BANK UNITED CORP, S-4/A, 1996-06-28

BANK UNITED CORP
S-4/A, 1996-06-28
SAVINGS INSTITUTION, FEDERALLY CHARTERED

Previous: INVESCO INTERNATIONAL FUNDS INC, N-30D, 1996-06-28

Next: STAGECOACH TRUST, 485BPOS, 1996-06-28

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 28, 1996

REGISTRATION NO. 33-63652
================================================================================

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 1
TO
FORM S-4

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

BANK UNITED CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 6711
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)

13-3528556
(I.R.S. EMPLOYER IDENTIFICATION NO.)

50 CHARLES LINDBERGH BLVD.,
SUITE 500
UNIONDALE, NEW YORK 11553
(516) 745-6644

(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

------------------------

SALVATORE A. RANIERI
VICE PRESIDENT AND GENERAL COUNSEL
50 CHARLES LINDBERGH BLVD.,
SUITE 500
UNIONDALE, NEW YORK 11553
(516) 745-6644

(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

------------------------

COPIES TO:

WILLIAM F. BAVINGER, ESQ. CRAIG M. WASSERMAN, ESQ.
BRYAN CAVE LLP WACHTELL, LIPTON, ROSEN & KATZ
700 THIRTEENTH STREET 51 WEST 52ND STREET
WASHINGTON, D.C. 20005 NEW YORK, NY 10019
(212) 403-1000

JONATHON K. HEFFRON
EXECUTIVE VICE PRESIDENT,
CHIEF OPERATING OFFICER
AND GENERAL COUNSEL
BANK UNITED
3200 SOUTHWEST FREEWAY
HOUSTON, TEXAS 77027
------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this registration statement becomes
effective.

If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

================================================================================

BANK UNITED CORP.

Cross-Reference Sheet Between Items in Form S-4 and Prospectus
Pursuant to Item 501(b) of Regulation S-K

ITEM NO. FORM S-4 CAPTION HEADING IN PROSPECTUS
- ----------- ----------------------------------------------------------- ---------------------------------------
<S> <C>
A. Information About the Transaction
Item 1. Forepart of Registration Statement and Outside Front Cover
Page of Prospectus......................................... Outside Front Cover Page of Prospectus
Item 2. Inside Front and Outside Back Cover Pages of Prospectus.... Inside Front Cover Page
of Prospectus; Additional
Information; Exchange Agent; Outside
Back Cover Page of Prospectus.
Item 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other
Information................................................ Outside Front Cover Page of Prospectus;
Summary; Risk Factors; The Company;
Purpose of the Exchange Offer; The
Exchange Offer; Federal Income Tax
Considerations; Capitalization; Ratios
of Earnings to Fixed Charges.
Item 4. Terms of Transaction....................................... Summary; Purpose of the Exchange Offer;
The Exchange Offer; Federal Income Tax
Considerations; Capitalization.
Item 5. Pro Forma Financial Information............................ *
Item 6. Material Contacts with the Company Being Acquired.......... *
Item 7. Additional Information Required for Reoffering by Persons
and Parties Deemed to be Underwriters...................... *
Item 8. Interests of Named Experts and Counsel..................... *
Item 9. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities................................. *
B. Information About the Registrant
Item 10. Information with Respect to S-3 Registrants................ *
Item 11. Incorporation of Certain Information by Reference.......... *
Item 12. Information with Respect to S-2 or S-3 Registrants......... *
Item 13. Incorporation of Certain Information by Reference.......... *
Item 14. Information with Respect to Registrants Other than S-2 or
S-3 Registrants............................................ The Company; Selected Consolidated
Financial and Other Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Regulation; Description of
Properties; Legal Proceedings.
C. Information About the Company Being Acquired
Item 15. Information with Respect to S-3 Companies.................. *
Item 16. Information with Respect to S-2 or S-3 Companies........... *
Item 17. Information with Respect to Companies Other than S-2 or S-3
Companies.................................................. *
D. Voting and Management Information
Item 18. Information if Proxies, Consents or Authorizations Are to
be Solicited............................................... *
Item 19. Information if Proxies, Consents or Authorizations Are Not
to be Solicited or in an Exchange Offer.................... Management
</TABLE>
- ------------

* Omitted because inapplicable or answer is in the negative.

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.

PROSPECTUS

SUBJECT TO COMPLETION, DATED JUNE 28, 1996
BANK UNITED CORP.
OFFER TO EXCHANGE 8.05% SENIOR NOTES DUE MAY 15, 1998,
FOR ANY AND ALL RULE 144A NOTES (AS DEFINED BELOW)

THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1996, UNLESS EXTENDED. AS DESCRIBED HEREIN,
WITHDRAWAL RIGHTS WITH RESPECT TO THE EXCHANGE OFFER ARE EXPECTED
TO EXPIRE AT THE EXPIRATION OF THE EXCHANGE OFFER.

Bank United Corp., a Delaware corporation formerly named USAT Holdings Inc.
(the "Company"), hereby offers, upon the terms and conditions set forth in this
Prospectus and the related Letter of Transmittal (which together constitute the
"Exchange Offer"), to exchange its 8.05% Senior Notes due May 15, 1998 (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act") pursuant to a registration statement of which
this Prospectus is a part, for a like principal amount of its issued and
outstanding 8.05% Senior Notes due May 15, 1998, previously issued and sold to
certain qualified institutional buyers in reliance on, and subject to the
restrictions imposed pursuant to Rule 144A ("Rule 144A") under the Securities
Act, as well as to a limited number of institutional investors that are
"accredited investors" within the meaning of Rule 501 under the Securities Act
(such outstanding securities being collectively referred to herein as "Rule 144A
Notes"). The principal amount of the Rule 144A Notes currently outstanding is
$115,000,000.

The Exchange Notes offered hereby are substantially identical to the Rule
144A Notes except that the Exchange Notes have been registered under the
Securities Act. For federal income tax purposes, the Exchange Offer will result
in a tax-free exchange. See "Federal Income Tax Considerations".

The Company's purpose in engaging in the Exchange Offer is to satisfy the
condition pursuant to which the interest rate on the Rule 144A Notes will revert
to 8.05% per annum. The Exchange Offer will provide holders of Rule 144A Notes
with Exchange Notes that, with certain exceptions set forth below, will
generally be transferable without registration or any prospectus delivery
requirement under the Securities Act. The Rule 144A Notes also may generally be
transferable without such registration. See "Purpose of the Exchange Offer" and
"Risk Factors -- Restrictions on Transfer".

Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission"), the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Rule 144A Notes may be offered for resale, resold
and otherwise transferred by holders thereof (other than any such holder that is
an "affiliate" or "promoter" of the Company within the meaning of Rule 405 under
the Securities Act) without complying with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of each such holder's business and such holders
have no arrangement or understanding with any person to participate in a
distribution of the Exchange Notes. Each broker-dealer that receives Exchange
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Rule 144A Notes where such Rule 144A Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 90 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution".

The Exchange Offer is not conditioned upon any minimum number of Rule 144A
Notes being tendered. The Exchange Offer will expire at 5:00 p.m., New York City
time, on , 1996, unless extended (the "Expiration Date"). Subject to the terms
and conditions of the Exchange Offer, including the reservation of certain
rights by the Company and the right of holders of Rule 144A Notes to withdraw
tenders at any time prior to the acceptance thereof, Rule 144A Notes validly
tendered prior to the Expiration Date will be accepted on or promptly after the
Expiration Date. Exchange Notes to be issued in exchange for properly tendered
Rule 144A Notes will be mailed by the Exchange Agent promptly after the
acceptance thereof. See "The Exchange Offer -- Withdrawal Rights".

SEE "RISK FACTORS" COMMENCING AT PAGE 13 FOR A DESCRIPTION OF CERTAIN
RISKS THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE EXCHANGE
NOTES.
(TEXT CONTINUED ON FOLLOWING PAGE)
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE FEDERAL DEPOSIT INSURANCE CORPORATION (THE
"FDIC"), THE OFFICE OF THRIFT SUPERVISION (THE "OTS") OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE COMMISSION, THE FDIC, THE OTS OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

THE EXCHANGE NOTES OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR
SAVINGS ASSOCIATION, AND ARE NOT INSURED BY THE
FDIC OR ANY OTHER
GOVERNMENTAL AGENCY.
------------------

The date of this Prospectus is , 1996.

The Exchange Notes and the Rule 144A Notes are referred to collectively as
the "Senior Notes". Interest on the Senior Notes is payable semi-annually on May
15 and November 15 of each year, commencing November 15, 1993. The Senior Notes
will mature on May 15, 1998. The Senior Notes are not redeemable prior to
maturity, except that the Senior Notes are redeemable upon the occurrence of a
Change of Control (as defined herein) or the sale or other disposition of at
least 80% of the assets of the Bank (i) at the option of the Company, in whole
but not in part, and (ii) at the option of holders, in whole or in part, in each
case at 101% of their principal amount plus accrued interest to the date of
redemption. The Senior Notes are subject to, and entitled to the benefits of, an
Indenture, dated as of May 15, 1993 (the "Original Indenture"), and a First
Supplemental Indenture, dated as of January 23, 1995 (the "Supplemental
Indenture") (collectively, the "Indenture"). The Indenture does not limit the
right of the Company to conduct a tender offer for, or otherwise to purchase,
the Senior Notes. See "Description of the Senior Notes".

The Senior Notes will rank PARI PASSU with or senior to such other
indebtedness as the Company may incur. The Indenture generally restricts the
incurrence of additional debt by the Company except for certain intercompany or
affiliate subordinated debt and certain debt which may be incurred to redeem or
repurchase the Senior Notes. No such debt is currently outstanding. The
Indenture does not limit the incurrence of debt by subsidiaries of the Company.
See "Description of the Senior Notes".

