 and 992,938 at December
31, 1999 and September 30, 1999 10 10
Class A Common Stock, $0.01 par value. Authorized shares--30,000,000;
issued shares - 18,064,068 at December 31, 1999 and 18,049,430 at
September 30, 1999; outstanding shares - 17,731,068 at December 31, 1999
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 - 458,467 at December 31, 1999
and September 30, 1999 5 5
Additional paid-in capital 181,499 181,335
Retained earnings 18,044 14,081
Treasury stock (2,801) (1,684)
Accumulated other comprehensive loss, net of tax (4,947) (3,790)
----------- -----------
Total stockholders' equity 191,991 190,137
----------- -----------
Total liabilities and stockholders' equity $ 4,031,988 $ 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 DECEMBER 31,
-------------------------------
(UNAUDITED)
1999 1998
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(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<S> <C> <C>
Interest income:
Interest and fees on loans $ 60,675 $ 50,837
Interest on mortgage-backed securities 6,085 4,073
Interest on short-term investments 565 848
Interest and dividends on long-term investments
and other earning assets 1,627 2,387
-------- --------
Total interest income 68,952 58,145
-------- --------
Interest expense:
Interest on deposits 28,219 27,666
Interest on borrowings 16,262 15,102
Preferred dividends of trust subsidiaries 5,282 5,288
-------- --------
Total interest expense 49,763 48,056
-------- --------
Net interest income before provision for loan losses 19,189 10,089
Provision for loan losses 1,200 400
-------- --------
Net interest income after provision for loan losses 17,989 9,689
-------- --------
Non-interest income:
Service fees, net 943 1,078
Other 364 215
-------- --------
Total non-interest income 1,307 1,293
-------- --------
Non-interest expenses:
Employee compensation and benefits 4,872 3,114
Occupancy and equipment 2,148 1,641
Insurance 410 380
Professional fees - legal and accounting 887 582
Telecommunication and data processing 643 664
Loan servicing expense 1,493 1,962
Real estate owned operations (109) 21
Advertising and promotion expense 714 377
Amortization of goodwill 388 384
Other operating expenses 1,542 1,097
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Total non-interest expenses 12,988 10,222
-------- --------
Income before income taxes, extraordinary item
and preferred stock dividends 6,308 760
Provision for income taxes 2,579 364
-------- --------
Income before extraordinary item 3,729 396
Extraordinary item, net of taxes 431 --
-------- --------
Income before preferred stock dividends 4,160 396
Preferred stock dividends 197 188
-------- --------
Net income $ 3,963 $ 208
======== ========
Earnings Per Share:
Basic
Net income before extraordinary item $ 0.19 $ 0.01
Extraordinary item, net of taxes 0.03 --
-------- --------
Net income $ 0.22 $ 0.01
======== ========
Diluted
Net income before extraordinary item $ 0.19 $ 0.01
Extraordinary item, net of taxes 0.02 --
-------- --------
Net income $ 0.21 $ 0.01
======== ========
Weighted average number of common shares
outstanding during the period:
Basic 18,304 18,189
======== ========
Diluted 18,975 18,566
======== ========
</TABLE>
SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1999
-----------------------------------------------------------------------
(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 -- -- -- 4,160 -- -- 4,160
Dividends declared on preferred stock - -- -- -- (197) -- -- (197)
Other comprehensive loss, net of tax -- -- -- -- -- (1,157) (1,157)
---------
Total comprehensive income 2,806
Stock issued through the
exercise of options, restricted
stock grants, directors'
compensation and employee
stock grants -- 1 131 -- -- -- 132
Treasury stock acquired -- -- -- -- (1,117) -- (1,117)
Common stock issued through
preferred stock dividends -- -- 33 -- -- -- 33
--------- --------- --------- --------- --------- --------- ---------
Balance, December 31, 1999 $ 10 $ 186 $ 181,499 $ 18,044 $ (2,801) $ (4,947) $ 191,991
========= ========= ========= ========= ========= ========= =========
</TABLE>
SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
------------------------
1999 1998
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES: (UNAUDITED; IN THOUSANDS)
<S> <C> <C>
Net income $ 4,160 $ 396
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Provision for loan losses 1,200 400
Provision for losses on tax certificates -- 10
Depreciation and amortization 717 579
Amortization of fees, discounts and premiums 1,172 6,193
Amortization of mortgage servicing rights 410 243
Amortization of goodwill 388 384
Amortization of issuance costs on senior notes 211 --
Net loss on sales of loans and mortgage-backed securities -- 9
Net gain on the sale of real estate owned (127) (12)
Extraordinary gain on repurchase of trust preferred securities (701) --
Loans originated for sale -- (132,060)
Proceeds from sale of loans -- 11,982
(Increase ) decrease in accrued interest receivable (152) 6,657
Increase in interest payable on deposits and FHLB advances 2,332 1,621
Increase (decrease) in accrued taxes 2,137 (142)
Decrease in other liabilities (7,525) (5,750)
(Increase) decrease in prepaid expenses and other assets (2,340) 13,943
Other, net 1,315 (383)
--------- ---------
Net cash provided by (used in) operating activities 3,197 (95,930)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in loans (112,747) 9,172
Purchase of investment securities -- (1,009)