The interest rate on the Exchange Notes is 8.05% per annum. The interest
rate on the Rule 144A Notes was initially 8.05% per annum, and increased to
8.55% per annum in October 1993, and to 9.05% per annum in February 1994,
because the Company had not consummated the Exchange Offer. The interest rate on
the Rule 144A Notes will revert to 8.05% per annum from and including the date
of the consummation of the Exchange Offer. See "Purpose of the Exchange Offer".

There has not previously been any public market for the Rule 144A Notes or
the Exchange Notes. The Company does not intend to list the Exchange Notes on
any securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Exchange Notes will develop. See "Risk Factors -- No Prior Market". Moreover, to
the extent that Rule 144A Notes are tendered and accepted in the Exchange Offer,
the trading market for untendered and tendered but unaccepted Rule 144A Notes
could be adversely effected.

THE COMPANY WILL NOT PAY ANY COMMISSION OR OTHER REMUNERATION TO ANY
BROKER, DEALER, SALESMAN OR OTHER PERSON FOR SOLICITING TENDERS OF RULE 144A
NOTES. SEE "THE EXCHANGE OFFER -- SOLICITATION OF TENDERS; EXPENSES".

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-4 (including all amendments thereto, the "Registration Statement") under the
Securities Act with respect to the securities offered hereby. This Prospectus,
which constitutes a part of the Registration Statement does not contain all the
information set forth in the Registration Statement. For further information
with respect to the Company and the securities offered hereby, reference is made
to the Registration Statement and to the exhibits filed therewith. Statements
made in this Prospectus as to the contents of any contract or other document
referred to are not necessarily complete, and where applicable reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement, and each such statement is qualified by such reference.

The Registration Statement may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at the regional offices of the
Commission located at Seven World Trade Center, New York, New York 10048 and at
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates.

EXCHANGE AGENT

The Bank of New York has agreed to provide certain services as Exchange
Agent in connection with the Exchange Offer. Owners of Rule 144A Notes who
require assistance should contact the Exchange Agent at The Bank of New York,
101 Barclay Street (7 East), Reorganization Section, New York, New York 10286,
Attention Enrique Lopez (800) 524-4558.

SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION, DEFINITIONS AND FINANCIAL STATEMENTS APPEARING ELSEWHERE HEREIN.
INVESTORS SHOULD CAREFULLY REVIEW THE ENTIRE PROSPECTUS. THE FISCAL YEAR FOR
BANK UNITED CORP. AND ITS WHOLLY OWNED SUBSIDIARY, BANK UNITED (THE "BANK"),
ENDS SEPTEMBER 30, AND, UNLESS OTHERWISE INDICATED, REFERENCES TO PARTICULAR
YEARS ARE TO FISCAL YEARS ENDING SEPTEMBER 30 OF THE YEAR INDICATED. AS USED
HEREIN, THE TERM "COMPANY" REFERS TO BANK UNITED CORP. AND ITS PREDECESSORS, AND
ITS CONSOLIDATED SUBSIDIARIES, UNLESS THE CONTEXT OTHERWISE REQUIRES. SEE PAGE
140 FOR THE INDEX OF DEFINED TERMS USED IN THIS PROSPECTUS.

PURPOSE OF THE EXCHANGE OFFER

The Company's purpose in engaging in the Exchange Offer is to satisfy the
condition pursuant to which the interest rate on the Rule 144A Notes will revert
to 8.05% per annum. Because the Company did not consummate the Exchange Offer by
October 14, 1993, the interest rate on the Rule 144A Notes increased to 8.55%
per annum. Because the Company did not consummate the Exchange Offer by February
11, 1994, the interest rate on the Rule 144A Notes increased to 9.05% per annum.
The interest rate on the Rule 144A Notes will revert to 8.05% per annum from and
including the date on which the Exchange Offer is consummated. The Exchange
Offer will provide holders of Rule 144A Notes with Exchange Notes that, with
certain exceptions, will generally be transferable without registration or any
prospectus delivery requirement under the Securities Act and without
registration under the securities laws of many states. The Rule 144A Notes also
may generally be transferable without such registration. See "Purpose of the
Exchange Offer" and "Risk Factors -- Restrictions on Transfer".

THE EXCHANGE OFFER

Exchange Ratio...................... Each Rule 144A Note is exchangeable for a
like principal amount of Exchange Notes.

Expiration Date..................... 5:00 p.m., New York City time, on , 1996,
unless extended, in which case the term
"Expiration Date" means the latest date
and time to which the Exchange Offer shall
have been extended.

Principal Amount of Senior Notes.... Subject to the terms and conditions of the
Exchange Offer, any and all Rule 144A
Notes will be accepted if duly tendered
and not withdrawn prior to acceptance
thereof. The Exchange Offer is not
conditioned upon any minimum principal
amount of Rule 144A Notes being tendered.
The Indenture limits the aggregate amount
of Senior Notes, including Rule 144A Notes
and Exchange Notes, which may be
outstanding to $115 million principal
amount, all of which is currently in the
form of Rule 144A Notes.

Trading and Market Price............ The Rule 144A Notes are currently eligible
for quotation through the National
Association of Securities Dealers, Inc.'s
("NASD's") PORTAL system. Prior to the
date hereof, there has been only a private
institutional trading market for the Rule
144A Notes. It is anticipated that the
Exchange Notes will trade in the
over-the-counter market following
expiration of the Exchange Offer; however,
no assurance can be given as to the prices
at which the Exchange Notes may trade, or
as to the liquidity which may exist in
such market. Goldman, Sachs & Co.
("Goldman Sachs") has advised the Company
that it intends to act as a market maker
for the Exchange Notes; however, it is not
obligated to do so and may discontinue
market making activities with respect to
the Exchange Notes at any time. A decision
to terminate market making activities may
adversely affect the liquidity of, and the
trading prices for, the Senior Notes. See
"Risk Factors -- No Prior Market".

4
Federal Income Tax
Considerations.................... Generally, for federal income tax
purposes, holders of Rule 144A Notes will
not recognize any gain or loss upon the
receipt of Exchange Notes pursuant to the
Exchange Offer. See "Federal Income Tax
Considerations".

Conditions of the
Exchange Offer.................... The Company's obligation to consummate the
Exchange Offer is subject to certain
conditions. See "The Exchange Offer --
Conditions".

Withdrawal Rights................... Tenders of Rule 144A Notes may be
withdrawn at any time prior to the
Expiration Date. See "The Exchange Offer
-- Withdrawal Rights".

How to Tender....................... Tendering holders of Rule 144A Notes must
either (i) complete and sign a Letter of
Transmittal, have their signatures
guaranteed if required, forward the Letter
of Transmittal and any other required
documents to the Exchange Agent at the
address set forth under the caption "The
Exchange Offer -- Exchange Agent", and
either deliver the Rule 144A Notes to the
Exchange Agent or tender such Rule 144A
Notes pursuant to the procedures for
book-entry transfer or (ii) request a
broker, dealer, bank, thrift trust company
or other nominee to effect the transaction
for them. Beneficial owners of Rule 144A
Notes registered in the name of a broker,
dealer, bank, trust company or other
nominee must contact such institution to
tender their Rule 144A Notes. Rule 144A
Notes may be physically delivered, but
physical delivery is not required if a
confirmation of a book-entry transfer of
such Rule 144A Notes to the Exchange
Agent's account at the Depository Trust
Company ("DTC") is delivered in a timely
fashion. Certain provisions have also been
made for holders whose Rule 144A Notes are
not readily available or who cannot comply
with the procedure for book-entry transfer
on a timely basis. Questions regarding how
to tender and requests for information
should be directed to the Exchange Agent.
See "The Exchange Offer -- How to Tender".

Acceptance of Tenders............... Subject to the terms and conditions of the
Exchange Offer, including the reservation
of certain rights by the Company to delay
or terminate the Exchange Offer if certain
conditions occur (relating generally to
the legal effect of the offer or the
occurrence of certain legal or
administrative proceedings or other
impediments or changes in applicable law
or regulations), Rule 144A Notes validly
tendered prior to the Expiration Date will
be accepted promptly after such Expiration
Date. See "The Exchange Offer --
Conditions" and "-- Acceptance of
Tenders". Subject to such terms and
conditions, Exchange Notes to be issued in
exchange for validly tendered Rule 144A
Notes will be mailed by the Exchange Agent
promptly after acceptance of the tendered
Rule 144A Notes. Although the Company does
not currently intend to do so, if it
modifies the terms of the Exchange Offer
prior to the Expiration Date, such
modified terms will be available to all
holders of Rule 144A Notes, whether or not
their Rule 144A Notes have been tendered
prior to such modification. Any material
modification will be disclosed in
accordance with the applicable rules of
the Commission and, if required, the
Exchange Offer will be extended to permit
holders of Rule 144A Notes adequate time
to consider such modification. See "The
Exchange Offer -- Acceptance of Tenders".

Exchange Agent...................... The Bank of New York.

THE SENIOR NOTES

Principal Amount.................... $115 million aggregate principal amount at
any one time outstanding of Rule 144A
Notes and Exchange Notes.

Maturity Date....................... May 15, 1998.

Interest Payment Dates.............. May 15 and November 15, commencing
November 15, 1993.

Interest Rate....................... The interest rate on the Exchange Notes is
8.05% per annum. The interest rate on the
Rule 144A Notes was initially 8.05% per
annum, and increased to 8.55% per annum in
October 1993, and to 9.05% per annum in
February 1994, because the Company had not
consummated the Exchange Offer by those
dates. The interest rate on the Rule 144A
Notes will revert to 8.05% per annum from
and including the date of the consummation
of the Exchange Offer.

Optional Redemption................. The Senior Notes are not redeemable prior
to maturity, except that the Senior Notes
are redeemable upon the occurrence of a
Change of Control (as defined in the
Indenture) or the sale or other
disposition of at least 80% of the assets
of the Bank (i) at the option of the
Company, in whole but not in part, and
(ii) at the option of the holder, in whole
or in part, in each case at 101% of their
principal amount plus accrued interest to
the date of redemption. See "Description
of the Senior Notes -- Certain Covenants
-- Change of Control; Sale or Other
Disposition of Bank's Assets".

Ranking............................. The Senior Notes are general unsecured
obligations of the Company and will rank
on a parity in right of payment to all
existing and future unsubordinated
indebtedness of the Company.

Because the Company is a shareholder of
its subsidiaries, including the Bank, the
rights of creditors of subsidiaries to
payment from the subsidiary of which they
are creditors is, in effect, senior to the
rights of the Company as a shareholder of
such subsidiary and, in effect, to the
rights of holders of Senior Notes, who
will have no direct claim against any
subsidiary for payment.

Registration Covenant............... The Company will be obligated to use its
best efforts to consummate the Exchange
Offer made hereby. See "Interest Rate"
above. Under certain conditions the
Company may abandon the Exchange Offer and
satisfy its obligation to make the
Exchange Offer by the filing and
effectiveness of a "shelf" registration
statement permitting resales by holders of
the out- standing Rule 144A Notes. See
"The Exchange Offer -- Conditions" and
"Description of the Senior Notes --
Registration Covenant; Exchange Offer".

Certain Additional Covenants........ The Indenture contains certain additional
covenants which, among other things, limit
(i) the incurrence of debt by the Company
(but not its subsidiaries) to debt
represented by the Senior Notes,
subordinated debt owed to certain of its
subsidiaries, short-term subordinated debt
incurred for certain permitted purposes
and outstanding for not more than 60 days,
and debt incurred to refinance the Senior
Notes, (ii) certain investments by the
Company and its subsidiaries, (iii) the
payment of dividends and the making of
certain other distributions by the Company
and its subsidiaries, (iv) the disposition
of and the existence of liens on the stock
of certain of the Company's subsidiaries,
and (v) the existence of certain liens on
other property or assets of the Company.
See "Description of the Senior Notes --
Certain Covenants".

Use of Proceeds..................... No new proceeds will be received by the
Company as a result of the Exchange Offer.

THE COMPANY

Bank United Corp. is a broad-based financial services provider to consumers
and businesses in Texas and other selected regional markets throughout the
United States. Through the Bank, its principal subsidiary, the Company operates
67 Texas-based community banking branches serving nearly 182,000 households and
businesses, 9 commercial banking offices and a nationwide network of mortgage
offices. At March 31, 1996, the Company had consolidated total assets of $11.3
billion, total deposits of $5.0 billion and total stockholders' equity of $526.4
million. The Company has recently filed a registration statement with the
Commission relating to an initial public offering (the "Common Stock Offering")
of its Class A Common Stock, par value $0.01 per share ("Class A Common Stock"),
by certain of its stockholders (the "Selling Stockholders"). Upon completion of
the Common Stock Offering, the Company will be the largest publicly traded
depository institution headquartered in Texas, in terms of both assets and
deposits.

The Company was incorporated in Delaware on December 19, 1988 as USAT
Holdings Inc. and became the holding company for the Bank upon the Bank's
formation on December 30, 1988. The Bank is a federally chartered savings bank,
the deposits of which are insured by the Savings Association Insurance Fund (the
"SAIF") which is administered by the FDIC. The Company has no significant assets
other than its equity interest in the Bank. In June 1996, the Company changed
its name to Bank United Corp.

BUSINESS STRATEGY

From its incorporation in December 1988 until the early 1990's, the
Company's operations were designed to minimize interest rate and credit risk
while maximizing the net value of the Company's assets and liabilities. To this
end, Company management's strategy focused on traditional thrift and mortgage
banking activities, certain wholesale activities (primarily related to
mortgage-backed securities ("MBS") and mortgage servicing rights ("MSRs")) and
internal as well as external growth. In addition, over this period the Company
benefited substantially from certain federal financial assistance and tax
benefits received and recorded in connection with its acquisitions of certain
assets and certain liabilities of failed thrift institutions during the period
1988-1992. As of March 31, 1996, the Company's stockholders' equity was $526.4
million (not adjusted for the dividend paid and related contractual payments
made to the FDIC in May 1996), a more than fourfold increase from $118.0
million, which represents total stockholders' equity at December 1988, adjusted
for subsequent capital contributions totaling $57.9 million.

Over the past few years, the Company's management has pursued a strategy
designed to reduce the Bank's reliance on its traditional thrift and mortgage
banking lines of business by developing higher margin consumer and commercial
lending lines of business. During this time, the Company increased its
originations and the size of its portfolio of multi-family, residential
construction, consumer and commercial loans as well as the level of lower cost
transaction and commercial deposit accounts. To support this strategy, the
Company has hired experienced commercial banking professionals and has engaged
in more aggressive marketing campaigns. In addition to its efforts to increase
originations of commercial and consumer loans, the Company plans to increase the
retention of higher yielding single family and multi-family mortgage loans that,
in the past, may have been sold or securitized.

OPERATIONAL OVERVIEW

The Company's operating structure reflects its current strategy, with four
business groups in two business segments.

-------------------------------------------------
| Bank United Corp. |
| (the "Company") |
-------------------------------------------------
|
-------------------------------------------------
| Bank United |
| (the "Bank") |
-------------------------------------------------
---------------------- | -------------------------------
| Banking Segment |--------------------| Mortgage Banking Segment |
---------------------- -------------------------------
| |
----------------------------------------- |
| | | |
- ----------------- ----------------- --------------------- -------------------
| Community | | Commercial | | Financial Markets | |Mortgage Banking |
| Banking Group | | Banking Group | | Group | | Group |
- ----------------- ----------------- --------------------- -------------------

<TABLE>
<CAPTION>
ACTIVITIES
<S> <C> <C> <C>
o Deposit Gathering o Mortgage Banker o Loan Acquisitions o Retail Mortgage
o Consumer Lending Finance o Wholesale Funding Originations
o Small Business o Multi-Family Lending o Investment o Wholesale Mortgage
Banking o Residential Management Originations
o Investment Product Construction Lending o Securitization of o Mortgage Servicing
Sales o Commercial Real Whole Loans
Estate Lending
</TABLE>

COMMUNITY BANKING GROUP. The Community Banking Group's principal activities
include deposit gathering, consumer lending, small-business banking and
investment product sales. The Community Banking Group, which has marketed itself
under the name "Bank United" since 1993, operates a 67 branch community banking
network, a 24-hour telephone banking center and a 62-unit ATM network, which
together serve as the platform for the Company's consumer and small business
banking activities. The Company's branch network includes 34 branches in the
greater Houston area, 29 branches in the Dallas/Ft. Worth metropolitan area, and
two branches each in Austin and San Antonio. In addition, the Company plans to
open at least three supermarket-based banking branches in 1996. Through its
branch network, the Company maintains more than 400,000 accounts with an
estimated 182,000 households and businesses.

COMMERCIAL BANKING GROUP. The Commercial Banking Group provides credit and
a variety of cash management and other services to certain real estate and real
estate related businesses. The Commercial Banking Group conducts its activities
through four units: Mortgage Banker Finance ("MBF"), a financial services
provider to small- to medium-sized mortgage companies; Multi-Family Lending;
Residential Construction Lending; and Commercial Real Estate Lending. Business
is solicited in Texas and in targeted regional markets throughout the United
States. The Commercial Banking Group is expanding its products and industry
specialties to include health care lending, asset-based lending and other
commercial and industrial loan products.

FINANCIAL MARKETS GROUP. The Financial Markets Group manages the Company's
asset portfolio activities, including loan acquisition and management and the
securitization of whole loans. Additionally, under the supervision of the Bank's
Asset and Liability Committee (the "ALCO"), the Financial Markets Group is
responsible for the Company's investment portfolio, for interest rate risk
hedging strategies, and for securing funding sources other than consumer and
commercial deposits.

MORTGAGE BANKING GROUP. The Mortgage Banking Group principally engages in
three activities: retail mortgage originations, wholesale mortgage originations
and mortgage servicing. The Mortgage Banking Group originates and services first
mortgage loans for single family residences for both the Company's portfolio and
for sale to investors. At December 31, 1995,

the Company, with originations of $3.4 billion in fiscal 1995, was ranked by the
AMERICAN BANKER as among the 30 largest originators of single family loans in
the nation. In addition, the Company was ranked by the AMERICAN BANKER as one of
the 40 largest single family loan servicers in the nation at December 31, 1995.
The Company had an $11.6 billion servicing portfolio at March 31, 1996. The
Mortgage Banking Group operates under the names "Bank United Mortgage" in Texas
and Virginia and "Commonwealth United Mortgage" elsewhere in the United States.

RECENT DEVELOPMENTS

The Company was organized, and through June 17, 1996 operated, as a
subsidiary of Hyperion Holdings Inc., a Delaware corporation ("Hyperion
Holdings"). During that period, all of the outstanding shares of Hyperion
Holdings were owned by Hyperion Partners L.P., a Delaware limited partnership
("Hyperion Partners"). The general partner of Hyperion Partners is indirectly
controlled by three individuals, including Lewis S. Ranieri, who from 1988 has
served as Chairman of the Board of the Company and, until June , 1996, also as
President and Chief Executive Officer ("CEO") of the Company and Chairman of the
Board of the Bank.