Purchase of mortgage-backed securities (19,898) (51,919)
Purchase of other interest-earning assets (8,249) (14,249)
Proceeds from repayments of investment securities 1,250 1,750
Proceeds from repayments of mortgage-backed securities 14,411 71,040
Proceeds from repayments of other interest-earning assets 12,500 635
Proceeds from the sale of real estate owned 2,145 182
Purchases of office properties and equipment (832) (1,682)
Net decrease in tax certificates 975 6,692
--------- ---------
Net cash (used in) provided by investing activities (110,445) 20,612
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 81,144 176,338
Net (decrease) increase in Federal Home Loan Bank Advances (85,021) 49,981
Net decrease in other borrowings (26,701) (119,168)
Capitalized cost for senior notes (304) (599)
Net proceeds from issuance of common stock 46 228
Repurchase of trust preferred securities (1,698) --
Repurchase of common stock (1,117) --
Dividends paid on BankUnited's preferred stock (164) (157)
Decrease in advances from borrowers for taxes and insurance (12,209) (8,366)
--------- ---------
Net cash (used in) provided by financing activities (46,024) 98,257
--------- ---------
(Decrease) increase in cash and cash equivalents (153,272) 22,939
Cash and cash equivalents at beginning of period 226,535 91,511
--------- ---------
Cash and cash equivalents at end of period $ 73,263 $ 114,450
========= =========
Supplemental Disclosures:
Interest paid on deposits and borrowings $ 47,431 $ 46,434
========= =========
Transfer of loans to real estate owned $ 3,754 $ 970
========= =========
Transfer of loans from held for sale to portfolio $ -- $ 73,825
========= =========
</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 period
ended December 31, 1999 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
December 31, 1999 consolidated financial statements.
7
<PAGE>
2. EARNINGS PER SHARE
The following tables reconcile basic and diluted earnings per share for
the three months ended December 31, 1999 and 1998.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED DECEMBER 31,
1999 1998
------- -------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
BASIC EARNINGS PER SHARE:
Numerator:
Income after preferred stock dividends
and before extraordinary item .................. $ 3,532 $ 208
Extraordinary item ............................. 431 --
------- -------
Net income ....................................... $ 3,963 $ 208
======= =======
Denominator:
Weighted average common shares outstanding ....... 18,304 18,189
======= =======
Basic earnings per share before extraordinary item . $ 0.19 $ 0.01
Basic earnings per share from extraordinary item ... 0.03 --
------- -------
Basic earnings per share ........................... $ 0.22 $ 0.01
======= =======
DILUTED EARNINGS PER SHARE:
Numerator:
Income after preferred stock dividends
and before extraordinary item .................. $ 3,532 $ 208
Plus:
Reduction of preferred stock dividends ......... 41 --
------- -------
Diluted income available to common
shareholders before extraordinary item ......... 3,573 208
Extraordinary item ............................. 431 --
------- -------
Diluted net income available to common
shareholders ................................. $ 4,004 $ 208
======= =======
Denominator:
Weighted average common shares outstanding ....... 18,304 18,189
Plus:
Number of common shares from the conversion of
options and warrants ......................... 228 377
Number of common shares from the conversion
of dilutive preferred stock* ................. 443 --
------- -------
Diluted weighted average common shares outstanding 18,975 18,566
======= =======
Diluted earnings per share before extraordinary item $ 0.19 $ 0.01
Diluted earnings per share from extraordinary item . 0.02 --
------- -------
Diluted earnings per share ......................... $ 0.21 $ 0.01
======= =======
</TABLE>
- ----------
* For the three months ended December 31, 1998 there were 343,000 common
stock equivalent shares, 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 three month period ended December
31, 1999, 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 three month
period ended December 31, 1999, 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 required, actual
and excess regulatory capital levels as of December 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 $118,802 3.0% $321,550 8.1% $202,748 5.1%
Risk-Based Capital $168,653 8.0% $332,647 15.8% $163,994 7.8%
</TABLE>
4. COMPREHENSIVE INCOME
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 months ended
December 31, 1999 and 1998, BankUnited's other comprehensive loss was as
follows:
FOR THE THREE MONTHS
ENDED DECEMBER 31,
--------------------
1999 1998
------- -------
(IN THOUSANDS)
Other comprehensive loss, net of taxes:
Unrealized holding losses arising
during the period .................. $(1,189) $ (968)
Less reclassification adjustment for:
Amortization of unrealized losses on
transferred securities ........... 32 --
------- -------
Total other comprehensive loss .......... $(1,157) $ (968)
======= =======
9
<PAGE>
5. CONTINGENCIES AND OFF-BALANCE SHEET ACTIVITIES
The Bank has an interest rate cap contract with a major Wall Street
firm in a notional amount of $60.0 million, terminating on April 23, 2000. The
contract requires the counter-party to pay the Bank quarterly interest payments
based on the notional amount 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.