DIVIDEND DISTRIBUTION AND RESTRUCTURING In May 1996, the Company paid a
dividend of $100 million on its common stock to Hyperion Holdings and other
holders of its common stock. The proceeds of this dividend received by Hyperion
Holdings were distributed by Hyperion Partners to its limited and general
partners in accordance with the limited partnership agreement of Hyperion
Partners. During June 1996, the following actions were taken in the order
indicated (collectively, the "Restructuring"): (i) Hyperion Holdings exchanged
shares of a newly created class of its non-voting common stock for certain
shares of its voting common stock held by Hyperion Partners; (ii) Hyperion
Partners then distributed the Hyperion Holdings common stock to its limited and
general partners in accordance with the limited partnership agreement of
Hyperion Partners (the "Distribution"); and (iii) following the Distribution,
Hyperion Holdings was merged with and into the Company (the "Merger"), with the
result that holders of Hyperion Holdings voting and nonvoting common stock
received shares of Class A Common Stock and Class B Common Stock and the holders
of Class C Common Stock (as defined below) received shares of Class B Common
Stock as set forth under "Common Stock Offering: Selling Stockholders". As part
of the Restructuring, the common stock of Hyperion Holdings and the Class C
Common Stock were converted 1,800 to one. See Note 21 to the Consolidated
Financial Statements for a discussion of subsequent events and see
"Capitalization". The Common Stock Offering is intended to establish a public
market for the Class A Common Stock while providing the Selling Stockholders
with liquidity for their current holdings in the Company.

MANAGEMENT Day-to-day operations of the Bank are directed by Barry C.
Burkholder, President and CEO of the Bank, who brings over 20 years of
commercial banking experience to the Bank, with specific experience in consumer
banking, mortgage banking and related areas. In connection with the
Restructuring and the Common Stock Offering, Mr. Burkholder will also become
Chairman of the Board of the Bank as well as President and CEO of the Company.
The executive management group of the Bank consists of seven individuals who
have worked together for the past six years, giving them a thorough
understanding of the businesses they have developed together. They average more
than 20 years of related industry experience, the majority of which comes from
commercial banking. As a team, they have brought the discipline and
sophistication of commercial banking

to the Bank. The next level of senior management is composed of 42 executives, a
third of whom were hired directly from commercial banks. The balance of the
senior management team has experience working with various financial services
companies, including mortgage banks, thrifts and accounting firms. See
"Management".

Lewis S. Ranieri, who has over 20 years of investment experience with
particular expertise in the field of MBS, has previously served as Chairman of
the Board of the Bank and of the Company as well as President and CEO of the
Company, and will continue, after the Common Stock Offering, to serve as
Chairman of the Board of the Company. The Company is contemplating entering into
a consulting agreement with Mr. Ranieri pursuant to which he would serve as a
consultant to the Company for a three year period. See "Business -- Management"
and "Management -- Certain Relationships and Related Transactions".

FUTURE TAX BENEFITS In connection with the acquisition from the Federal
Savings and Loan Insurance Corporation (the "FSLIC") of certain of the assets
and the assumption of all the deposits and certain other liabilities of United
Savings Association of Texas ("Old USAT"), an insolvent thrift (the
"Acquisition"), and the related Assistance Agreement (as defined below), the
Company succeeded to and recorded substantial net operating loss carryforwards
("NOLs") which have resulted in certain tax benefits. As of March 31, 1996, the
Company had NOLs of $808.0 million available to reduce taxable income in future
years. Pursuant to the Tax Benefits Agreement (as defined below), the Bank is
required to pay to the FSLIC Resolution Fund ("FRF") a specified portion of net
tax benefits obtained through the taxable year ending nearest to September 30,
2003. See "Regulation -- Taxation -- FSLIC Assistance".

The Common Stock Offering is structured with the intent to preserve the
beneficial tax attributes of the Company as described above. See "Regulation --
Taxation". Accordingly, certain of the Selling Stockholders and other holders of
the Common Stock have agreed to limit their further disposition of Common Stock
for up to three years following the Common Stock Offering except with the
approval of the Board of Directors of the Company (the "Company Board"). See
"Description of Capital Stock -- Common Stock". The limitations on transfers
will allow the Company to record a $101.7 million tax benefit in the quarter
ended June 30, 1996. See "Risk Factors -- Limitations on Use of Tax Losses;
Restrictions on Transfers of Stock" and Note 21 to the Consolidated Financial
Statements. Pro forma for the $100 million dividend, the related contractually
required payment to the FDIC of $5.9 million, the Restructuring and the
recognition of the $101.7 million tax benefit, stockholders' equity would have
been $520.0 million as of March 31, 1996. See "Capitalization".

CLAIMS RELATED TO FORBEARANCE AGREEMENT In connection with the original
acquisition of the Bank by the Company, the Federal Home Loan Bank (the "FHLB")
approved a forbearance letter, issued on February 15, 1989 (the "Forbearance
Agreement"). Under the terms of the Forbearance Agreement, the FSLIC agreed to
waive or forbear from the enforcement of certain regulatory provisions with
respect to regulatory capital requirements, liquidity requirements, accounting
requirements and other matters. After the enactment of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), the OTS
took the position that the capital standards set forth in FIRREA apply to all
savings institutions, including those institutions that had been operating under
previously granted capital and accounting forbearances, and that FIRREA
eliminated these forbearances. On July 25, 1995, the Bank, the Company, and
certain of their then-direct and indirect parent entities filed suit against the
United States in the Court of Federal Claims for alleged failures of the United
States to honor certain contractual obligations, including obligations related
to the Forbearance Agreement. The lawsuit is in a preliminary stage. Discovery
has been stayed pending the United States Supreme Court's review of UNITED
STATES V. WINSTAR CORP., an action by another thrift raising similar issues. The
Company is unable to predict the outcome of its suit against the United States
and the amount of judgment for damages, if any, that may be entered in favor of
the Company. Consequently, no assurances can be given as to the results of this
suit. See "Legal Proceedings".

SUMMARY CONSOLIDATED FINANCIAL DATA

The following table presents summary selected historical financial data of
the Company. The information set forth below should be read in conjunction with
the consolidated financial statements of the Company and the Notes thereto set
forth elsewhere herein (the "Consolidated Financial Statements") and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". The statement of operations data set forth below for each of the
three years ended September 30, 1995, 1994 and 1993 and the statement of
financial condition data at September 30, 1995 and 1994 are derived from, and
are qualified by reference to, the audited Consolidated Financial Statements.
The statement of operations data set forth below for each of the two years ended
September 30, 1992 and 1991 and the statement of financial condition data at
September 30, 1993, 1992 and 1991 are derived from the Company's audited
consolidated financial statements. Information at or for the six months ended
March 31, 1996 and 1995 is not audited, but, in the opinion of Management,
includes all adjustments (which include only normal recurring adjustments)
necessary for a fair presentation of operations and financial condition for
those periods. Results of operations for the six months ended March 31, 1996 are
not necessarily indicative of the results that may be expected for the entire
fiscal year.

<TABLE>
<CAPTION>
At or For the
Six Months Ended
March 31, At or For the Years Ended September 30,
---------------------------- ---------------------------------------------------------------------
1996 1995 1995 1994 1993 1992(1) 1991(1)
------------- ------------- ------------- ------------ ------------ ------------ ------------
(in thousands, except per share data and ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
FINANCIAL
CONDITION DATA:(2)
Total assets........ $ 11,266,636 $ 10,144,777 $ 11,983,534 $ 8,910,161 $ 8,440,556 $ 6,255,283 $ 6,876,847
Loans............... 7,878,080 6,161,432 8,260,240 5,046,174 4,862,379 4,101,716 3,431,154
Mortgage-backed
securities........ 1,954,070 2,600,876 2,398,263 2,828,903 2,175,925 833,425 419,064
Deposits............ 4,963,321 5,015,713 5,182,220 4,764,204 4,839,388 4,910,760 6,054,474
FHLB advances....... 4,139,023 3,284,373 4,383,895 2,620,329 2,185,445 632,345 287,345
Securities sold
under agreements
to repurchase..... 949,936 839,939 1,172,533 553,000 310,000 -- --
Minority
interest -- Bank
Preferred
Stock(3).......... 185,500 85,500 185,500 85,500 85,500 -- --
Total stockholders'
equity............ 526,441 476,693 496,103 451,362 389,203 232,373 161,760
Book value per
common share(4)... $ 18.24 $ 16.52 $ 17.19 $ 15.64 $ 13.48 $ 8.19 $ 6.87
STATEMENT OF
OPERATIONS
DATA:(2)
Interest income..... $ 421,221 $ 327,586 $ 746,759 $ 494,706 $ 482,490 $ 502,854 $ 422,184
Interest expense.... 309,289 239,960 552,760 320,924 300,831 348,291 330,659
------------- ------------- ------------- ------------ ------------ ------------ ------------
Net interest
income............ 111,932 87,626 193,999 173,782 181,659 154,563 91,525
Provision for credit
losses.............. 5,850 4,157 24,293 6,997 4,083 21,133 4,122
------------- ------------- ------------- ------------ ------------ ------------ ------------

At or For the
Six Months Ended
March 31, At or For the Years Ended September 30,
---------------------------- ---------------------------------------------------------------------
1996 1995 1995 1994 1993 1992(1) 1991(1)
------------- ------------- ------------- ------------ ------------ ------------ ------------

(in thousands, except per share data and ratios)

Net interest
income after
provision for
credit losses.. 106,082 83,469 169,706 166,785 177,576 133,430 87,403
Non-interest
income.............. 54,609 66,653 114,981 118,889 146,691 103,790 44,930
Non-interest
expense........... 99,304 101,645 194,576 199,593 201,964 180,415 113,627
------------- ------------- ------------- ------------ ------------ ------------ ------------
Income before
income taxes,
minority
interest and
extraordinary
loss........... 61,387 48,477 90,111 86,081 122,303 56,805 18,706
Income tax expense
(benefit)......... 25,278 20,186 37,415 (31,899) (26,153) 200 (409)
Less minority
interest(3)(5)...... 9,350 4,632 10,977 9,010 6,537 -- --
Extraordinary
loss(6)............. -- -- -- -- 14,549 -- --
------------- ------------- ------------- ------------ ------------ ------------ ------------
Net income........ $ 26,759 $ 23,659 $ 41,719 $ 108,970 $ 127,370 $ 56,605 $ 19,115
============= ============= ============= ============ ============ ============ ============
Operating
earnings(7)....... $ 55,039 $ 48,849 $ 91,295 $ 75,514 $ 77,105 $ 50,024 $ 16,510
Earnings per common
share(4).......... $ 0.87 $ 0.76 $ 1.35 $ 3.55 $ 4.11 $ 1.85 $ 0.71
CERTAIN RATIOS AND
OTHER DATA:(2)(8)
Return on average
assets............ 0.46% 0.50% 0.40% 1.32% 1.74% 0.89% 0.42%
Return on average
common equity..... 10.45 10.23 8.77 26.32 44.87 28.18 13.95
Stockholders' equity
to assets......... 4.67 4.70 4.14 5.07 4.61 3.71 2.35
Tangible
stockholders'
equity to tangible
assets............ 4.48 4.40 3.93 4.68 4.14 2.58 1.10
Net yield on
interest-earning
assets............ 2.00 1.92 1.92 2.20 2.61 2.60 2.16
Non-interest expense
to average total
assets............ 1.72 2.13 1.86 2.41 2.76 2.85 2.50
Efficiency
ratio(9).......... 60.16 62.45 59.50 66.38 65.11 63.98 75.14

(in thousands, except per share data and ratios)

Allowance for credit
losses to net
nonaccrual
loans............. 38.00 31.43 48.74 30.73 71.71 74.04 30.00
Allowance for credit
losses to total
loans............. 0.46 0.40 0.44 0.46 0.61 0.68 0.29
Net loan charge-offs
to average
loans............. 0.15 0.09 0.16 0.30 0.05 0.07 0.04
Nonperforming assets
to total assets... 1.10 1.04 0.84 1.09 0.72 0.89 0.59
REGULATORY CAPITAL
RATIOS OF THE
BANK:(2)(10)
Tangible
Capital........... 6.88% 5.65% 6.20% 6.01% 6.17% 4.24% 2.64%
Core Capital...... 6.96 5.77 6.29 6.17 6.43 5.04 3.59
Total Risk-Based
Capital........... 14.20 12.43 13.45 14.02 14.87 12.19 9.37
OTHER DATA:
NUMBER OF COMMUNITY
BANKING GROUP
BRANCHES(1)....... 67 64 65 62 62 65 74
NUMBER OF COMMERCIAL
BANKING GROUP
ORIGINATION
OFFICES........... 9 8 9 5 3 2 1
NUMBER OF MORTGAGE
BANKING GROUP
ORIGINATION
OFFICES........... 112 131 122 145 109 93 72
MORTGAGE BANKING
GROUP SERVICING
PORTFOLIO......... $ 11,594,485 $ 12,031,533 $ 12,532,472 $ 8,920,760 $ 8,073,226 $ 7,187,000 $ 4,681,712
MORTGAGE BANKING
GROUP
ORIGINATIONS...... 2,021,127 1,553,255 3,447,250 5,484,111 6,737,762 6,118,363 3,195,873

(in thousands, except per share data and ratios)

FINANCIAL MARKETS
GROUP LOANS
PURCHASED......... 80,948 769,995 2,640,755 1,312,827 1,202,970 912,847 1,885,956
</TABLE>

- ------------

(1) The Bank acquired from the Resolution Trust Company ("RTC") $2.2 billion in
deposit liabilities during fiscal 1991. Pursuant to the Bank's plan of
acquisition, rates on these deposits were reduced after acquisition and, as
expected, approximately $766 million of deposits were withdrawn from the
Bank during fiscal 1992. Also, the Bank consolidated overlapping branch
locations that resulted from these acquisitions. See "The Company --
History".

(2) See Note 21 to the Consolidated Financial Statements for a discussion of
subsequent events and see "Capitalization". On a pro forma basis,
stockholders' equity would have been $520.0 million as of March 31, 1996.

(3) During fiscal 1993, the Bank issued its 10.12% Noncumulative Preferred
Stock, Series A, and, during fiscal 1995, the Bank issued its 9.60%
Noncumulative Preferred Stock, Series B (the Preferred Stock, Series A and
Series B, is collectively referred to as the "Bank Preferred Stock"). None
of the shares of Bank Preferred Stock are owned by the Company. Certain
Selling Stockholders and directors and managers of the Company own shares
of the Bank Preferred Stock. See "Management -- Security Ownership of
Certain Beneficial Owners and Management -- Principal Stockholders, Bank
Preferred Stock".

(4) Per share results have been restated to reflect an 1,800 to one stock
conversion effective June 1996 in connection with the Restructuring. See
Note 21 to the Consolidated Financial Statements.

(5) All of the outstanding shares of common stock, par value $0.01, of the Bank
(the "Bank Common Stock") are currently owned by the Company. The Bank has
issued to the FDIC warrants (the "Warrants") to acquire 158,823 shares of
Bank Common Stock (representing 5.56% of the Bank Common Stock as of March
31, 1996 and September 30, 1995, assuming exercise of the Warrants), for an
exercise price of $0.01 per share. See "Business -- The Assistance
Agreement -- Warrant Agreement" and Note 16 to the Consolidated Financial
Statements.

(6) Reflects costs and charges associated with the issuance of the Senior
Notes. See Note 11 to the Consolidated Financial Statements.

(7) Operating earnings represents income before taxes, minority interest, and
extraordinary loss and excludes net gains (losses) on securities, MBS, and
other loans.

(8) Ratio, yield, and rate information are based on weighted average daily
balances for the six months ended March 31, 1996 and 1995 and fiscal 1995,
1994, and 1993 and average monthly balances for prior periods, with the
exception of return on average common equity which is based on average
monthly balances for all periods presented. Interim rates and yields are
annualized.

(9) Efficiency ratio represents non-interest expenses (excluding goodwill
amortization) divided by net interest income plus non-interest income,
excluding net gains (losses) on securities, MBS, and other loans.

(10) See Note 21 to the Consolidated Financial Statements for a discussion of
subsequent events. On a pro forma basis, the regulatory ratios for tangible
capital, core capital and total risk-based capital would have been 5.89%,
5.97% and 12.12%, respectively, as of March 31, 1996.

RISK FACTORS

INVESTMENT IN THE SENIOR NOTES INVOLVES CERTAIN RISKS. PROSPECTIVE
PURCHASERS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, IN ADDITION TO
THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS, WHEN EVALUATING THE COMPANY
AND ITS BUSINESS IN MAKING AN INVESTMENT DECISION.

SOURCE OF PAYMENT

As a holding company without significant assets other than the Bank Common
Stock, the Company's ability to pay dividends on the Common Stock and to meet
its other cash obligations, including debt service on the Senior Notes and its
other debt obligations, is dependent upon the receipt of dividends from the Bank
on the Bank Common Stock. The declaration of dividends by the Bank on all
classes of its capital stock is subject to the discretion of the Board of
Directors of the Bank, the terms of the Bank Preferred Stock, applicable
regulatory requirements and compliance with the covenants of the Senior Notes.

The Bank currently has outstanding 7,420,000 shares of the Bank Preferred
Stock, stated value $25 per share or $185.5 million in the aggregate. Total
aggregate annual dividend requirements on the Bank Preferred Stock are $18.25
million. While the Bank Preferred Stock is noncumulative, dividends may not be
paid on the Bank Common Stock if full dividends on the Bank Preferred Stock have
not been paid for the four most recent quarterly dividend periods (or for such
lesser time as the Bank Preferred Stock may have been outstanding). The Bank is
currently in compliance with this requirement. The ability of the Bank to make
timely payment of dividends to the Company in an amount sufficient to service
payments on the Senior Notes is contingent on the Bank having sufficient
dividend capacity under applicable regulatory guidelines to pay both the amount
of such dividends to the Company (plus any dividends (or payments in lieu
thereof) as may be required with respect to the Warrants), plus full dividends
on the Bank Preferred Stock. If for any reason the Bank failed to declare and
pay full dividends on the Bank Preferred Stock, the Company would not receive
any cash dividends from the Bank, from which the Company could pay debt service
on the Senior Notes, until four full quarterly dividends on the Bank Preferred
Stock had been paid. Unless an alternative source of funding for the Company
were secured, as to which there can be no assurance and for which no
arrangements have been made, this would likely result in a default by the
Company in payment on the Senior Notes. Failure to pay full dividends on the
Bank Preferred Stock is an Event of Default under the Indenture relating to the
Senior Notes. See "Description of the Senior Notes -- Events of Default".