The Bank has a second 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 December 31, 1999, the 3-month LIBOR rate
was 6.005%.
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.
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. During
the three months ended December 31, 1999, BankUnited purchased 99,799 shares of
its trust preferred securities. The trust preferred securities were purchased at
a cost of $1.7 million resulting in an extraordinary gain as a result of the
early extinguishment of the trust preferred securities in the amount of $0.4
million, net of $0.3 million in taxes.
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 month periods ended December 31, 1999 and 1998. 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
10
<PAGE>
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 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.
FIRST QUARTER HIGHLIGHTS
BankUnited reported record earnings for the first quarter of fiscal
2000 exceeding the records set in the two previous quarters. The primary reason
for the increase in core earnings was a sharp improvement in BankUnited's
interest spread for the three months ended December 31, 1999 to 1.90% from 1.02%
for the three months ended December 31, 1998. In addition, BankUnited's
efficiency ratio improved to 60.87% from 88.48% for the same quarter of 1998. As
a result of BankUnited pursuing its strategy of becoming an asset-generating
entity, residential loan originations increased to $173.0 million or 31.0% over
the same quarter last year. BankUnited's new focus on commercial lending,
consumer lending and small business banking has resulted in record increases in
production over the same quarter last year for loan originations and commitments
to lend in these areas of 296.2%. During the quarter, BankUnited launched its
new branding campaign, "Your money will be happier here" and its Miami Heat free
checking account through its partnership with the Miami Heat basketball
organization. Additionally, BankUnited continued to expand its branch network by
opening two branches during the quarter.
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. This is generally referred to as
11
<PAGE>
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. 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,
including recognizing the Year 2000 as a leap year, could result in a
significant disruption of BankUnited's banking operations. Based on the measures
already taken, a significant disruption of BankUnited's banking operations due
to such a failure is not currently expected because BankUnited has been
substantially compliant since June 30, 1999.
On and after January 1, 2000, BankUnited conducted extensive tests of
its information systems to verify that the systems correctly recognized the Year
2000. Additionally, BankUnited associates have closely monitored computer output
for accuracy subsequent to January 1, 2000. These tests and reviews have not
resulted in any incidents that would materially impact the operation or
financial condition of BankUnited.
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 conducted Year 2000 compliance tests, including such
tests as would be necessary to recognize the Year 2000 as a leap year, with the
two third-party service bureaus that handle its data processing and has received
certification that the bureaus are Year 2000 compliant. BankUnited has also
replaced its hardware and software used in its operations as necessary for Year
2000 compliance, and has received Year 2000 compliance certification from its
major telecommunications, loan servicing and correspondent banking 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.
BankUnited has designated a Year 2000 task force under the direction of
one of its senior officers, which has identified and coordinated BankUnited's
efforts to become Year 2000 compliant and has developed a Year 2000 contingency
plan. The contingency plan details alternate methods for meeting BankUnited's
data processing needs and cash and liquidity requirements, as well as covering
such matters as addressing problems that arise and responding to inquiries
during the leap year date change on February 29, 2000 and monitoring system
output throughout the Year 2000. The contingency plan was tested prior to
September 30, 1999. BankUnited has also launched an aggressive customer
awareness program, which includes an e-mail address, a toll-free hotline, a Year
2000 report card and Year 2000 awareness material for our retail and small
business customers. Additionally, BankUnited and its banking subsidiary are
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 $1.9 million, exclusive of internal costs, of
which approximately $1.8 million has been incurred through December 31, 1999.