While it is the present intention of the Board of Directors of the Bank to
declare dividends in an amount sufficient to provide the Company with the cash
flow necessary to meet its debt service obligations in respect of the Senior
Notes and to pay dividends to the holders of Common Stock, subject to applicable
regulatory restrictions, no assurance can be given that future circumstances
might not exist which would limit or preclude the declaration of such dividends.
After giving effect to a dividend paid, a tax benefit recorded and other
subsequent events which occurred during the third quarter of fiscal 1996, pro
forma as of March 31, 1996, the Bank would be permitted to pay $159.6 million of
dividends on its capital stock without prior approval of the OTS, and the
Company would be able to pay $62.7 million of dividends on its Common Stock
under the covenants of the Senior Notes. See "Regulation -- Safety and Soundness
Regulations -- Capital Requirements -- Capital Distributions", "Dividend
Policy", "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Capital Resources and Liquidity" and Notes 11, 15, 16
and 21 to the Consolidated Financial Statements.

GENERAL BUSINESS RISKS

The Company's business is subject to various material business risks. For
example, changes in prevailing interest rates can have significant effects on
the Company's business. Some of the risks to which the Company's business is
subject may become more acute in periods of economic slowdown or recession.
During such periods, payment delinquencies and foreclosures generally increase
and could result in an increased incidence of claims and legal actions against
the Company. In addition, such conditions could lead to a potential decline in
demand for the Company's products and services.

EVOLUTION OF BUSINESS

The Company's strategy in recent years has been to emphasize and grow its
Community Banking Group and Commercial Banking Group and to reduce the
significance over time of its residential mortgage lending business. See
"Business -- Business Strategy". The Community Banking Group and Commercial
Banking Group are expected to continue to represent a growing portion of the
Company's business. This strategic shift has occurred at a time of increasing
competitive pressures in the mortgage banking business. Community and commercial
banking activities, while potentially more profitable, generally entail a
greater degree of credit risk than does single family lending, the historical
focus of the Company.

In furtherance of the increasing emphasis on its community and commercial
banking businesses, the Company is in the process of evaluating its strategic
alternatives with respect to its mortgage banking business, including a sale or
restructuring of all or part of its mortgage origination business. No assurances
can be given regarding the timing or impact of any such sale or restructuring on
the Company's residential mortgage lending business.

Consistent with the Company's current business strategy, the Bank has
applied to establish a national bank subsidiary. If the Bank were to establish a
national bank subsidiary, the Company would become subject to regulation as a
bank holding company by the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"). Current rules and regulations of the Federal
Reserve Board would subject the Company to capital requirements that are not
currently applicable to the Company as a savings and loan holding company, and
would impose statutory limitations on the type of business activities in which
the Company may engage at the holding company level, which activities currently
are not restricted.

INTEREST RATE RISK

The Company's net interest income is the differential or "spread" between
the interest earned on loans and investments and the interest paid on deposits,
borrowings and notes payable. The Company has traditionally managed its business
to limit its overall exposure to changes in interest rates; however, under the
Company Board's current policies, management has more latitude to increase the
Company's interest rate sensitivity position within certain limits. See
"Business -- Business Strategy" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations". As a result, changes in market
interest rates may have a greater impact on the Company's financial performance
in the future than they have had historically.

An increase in the general level of interest rates may affect the Company's
net interest spread due to the periodic caps which limit the interest rate
change on the Company's MBS and loans that pay interest at adjustable rates.
Additionally, an increase in interest rates may, among other things, reduce the
demand for loans and the Company's ability to originate loans. A decrease in the
general level of interest rates may affect the Company through, among other
things, increased prepayments on its loan and servicing portfolios and increased
competition for deposits. Accordingly, changes in the level of market interest
rates affect the Company's net interest spread, loan origination volume, loan
and servicing portfolios, and the overall results of the Company.

COMPETITION

The Company experiences substantial competition both in attracting and
retaining deposits and in making loans. Its most direct competition for deposits
historically has come from other thrift institutions, commercial banks and
credit unions doing business in the Houston and Dallas/Fort Worth metropolitan
areas. In addition, as with all banking organizations, the Company has
experienced increasing competition from nonbanking sources. For example, the
Company also competes for funds with full service and discount broker-dealers
and with other investment alternatives, such as mutual funds and corporate and
governmental debt securities. The Company's competition for loans comes
principally from other thrift institutions, commercial banks, mortgage banking
companies, consumer finance companies, insurance companies and other
institutional lenders. A number of institutions with which the Company competes
for deposits and loans have significantly greater assets and capital than the
Company.

FUNDING AND LIQUIDITY

In recent years, the Company has relied primarily on collateralized
borrowings (borrowings from FHLB of Dallas ("FHLB Dallas") and borrowings on
securities sold under agreement to repurchase ("reverse repurchase agreement"))
to fund its asset growth. At March 31, 1996, such borrowings funded 45% of the
Company's assets. The Company's collateralized borrowings have an average
maturity of approximately six months.

The Company borrows funds from the FHLB Dallas under a security and pledge
agreement that restricts the amount of such borrowings to 65% of fully disbursed
single family loans, unless assets are physically pledged to the FHLB Dallas,
not to exceed 45% of total assets in any event. At March 31, 1996, the amounts
available under these restrictions were $4.7 billion and $5.1 billion,
respectively. The Company had $4.1 billion of outstanding advances at March 31,
1996.

The Company's ability to borrow on reverse repurchase agreements is limited
to the amount and market value of collateral that is available to collateralize
through reverse repurchase agreements. At March 31, 1996, the Company had $1.2
billion in such collateral, $995 million of which was collateralizing such
reverse repurchase agreements. See " -- Interest Rate Risk". There can be no
assurance that the Company will continue to be able to arrange collateralized
borrowings or other borrowing arrangements to fund continued growth in its
assets.

CONCENTRATION OF LOAN PORTFOLIO

The Company's current single family mortgage loan portfolio is concentrated
in certain geographical regions, particularly California. The performance of
such loans may be affected by changes in local economic and business conditions.
The California economy since the early 1990s has experienced an economic
recession, although the economy has recently shown signs of improvement.
Unfavorable or worsened economic conditions in California could have a material
adverse effect on the Company's financial condition and results of operations.

ACTIVE PURCHASER OF LOAN PORTFOLIOS

The Company has been an active purchaser and securitizer of residential
mortgage loans originated by other financial institutions. See "Business --
Financial Markets Group". While the Company intends to continue to pursue this
strategy on a selective basis, no assurance can be given as to the continued
availability of portfolio acquisition opportunities or the Company's ability to
obtain such portfolios on favorable terms.

When purchased by the Company, loan portfolios generally do not contain
delinquent or defaulted loans and may contain loans that have been outstanding
for a relatively short period of time. Consequently, the delinquency and loss
experience of the Company's loan portfolios to date are not necessarily
indicative of future results.

LIMITATIONS ON USE OF TAX LOSSES; RESTRICTIONS ON TRANSFERS OF STOCK

As of March 31, 1996, the Company had NOLs of $808.0 million available to
reduce taxable income in future years. Such tax deductions would be subject to
significant limitation under Section 382 of the Internal Revenue Code of 1986,
as amended (the "Code") if the Company undergoes an ownership change (as defined
below, an "Ownership Change"). In the event of an Ownership Change, Section 382
of the Code imposes an annual limitation on the amount of taxable income a
corporation may offset with NOLs and certain recognized built-in losses. The
limitation imposed by Section 382 of the Code for any post-change year would be
determined by multiplying the value of the Company's stock (including both
Common Stock and preferred stock) at the time of the Ownership Change by the
applicable long-term tax exempt rate (which was 5.78% for June 1996). Any unused
annual limitation may be carried over to later years, and the limitation may
under certain circumstances be increased by the built-in gains in assets held by
the Company at the time of the change that are recognized in the five-year
period after the change. Under current conditions, if an Ownership Change were
to occur, the Company's annual NOL utilization would be limited to a minimum of
approximately $31.8 million.

The Company would undergo an Ownership Change if, among other things, the
stockholders who own or have owned, directly or indirectly, 5% or more of the
Common Stock or are otherwise treated as 5% stockholders or a "higher tier
entity" under Section 382 of the Code and the regulations promulgated thereunder
("5% Stockholders"), increase their aggregate percentage ownership of such stock
by more than 50 percentage points

over the lowest percentage of such stock owned by such stockholders at any time
during the Testing Period (generally the preceding three years). In applying
Section 382 of the Code, at least a portion of the stock sold pursuant to the
Common Stock Offering would be considered to be acquired by a new 5% stockholder
even if no person acquiring the stock in fact owns as much as 5% of the
Company's stock. While the application of Section 382 of the Code is highly
complex and uncertain in some respects, the Common Stock Offering as
contemplated is not expected to cause an Ownership Change. In addition, events
could occur prior to or after the Common Stock Offering that are beyond the
control of the Company which could result in an Ownership Change. See
"Regulation -- Taxation -- Net Operating Loss Limitations".

In an effort to protect against a future Ownership Change that is not
initiated by the Company, the Certificate and By-Laws limit Transfers, subject
to certain exceptions, at any time during the three years following the Common
Stock Offering, of shares of Common Stock that would either cause a person or
entity to become a 5% Stockholder or increase a 5% Stockholder's percentage
ownership interest. "Transfers" are defined to include any sale, transfer,
assignment, conveyance, pledge, short sale, hypothecation or other disposition
or the issuance of any option to sell, transfer, assign, convey, pledge or
otherwise dispose. While such Transfers are deemed prohibited by the Certificate
and the Company is authorized not to recognize any transferee of such a Transfer
as a stockholder to the extent of such Transfer, these restrictions are
incomplete since the Company cannot, consistent with NASDAQ requirements,
prevent the settlement of transactions through NASDAQ, and because the
prohibition on Transfers by 5% Stockholders does not limit transactions in the
securities of such 5% Stockholders that could give rise to ownership shifts
within the meaning of the applicable Section 382 rules. Moreover, the Company
Board retains the discretion to waive these limitations or to take certain other
actions that could trigger an Ownership Change, including through the issuance
of additional shares of Common Stock in subsequent public or private offerings
or through subsequent merger or acquisition transactions.