The costs consist of approximately $0.7 million for the replacement of hardware
and
12
<PAGE>
software, $0.9 million for the write-off of non-compliant hardware and software
and $0.3 million for 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.
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 three months ended
December 31, 1999 and 1998, principal repayments on loans and mortgage-backed
securities and proceeds from maturities of other securities totaled $143.4
million and $426.1 million, respectively. BankUnited began experiencing
significant acceleration of prepayments on certain mortgage loans and mortgage
backed securities in the quarter ended June 30, 1998 due to the decrease in
long-term interest rates which continued through the quarter ended March 31,
1999. During the quarter ended June 30, 1999, long-term interest rates rose
slightly causing 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 used by financing
activities during the three months ended December 31, 1999 was $46.0 million
compared to a source of funds of $98.3 million, for the three months ended
December 31, 1998. The overall decrease in the sources of funds resulted from
the reduction in funds needed to purchase residential loans in the secondary
market.
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 three months ended
December 31, 1999, BankUnited's originations of loans totaled $247.5 million,
purchases of loans totaled $6.3 million and purchases of mortgage-backed
securities and other securities totaled $28.1 million. For the same period in
1998, BankUnited's originations of loans totaled $148.7 million, purchases of
loans totaled $400.2 million and purchases of mortgage-backed securities and
other securities totaled $67.2 million. The decrease in purchases of loans
during the three months ended December 31, 1999 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 5.76% and 6.96% as of December 31, 1999 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 December
31, 1999, the Bank was in compliance with all capital requirements and met the
definition of a "well capitalized" institution under applicable federal
regulations.
13
<PAGE>
ASSET QUALITY
Non-performing assets as of December 31, 1999 were $24.5 million, which
represents a decrease of $3.8 million or 13.4% 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 $5.4 million, offset by an increase in
real estate owned of $1.6 million. Non-accrual loans decreased due to a $2.4
million decrease in one-to-four family residential loan delinquencies and a $4.0
million decrease in commercial mortgage loan delinquencies, offset by a $1.0
million increase in non-mortgage commercial loan delinquencies. Included in the
decrease in non-accrual loans is a reduction due to $0.8 million in loan
charge-offs. The increase in real estate owned was due to an increase in
commercial real estate owned. Non-performing assets as a percentage of total
assets decreased from 0.69% as of September 30, 1999 to 0.61% as of December 31,
1999 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 December 31, 1999 and September 30, 1999.
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 1999
------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Non-accrual loans $16,032 $21,428
Restructured loans 960 962
Loans past due 90 days and still accruing (1) 431 693
------- -------
Total non-performing loans 17,423 23,083
Non-accrual tax certificates 1,936 1,703
Real estate owned 5,179 3,548
------- -------
Total non-performing assets $24,538 $28,334
======= =======
Allowance for losses on tax certificates $ 1,167 $ 1,168
Allowance for loan losses 12,486 12,107
------- -------
Total allowance $13,653 $13,275
======= =======
Non-performing assets as a percentage of
total assets 0.61% 0.69%
Non-performing loans as a percentage of
total loans 0.51% 0.70%
Allowance for loan losses as a percentage of
total loans 0.36% 0.36%
Allowance for loan losses as a percentage of
non-performing loans 71.66% 52.45%
Net charge offs as a percentage of average
total loans 0.10% 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 December 31, 1999 was $1.2
million as compared to $0.4 million for the three months ended December 31, 1998
as a result of the increase in non-mortgage commercial and consumer loans in the
loan portfolio which have a higher level of risk than one-to-four family
residential loans. BankUnited's allowance for loan losses has increased by a net
amount of $0.4 million from $12.1 million as of September 30, 1999 to $12.5
million as of December 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 months ended December 31, 1999 and 1998.
FOR THE THREE MONTHS
ENDED DECEMBER 31,
1999 1998
-------- --------
(IN THOUSANDS)
Balance at beginning of period $ 12,107 $ 6,128
Provision .................. 1,200 400
Loans charged off .......... (839) (101)
Recoveries ................. 18 167
-------- --------
Balance at end of period ..... $ 12,486 $ 6,594
======== ========
The following table sets forth BankUnited's allocation of the allowance
for loan losses by category as of December 31, 1999 and 1998.
AS OF DECEMBER 31,
1999 1998
------- -------
(IN THOUSANDS)
One-to-four family ............. $ 3,877 $ 2,687
Multi-family ................... 513 108
Commercial real estate ......... 1,903 2,764
Construction ................... 159 72
Land ........................... 1,179 72
Commercial business and consumer 3,268 653
Unallocated .................... 1,587 238
------- -------
Total allowance ............. $12,486 $ 6,594
======= =======
15
<PAGE>
LOAN PORTFOLIO
The following table sets forth the composition of BankUnited's loan
portfolio, including loans held for sale, at December 31, 1999 and September 30,
1999.
<TABLE>
<CAPTION>
DECEMBER 31, 1999 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 ............. $ 3,089,925 90.6% $ 3,010,427 91.1%
Multi-family ................... 35,183 1.0 30,057 0.9
Commercial real estate ......... 135,016 4.0 141,090 4.3
Construction ................... 15,912 0.5 15,425 0.5
Land ........................... 23,992 0.7 23,659 0.7
----------- ------- ----------- -------
Total mortgage loans ......... 3,300,028 96.8 3,220,658 97.5
----------- ------- ----------- -------
Other loans:
Commercial ..................... 69,058 2.0 48,173 1.5
Consumer ....................... 39,780 1.2 33,878 1.0
----------- ------- ----------- -------
Total other loans ............ 108,838 3.2 82,051 2.5
----------- ------- ----------- -------
Total loans ................ 3,408,866 100.0 3,302,709 100.0
Unearned discounts, premiums and
deferred loan fees, net ...... 12,608 0.4 12,264 0.4
Allowance for loan losses ...... (12,486) (0.4) (12,107) (0.4)
----------- ------- ----------- -------
Total loan portfolio .............. $ 3,408,988 100.0% $ 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 December 31, 1999 and September 30, 1999.
<TABLE>
<CAPTION>
AT DECEMBER 31, 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 ............. $ 31,299 $ 87 $ (679) $ 30,707
FNMA mortgage-backed securities ............. 5,225 16 (150) 5,091
FHLMC mortgage-backed securities ............ 15,444 1 (226) 15,219
Collateralized mortgage obligations ......... 84,578 130 (2,475) 82,233
Mortgage pass-through certificates .......... 2,965 -- (7) 2,958
-------- -------- -------- --------
Total mortgage-backed securities .......... 139,511 234 (3,537) 136,208
-------- -------- -------- --------
Other securities:
U.S. Treasury securities .................. 501 1 -- 502
U.S. government agency securities ......... 847 -- (7) 840
Equity securities ......................... 2,905 -- (72) 2,833
Trust preferred securities of other issuers 16,323 -- (2,215) 14,108
-------- -------- -------- --------
Total other securities .................. 20,576 1 (2,294) 18,283
-------- -------- -------- --------
Total available-for-sale ...................... $160,087 $ 235 $ (5,831) $154,491
======== ======== ======== ========
Held-to-maturity:
Mortgage-backed securities:
GNMA mortgage-backed securities ............. $ 58,747 $ 1 $ (831) $ 57,917
FNMA mortgage-backed securities ............. 1,906 -- (54) 1,852
FHLMC mortgage-backed securities ............ 71,248 -- (2,301) 68,947
Collateralized mortgage obligations ......... 60,310 -- (1,786) 58,524
Mortgage pass-through certificates .......... 22,975 39 (170) 22,844
-------- -------- -------- --------
Total mortgage-backed securities .......... 215,186 40 (5,142) 210,084
-------- -------- -------- --------
Other securities:
U.S. government agency securities ......... 4,999 -- (123) 4,876
State of Israel bonds ..................... 61 -- -- 61
-------- -------- -------- --------
Total other securities .................. 5,060 -- (123) 4,937
-------- -------- -------- --------
Total held-to-maturity ........................ $220,246 $ 40 $ (5,265) $215,021
======== ======== ======== ========
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
AT 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 DECEMBER
31, 1999 AND RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 1999
AND 1998.
FINANCIAL CONDITION
ASSETS
Total assets remained relatively constant from September 30, 1999 to
December 31, 1999, 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 $151.9 million, or 75.8% to $48.5 million at
December 31, 1999, from $200.4 million at September 30, 1999 primarily due to
the maturity of securities under agreements to resell.
BankUnited's investment in tax certificates decreased by $1.0 million,
or 6.8%, to $13.8 million at December 31, 1999 from $14.8 million at September
30, 1999, as a result of certificate redemptions and repayments.