Because the Company will have utilized a substantial portion of its
available ownership limitation in connection with the Common Stock Offering, the
Company may not be able to engage in significant transactions that would create
a further shift in ownership within the meaning of Section 382 of the Code
within the following three-year period without triggering an Ownership Change.
There can be no assurance that future actions on the part of the Company's
stockholders or the Company itself will not result in the occurrence of an
Ownership Change. See "Regulation -- Taxation -- Net Operating Loss
Limitations".

REGULATION

Both the Company, as a savings and loan holding company, and the Bank, as a
federal stock savings bank, are subject to significant regulation. Statutes and
regulations now affecting the Company and the Bank, respectively, may be changed
at any time, and the interpretation of these statutes and regulations by
examining authorities is also subject to change. There can be no assurance that
future changes in the regulations or in their interpretation will not adversely
affect the business of the Company. As a savings and loan holding company, the
Company is subject to regulation and examination by the OTS. As a federal
savings bank, the Bank is subject to examination from time to time by the OTS,
its primary regulator, and the FDIC, as administrator of the Bank Insurance Fund
(the "BIF") and the SAIF. There can be no assurance that the OTS or the FDIC
will not, as a result of such examinations or otherwise, impose various
requirements or regulatory sanctions upon the Bank or the Company respectively.
See "Regulation". As indicated above under " -- Evolution of Business", the Bank
has applied to establish a national bank subsidiary, which, if established,
would subject such subsidiary, the Bank and the Company to significant
additional regulation under various federal bank statutes.

RECAPITALIZATION OF THE SAIF AND ITS IMPACT ON SAIF PREMIUMS; OTHER LEGISLATIVE
PROPOSALS

Deposits of the Bank are currently insured by the SAIF, which is
administered by the FDIC. Both the SAIF and the BIF, the deposit insurance fund
that covers most commercial bank deposits, are statutorily required to achieve
and maintain a reserve ratio equal to 1.25% of estimated insured deposits. As a
result of the BIF reaching the 1.25% level, on August 16, 1995, the FDIC lowered
the deposit insurance premium assessment rate for BIF members to between 0.04%
and 0.31% of insured deposits, while retaining the existing assessment rate of
0.23% to 0.31% of insured deposits for members of the SAIF. On November 14,
1995, the FDIC further reduced

insurance premiums on BIF deposits by 0.04% of insured deposits, creating an
assessment range of 0% to 0.27% of insured deposits, subject to a statutory
requirement that all institutions pay at least $2,000 annually. Approximately
92% of BIF members qualify for the lowest assessment rate. As a result of the
significant disparity in the deposit insurance premiums paid by
"well-capitalized" SAIF members, such as the Bank, and well-capitalized BIF
members, SAIF members are at a competitive disadvantage to BIF members with
respect to the pricing of loans and deposits and the ability to achieve lower
operating costs.

Measures to mitigate the effect of the BIF/SAIF premium disparity are being
considered by the Congress. These proposals feature a one-time assessment (which
reports estimate from 0.75% of deposits to 0.90% of deposits) on SAIF-insured
institutions with the aim of fully recapitalizing the SAIF. Such an assessment
could result in an amount payable by the Bank, net of tax, of as much as $23.7
million to $28.5 million. See "Regulation". At this time, no assurance can be
given as to whether any BIF/SAIF legislative alternatives will become law.

Members of Congress have expressed their intention to consider legislation
in 1996 that generally would require federal savings associations, such as the
Bank, to convert to a national bank charter (or a state charter), and
legislation has been proposed in Congress that envisions such action as part of
a BIF/SAIF recapitalization package. It is uncertain to what extent, if at all,
the existing branch and investment powers of federal savings associations, such
as the Bank, that are impermissible for national banks would be grandfathered.
In addition, the proposals express the intent that savings and loan holding
companies such as the Company, convert to bank holding companies. It is also
uncertain to what extent, if at all, the existing powers of savings and loan
holding companies that are impermissible for bank holding companies, would be
grandfathered. None of the present activities of the Company would be
impermissible if the Company were to convert to a bank holding company or to
establish a national bank subsidiary. In addition, unless such legislation
provides grandfathering or other remedial provisions, a charter conversion could
result in recapture of deductions for bad debts previously taken by a thrift for
tax purposes. If this legislation requires the recapture of the pre-1988 tax bad
debt reserve, the Bank would be required to record an after-tax charge to
earnings of approximately $18 million. Other legislation, which has been passed
by each house of Congress, would require recapture of a thrift's post-1987 bad
debt reserve over a six taxable-year period with the opportunity to defer
recapture for up to two years if certain residential loan requirements are met.
There would be no financial statement impact from the recapture of the post-1987
tax bad debt reserves, because the Bank has already provided for this liability.
There can be no assurance as to the outcome of these various legislative
proposals, the effect of which could be material to the financial condition and
results of operations of the Company and the Bank.

FEDERAL PROGRAMS

The continuation of programs administered by the Federal National Mortgage
Association (the "FNMA"), the Federal Home Loan Mortgage Corporation (the
"FHLMC") and the Government National Mortgage Association (the "GNMA"), which
facilitate the issuance of MBS, as well as the Company's continued eligibility
to participate in such programs, enhances the Company's ability to generate
funds by sales of mortgage loans or MBS. A portion of the Company's business is
also dependent upon the continuation of various programs administered by the
Federal Housing Administration (the "FHA"), which insures mortgage loans, and
the Department of Veterans' Affairs (the "VA"), which partially guarantees
mortgage loans.

Any discontinuation of, or significant reduction in, the operation of such
programs would have a material adverse effect on the Company's mortgage banking
operations. The Company expects to remain eligible to participate in such
programs; however, any significant impairment of its eligibility could have a
material adverse impact on its operations. See "Business -- Mortgage Banking
Group".

ANTI-TAKEOVER PROVISIONS

The Certificate and the By-Laws, and applicable provisions of the Delaware
General Corporation Law (the "DGCL"), contain several provisions that may make
more difficult the acquisition of control of the Company without the approval of
the Company Board. Certain provisions of the Certificate and the By-Laws, among
other things, (i) authorize the issuance of additional shares of Common Stock
and shares of "blank check" Preferred Stock, (ii) classify the Company Board
into three classes, each of which (after an initial transition period) will

serve for staggered three year periods; (iii) provide that a director of the
Company may be removed by the stockholders only for cause; (iv) provide that
only the Company Board or the Chairman of the Board of the Company may call
special meetings of the stockholders; (v) provide that the stockholders may take
action only at a meeting of the stockholders or by unanimous written consent;
(vi) provide that stockholders must comply with certain advance notice
procedures in order to nominate candidates for election to the Company Board or
to place stockholders' proposals on the agenda for consideration at meetings of
the stockholders; and (vii) provide that the stockholders may amend or repeal
any of the foregoing provisions of the Certificate or the By-Laws only by a vote
of 80% of the stock entitled to vote generally in the election of directors (the
"Voting Stock"). With certain exceptions, Section 203 of the DGCL ("Section
203") imposes certain restrictions on mergers and other business combinations
between the Company and any holder of 15% or more of the Common Stock.

CONCENTRATION OF OWNERSHIP

Prior to June 18, 1996, the Company was indirectly owned by Hyperion
Partners, the general partner of which is indirectly controlled by three
individuals, including Lewis S. Ranieri, who served as Chairman of the Board,
President and CEO of the Company and Chairman of the Board of the Bank. As a
result of the Restructuring the limited and general partners of Hyperion
Partners primarily hold the outstanding Common Stock. See "The Company -- Recent
Developments" and "Common Stock Offering: Selling Stockholders". While it is
anticipated that no single stockholder of the Company will own in excess of 10%
of the voting stock of the Company immediately following the Common Stock
Offering, the Selling Stockholders will continue to hold a significant ownership
interest in the Company, and certain Selling Stockholders have agreed to limit
their further disposition of Class A Common Stock. Following the consummation of
the Common Stock Offering, Lewis S. Ranieri will serve as non-executive Chairman
of the Board of the Company, and Barry C. Burkholder, who is currently President
and CEO of the Bank, will also become Chairman of the Board of the Bank as well
as the President and CEO of the Company. While the Company is contemplating
entering into a consulting agreement with Mr. Ranieri pursuant to which he will
serve as a consultant to the Company for a period of three years, he may devote
a substantial amount of time to other business ventures, including competitive
activities through Hyperion Partners II L.P. ("Hyperion Partners II") and its
affiliates.

RESTRICTIONS ON TRANSFER

The Rule 144A Notes were offered and sold in a private offering exempt from
registration pursuant to Section 4(2) of the Securities Act and Rule 144A and
Regulation D promulgated thereunder. As a result, the Rule 144A Notes may not be
reoffered or resold by purchasers except pursuant to an effective registration
statement under the Securities Act and applicable state securities laws, or
pursuant to applicable exemptions from such registration, and the Rule 144A
Notes are legended to restrict transfer as aforesaid. The Rule 144A Notes
generally may be transferable without such registration. Rule 144(k) under the
Securities Act provides that if three years have elapsed since restricted
securities were acquired from the issuer or from an affiliate of the issuer,
such securities may be resold without registration by a holder who is not an
affiliate of the issuer at the time of the sale and has not been an affiliate of
the issuer during the preceding three months. On May 15, 1996, three years had
elapsed since the initial sale by the Company of the Rule 144A Notes. See
"Purpose of the Exchange Offer".