Mortgage-backed securities held-to-maturity increased by $12.4 million,
or 6.1% to $215.2 million at December 31, 1999 from $202.8 million at September
30, 1999 due primarily to purchases of $19.9 million, offset by repayments and
amortization of premiums.
Mortgage-backed securities available-for-sale decreased by $8.2 million
or 5.7% to $136.2 million at December 31, 1999, from $144.4 million at September
30, 1999, due primarily to repayments and amortization of $6.7 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)
remained relatively constant from September 30, 1999 to December 31, 1999.
Mortgage loan purchases of $6.3 million and loan originations of $247.5 million
were offset by repayments of $144.6 million (net of accretion of discount and
amortization of premium). BankUnited classified all of the residential loans
originated during the quarter as loans receivable, net.
LIABILITIES
Deposits increased by $81.1 million from September 30, 1999 to December
31, 1999 due to an increase in certificates of deposit of $105.2 million. This
increase was partially offset by a decrease in savings and checking accounts of
$14.6 million and $9.5 million, respectively. This change in the deposit mix
resulted in a slight increase in BankUnited's cost of interest-bearing deposits
to 4.84% for the three months ended December 31, 1999 from 4.78% for the three
months ended September 30, 1999.
Securities sold under agreements to repurchase decreased by $26.7
million, or 84.2%, to $5.0 million at December 31, 1999 from $31.7 million at
September 30, 1999. This decrease resulted from the maturity of the agreements.
19
<PAGE>
Trust preferred securities decreased $2.5 million, or 1.1%, to $216.0
million at December 31, 1999 from $218.5 million at September 30, 1999. 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. During the three
months ended December 31, 1999, BankUnited purchased 99,799 shares of its trust
preferred securities. The trust preferred securities were purchased at a cost of
$1.7 million, resulting in an extraordinary gain of $0.4 million, net of $0.3
million in taxes. 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 three month period ended December
31, 1999, 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 three month period ended December 31, 1999,
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 $4.0 million
for the three months ended December 31, 1999, compared to $208,000 for the three
months ended December 31, 1998. Below is a more detailed discussion of each
major category of income and expenses. The increase in net income after
preferred stock dividends for the three months ended December 31, 1999 as
compared to the prior year period was attributable to an increase in the
interest rate spread to 1.90% for the three months ended December 31, 1999 from
1.02% for the prior year period.
NET INTEREST INCOME
Net interest income before provision for loan losses increased by $9.1
million, or 90.1%, to $19.2 million for the three months ended December 31, 1999
from $10.1 million for the same prior year period.
The increase in net interest income for the three months ended December
31, 1999 was primarily the result of the improved net interest margin which
increased to 2.06% from 1.17% for the same prior year period. For the three
months ended December 31, 1999, the increase in the net interest margin was due
to an increase in the yield on interest-earning assets to 7.25% from 6.48% for
the same period in 1998, primarily attributable to the higher yields on the
loans originated by BankUnited, and an 11 basis point decrease in the cost of
interest- bearing liabilities to 5.35% from 5.46% for the same period in 1998.
Interest income increased by $10.9 million, or 18.8%, to $69.0 million
for the three months ended December 31, 1999, compared to $58.1 million for the
same prior year period.
20
<PAGE>
The results of operations for the three months ended December 31, 1999
reflect a reduction in the net amortization of premiums/discounts on purchased
loans and mortgage-backed securities compared to the three month period ended
December 31, 1998. The amortization of premiums, net of discounts and deferred
origination costs, decreased from $6.1 million for the three months ended
December 31, 1998 to $1.0 million for the period ended December 31, 1999. The
decrease in premium amortization was a result of the lower level of loan
prepayments experienced in the first quarter of fiscal 2000, compared to the
first quarter of fiscal 1999. See "-Analysis of Net Interest Income."
Interest expense increased $1.7 million, or 3.5%, to $49.8 million for
the three months ended December 31, 1999, compared to $48.1 million for the same
prior year period. The increase reflects an increase in the average balance for
interest-bearing deposits during the period. There was an increase in average
interest-bearing deposits of $0.1 billion, or 4.6%, to $2.3 billion for the
three months ended December 31, 1999, from $2.2 billion for the same prior year
period. Additionally, 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. The increase in interest expense was partially offset by a decline in the
average cost of interest-bearing liabilities. For the three months ended
December 31, 1999, the average rate paid on interest-bearing liabilities
decreased 11 basis points to 5.35% from 5.46% for the same prior year period.
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. 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.