Each holder (other than any holder who is an affiliate or promoter of the
Company) who duly exchanges Rule 144A Notes for Exchange Notes in the Exchange
Offer will receive Exchange Notes that are freely tradeable under the Securities
Act. Holders of Rule 144A Notes who participate in such Exchange Offer should be
aware, however, that, except in the case of certain broker-dealers as described
below, if they accept the Exchange Offer for the purpose of engaging in
secondary resales, the Exchange Notes may not be publicly reoffered or resold
without complying with the registration and prospectus delivery requirements of
the Securities Act. As a result, each holder of Rule 144A Notes (except certain
broker-dealers as described below) accepting the Exchange Offer will be deemed
to have represented, by its acceptance of the Exchange Offer that it acquired
the Exchange Notes in the ordinary course of its business and it is not engaged
in, and does not intend to engage in, a distribution of the Exchange Notes. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Rule 144A Notes, where such Rule 144A Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in

connection with any resale of such Exchange Notes. See "Plan of Distribution".
If existing Commission interpretations permitting free transferability of the
Exchange Notes following the Exchange Offer are changed prior to consummation of
the Exchange Offer, the Company will use its best efforts to register the Rule
144A Notes for resale under the Act. At December 31, 1995, the Rule 144A Notes
were held by 14 holders of record. See "The Exchange Offer", and "Description of
the Senior Notes -- Registration Covenant; Exchange Offer".

NO PRIOR MARKET

There is no pre-existing market for the Exchange Notes, and no assurance
can be given that any market for the Exchange Notes will develop, nor can any
assurance be given with respect to the price or prices at which such securities
may trade, if a market does develop. The Company has been advised by Goldman
Sachs that it intends to act as a market maker for the Exchange Notes in the
over-the-counter market; however, Goldman Sachs is under no obligation to do so,
and, if it does act as a market maker, it may elect to discontinue market making
activities at any time. A decision to terminate market making activities may
adversely affect the liquidity of, and the trading prices for, the Exchange
Notes. The Rule 144A Notes are designated for trading in NASD's PORTAL System.

LIABILITY UNDER REPRESENTATIONS AND WARRANTIES AND OTHER CREDIT RISKS

In the ordinary course of business, the Company has liability under
representations and warranties made to purchasers and insurers of mortgage loans
and to purchasers of MSRs. In connection with MSRs that the Company purchases,
it may have liability as a successor to third-party originators' representations
and warranties. Under certain circumstances, the Company may become liable for
the unpaid principal and interest on defaulted loans if there has been a breach
of representations or warranties. In the case of any mortgage loans found to be
defective with respect to representations or warranties made or succeeded to by
the Company, the Company may be required to repurchase such mortgage loans, with
any subsequent loss on resale or foreclosure being borne by the Company. The
Company's losses from breaches of representations and warranties have not been
material to date.

LITIGATION

The operations of financial institutions, such as the Company, are subject
to substantial statutory and regulatory compliance obligations. These
requirements are complex, and even inadvertent noncompliance could result in
liability. During the past several years, numerous individual claims and
purported consumer class action claims were commenced against a number of
financial institutions, their subsidiaries, and other mortgage lending
institutions, alleging violations of various statutory and regulatory provisions
relating to mortgage lending and servicing, including the Truth-in-Lending Act
(the "TILA"), the Real Estate Settlement Procedures Act (the "RESPA"), the Equal
Credit Opportunity Act (the "ECOA"), the Fair Housing Act (the "FH Act") and
various state laws. While the Company has had various claims asserted against it
under these statutes, management does not expect these claims to have a material
adverse effect on the Company's financial condition, results of operations, or
liquidity.

Maxxam, Inc. ("Maxxam") has filed a petition for review in a Federal
appeals court and a motion to intervene in Federal District Court, each
challenging the December 30, 1988 order of the FSLIC approving the Acquisition.
See "The Company -- History". Maxxam contends that it should have been selected
as the winning bidder. Management of the Company believes, after consultation
with legal counsel, that these claims are barred by applicable time limits, have
no basis under existing law, and will not have a material adverse effect on the
Bank's or the Company's financial condition, results of operations or liquidity.
See "Legal Proceedings".

THE COMPANY

GENERAL

The Company is a broad-based financial services provider to consumers and
businesses in Texas and other selected regional markets throughout the United
States. Through the Bank, its principal subsidiary, the Company operates 67
Texas-based community banking branches serving nearly 182,000 households and
businesses, 9 commercial banking offices and a nationwide network of mortgage
offices. At March 31, 1996, the Company had consolidated total assets of $11.3
billion, total deposits of $5.0 billion and total stockholders' equity of $526.4
million. Upon completion of the Common Stock Offering, the Company will be the
largest publicly traded depository institution headquartered in Texas, in terms
of both assets and deposits.

The Bank is a federally chartered savings bank, the deposits of which are
insured by the SAIF, which is administered by the FDIC. The Company has no
significant assets other than its equity interest in the Bank. In June 1996, the
Company changed its name to Bank United Corp. The Company's address is 50
Charles Lindbergh Blvd., Uniondale, NY 11553, and its phone number is (516)
745-6644.

HISTORY

The Company was incorporated in Delaware on December 19, 1988 as USAT
Holdings Inc. and became the holding company for the Bank upon the Bank's
formation on December 30, 1988. In the Acquisition, the Company initially
acquired from the FSLIC certain of the assets and assumed all the deposits and
certain other liabilities of Old USAT, an insolvent thrift. In connection with
the Acquisition, the Company entered into an agreement which, among other
things, provided for federal financial assistance to the Bank (the "Assistance
Agreement"). On December 23, 1993, the Company and the FDIC entered into an
agreement providing for the termination of the Assistance Agreement. See
"Business -- The Assistance Agreement".

Immediately after the Acquisition, the Bank operated 19 banking branches,
primarily in the greater Houston metropolitan area, with no significant loan
origination capabilities. Through both acquisitions and internal growth, the
Bank has substantially expanded its Texas community banking branch network,
built a nationwide mortgage banking business, and established itself as a
provider of a broad array of financial products, including commercial banking
services and products. In 1990, 1991, and 1992, the Bank entered into various
agreements with the RTC, whereby the Bank purchased certain assets and assumed
certain liabilities, primarily deposit liabilities, of six thrift institutions
in RTC receivership. In connection with these acquisitions, the Bank received
cash from the RTC. The amount of cash received from the RTC was based on the
amount by which the sum of the liabilities assumed exceeded the sum of the
market values of the assets purchased, less a purchase premium. In 1990, the
Bank consummated its agreement to purchase certain assets and assume certain
liabilities relating to the loan origination operations of Commonwealth Mortgage
of America, L.P. Since July 1992, and particularly in 1994, the Bank has entered
into agreements to purchase several mortgage origination networks.

RECENT DEVELOPMENTS

The Company was organized, and through June 17, 1996 operated, as a
subsidiary of Hyperion Holdings. During that period, all of the outstanding
shares of Hyperion Holdings were owned by Hyperion Partners. The general partner
of Hyperion Partners is indirectly controlled by three individuals, including
Lewis S. Ranieri, who, from December 1988, has served as Chairman of the Company
Board and, until June , 1996, also as President and CEO of the Company and
Chairman of the Board of the Bank.

DIVIDEND DISTRIBUTION AND RESTRUCTURING

During May 1996, the Company paid a dividend of $100 million on its Common
Stock to Hyperion Holdings and other holders of its Common Stock. The proceeds
of this dividend received by Hyperion Holdings were distributed by Hyperion
Partners to its limited and general partners in accordance with the limited
partnership agreement of Hyperion Partners. During June 1996, the Restructuring
was effected as follows: (i) Hyperion Holdings exchanged shares of a newly
created class of its nonvoting common stock for certain shares of its voting
common stock held by Hyperion Partners; (ii) Hyperion Partners then distributed
the Hyperion Holdings common stock to its limited and general partners in
accordance with the limited partnership agreement of Hyperion Partners; and
(iii) following the Distribution, Hyperion Holdings was merged with and into the

Company, with the result that holders of Hyperion Holdings voting and nonvoting
common stock received shares of Class A Common Stock and Class B Common Stock
and the holders of Class C Common Stock received shares of Class B Common Stock.
As part of the Restructuring, the common stock of Hyperion Holdings and the
Class C Common Stock were converted 1800 to one. See Note 21 to the Consolidated
Financial Statements for a discussion of subsequent events and see
"Capitalization". The Common Stock Offering is intended to establish a public
market value for the Class A Common Stock while providing the Selling
Stockholders with liquidity for their current holdings in the Company.

MANAGEMENT

Day-to-day operations of the Bank are directed by Barry C. Burkholder,
President and CEO of the Bank, who brings over 20 years of commercial banking
experience to the Bank, with specific experience in consumer banking, mortgage
banking and related areas. In connection with the Restructuring and the Common
Stock Offering, Mr. Burkholder will also become Chairman of the Board of the
Bank as well as President and CEO of the Company. The executive management group
of the Bank consists of seven individuals who have worked together for the past
six years, giving them a thorough understanding of the businesses they have
developed together. They average more than 20 years of related industry
experience, the majority of which comes from commercial banking. As a team, they
have brought the discipline and sophistication of commercial banking to the
Bank. The next level of senior management comprises 42 executives, a third of
whom were hired directly from commercial banks. The balance of the senior
management team has experience working with various financial services
companies, including mortgage banks, thrifts and accounting firms. See
"Management".

Lewis S. Ranieri, who has over 20 years of investment experience with
particular expertise in the field of MBS, has previously served as Chairman of
the Board of the Bank and of the Company, as well as President and CEO of the
Company, and will continue, after the