21
<PAGE>
YIELDS EARNED AND RATES PAID
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 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) $3,333,705 $ 60,675 7.28% $3,040,126 $ 50,837 6.68%
Mortgage-backed securities
and collateralized mortgage
obligations 353,371 6,085 6.89 340,244 4,073 4.79
Short-term investments (2) 33,127 565 6.68 66,228 848 5.01
Tax certificates 13,792 258 7.47 36,542 628 6.87
Long-term investments and
FHLB stock 70,993 1,369 7.69 95,203 1,759 7.34
---------- ---------- ------- ---------- ---------- -------
Total interest-earning assets $3,804,988 $ 68,952 7.25% $3,578,343 $ 58,145 6.48%
---------- ---------- ------- ---------- ---------- -------
Interest-bearing liabilities:
NOW/money market $ 267,108 $ 1,794 2.67% $ 240,954 $ 1,829 3.01%
Savings 367,223 4,181 4.53 315,861 3,641 4.57
Certificates of deposit 1,686,185 22,244 5.25 1,620,860 22,196 5.43
Trust preferred securities 218,151 5,282 9.69 218,500 5,288 9.68
Senior notes 200,000 2,901 5.80 -- -- --
FHLB advances and other
borrowings 950,659 13,361 5.50 1,082,854 15,102 5.47
---------- ---------- ------- ---------- ---------- -------
Total interest-bearing
liabilities $3,689,326 $ 49,763 5.35% $3,479,029 $ 48,056 5.46%
---------- ---------- ------- ---------- ---------- -------
Excess of interest-earning assets
over interest-bearing liabilities $ 115,662 $ 99,314
========== ==========
Net interest income $ 19,189 $ 10,089
========== ==========
Interest rate spread 1.90% 1.02%
======= =======
Net interest margin 2.06% 1.17%
======= =======
Ratio of interest-earning assets to
interest-bearing liabilities 103.14% 102.85%
========== ==========
</TABLE>
- ----------------------
(1) The yields and rates along with the corresponding interest rate spread
and net interest margin for the three months ended December 31, 1998
reflect the accelerated amortization of purchase premiums on the
One-Year CMT loans.
(2) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and
certificates of deposit.
22
<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 DECEMBER 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 ................................ $ 5,318 $ 4,176 $ 344 $ 9,838
Mortgage-backed securities and
collateralized mortgage obligations 157 1,786 69 2,012
Short-term investments (1) ........... (424) 282 (141) (283)
Tax certificates ..................... (391) 54 (33) (370)
Long-term investments and
FHLB stock ........................ (478) 81 7 (390)
-------- -------- -------- --------
Total interest-earning assets ... 4,182 6,379 246 10,807
-------- -------- -------- --------
Interest expense attributable to:
NOW/money market ................... 198 (205) (28) (35)
Savings ............................ 590 (35) (15) 540
Certificates of deposit ............ 892 (753) (91) 48
Trust preferred securities ......... (8) 2 -- (6)
Senior notes ....................... -- -- 2,901 2,901
FHLB advances and other
borrowings ....................... (1,844) 118 (15) (1,741)
-------- -------- -------- --------
Total interest-bearing liabilities (172) (873) 2,752 1,707
-------- -------- -------- --------
Increase in net interest income ........ $ 4,354 $ 7,252 $ (2,506) $ 9,100
======== ======== ======== ========
</TABLE>
- ------------------
(1) Short-term investments include FHLB overnight deposits, securities
purchased under agreements to resell, federal funds sold and
certificates of deposit.
PROVISION FOR LOAN LOSSES
The provision for loan losses increased by $0.8 million, or 200.0%, to
$1.2 million for the three months ended December 31, 1999, compared to $0.4
million for the same prior year period. This increase in the provision was a
result of the increase of non-mortgage commercial and consumer loans in the loan
portfolio which have a higher level of risk than one-to-four family residential
loans.
23
<PAGE>
NON-INTEREST EXPENSES
Non-interest expenses increased by $2.8 million, or 27.5% to $13.0
million for the three months ended December 31, 1999, compared to $10.2 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 quarter as well as the
hiring of additional associates in the key sales areas of business banking and
private banking. Total non-interest expenses, as a percentage of average assets,
increased from 1.10% for the three months ended December 31, 1998, to 1.32% for
the same period in 1999 as a result of the additional charges.
INCOME TAXES
The income tax provision increased by $2.2 million, or 550.0% to $2.6
million for the three months ended December 31, 1999, compared to $0.4 million
for the prior year period. This increase was due to the higher pre-tax earnings
during the three months ended December 31, 1999 as compared to the prior year
period. The increase was offset by a decrease in the effective tax rate to 41%
for the three months ended December 31, 1999, as compared to 48% for the same
period in 1998.
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. During
the three months ended December 31, 1999, BankUnited purchased 99,799 shares of
its trust preferred securities. The trust preferred securities were purchased at
a cost of $1.7 million resulting in an extraordinary gain as a result of the
early extinguishment of the trust preferred securities in the amount of $0.4
million, net of $0.3 million in taxes.
24
<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 three months ended December 31, 1999 which related to
risks associated with investments and mortgage-backed securities.
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 stockholder's equity. See
Note 4 - "Comprehensive Income" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Securities Portfolio."
25
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of stockholders of BankUnited held on January 26,
2000, the stockholders voted on the election of directors to BankUnited's Board
of Directors and the approval of an amendment to BankUnited's 1996 Incentive
Compensation and Stock Award Plan (the "1996 Plan").
The stockholders voted to elect the nominees for directors as follows:
VOTES FOR VOTES WITHHELD
--------- --------------
Marc D. Jacobson 2,049,468 198,744
Anne W. Solloway 2,049,321 198,890
Neil H. Messinger 2,049,468 198,744
Marc Lipsitz 2,049,458 198,754
A. Frederick Schild 2,049,408 198,804
Barry Shulman 2,049,468 198,744
The stockholders voted to approve an amendment to the 1996 Plan to
increase, by 250,000 shares each, the number of shares of BankUnited's Class A
Common Stock and Class B Common Stock (together, the "Common Stock") available
for the grant of options. Voting on the amendment was as follows:
VOTES FOR VOTES AGAINST VOTES ABSTAINING
--------- ------------- ----------------
1,823,956 415,846 8,409
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
10.1 1996 Incentive Compensation and Stock Award Plan, as
Amended in January 26, 2000.*
27.1 Financial Data Schedule
* Compensation Plan
(b) Reports on Form 8-K.
BankUnited filed no reports on Form 8-K during the quarter for
which this report is filed.
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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/ HUMBERTO LOPEZ
--------------------------------------------
Humberto Lopez
Executive Vice President and Chief Financial
Officer
Date: February 14, 2000
<PAGE>
BANKUNITED FINANCIAL CORPORATION AND SUBSIDIARIES
Form 10-Q for the Quarter Ended December 31, 1999
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NO. NUMBERED PAGE
----------- -------------
<S> <C> <C>
10.1 1996 Incentive Compensation and Stock Award Plan,
as amended on January 26, 2000 *.........................
27.1 Financial Data Schedule..................................
* Compensation Plan
</TABLE>
EXHIBIT 10.1
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.
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(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.
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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.
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(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.
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.
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 1,600,000, 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 2,300,000 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 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.
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<PAGE>
(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 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.
(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.
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<PAGE>
(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 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.
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<PAGE>
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:
(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
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<PAGE>
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 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
B-8
<PAGE>
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.
(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
B-9
<PAGE>
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 THREE MONTHS ENDED
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 24,797
<INT-BEARING-DEPOSITS> 48,466
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 154,491
<INVESTMENTS-CARRYING> 234,086
<INVESTMENTS-MARKET> 228,861
<LOANS> 3,421,474
<ALLOWANCE> 12,486
<TOTAL-ASSETS> 4,031,988
<DEPOSITS> 2,360,942
<SHORT-TERM> 165,000
<LIABILITIES-OTHER> 46,623
<LONG-TERM> 1,267,432
0
10
<COMMON> 186
<OTHER-SE> 191,795
<TOTAL-LIABILITIES-AND-EQUITY> 4,031,988
<INTEREST-LOAN> 60,675
<INTEREST-INVEST> 8,277
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 68,952
<INTEREST-DEPOSIT> 28,219
<INTEREST-EXPENSE> 49,763
<INTEREST-INCOME-NET> 19,189
<LOAN-LOSSES> 1,200
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 12,988
<INCOME-PRETAX> 6,308
<INCOME-PRE-EXTRAORDINARY> 3,729
<EXTRAORDINARY> 431
<CHANGES> 0
<NET-INCOME> 3,963
<EPS-BASIC> 0.22
<EPS-DILUTED> 0.21
<YIELD-ACTUAL> 2.06
<LOANS-NON> 16,032
<LOANS-PAST> 431
<LOANS-TROUBLED> 960
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12,107
<CHARGE-OFFS> 839
<RECOVERIES> 18
<ALLOWANCE-CLOSE> 12,486
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
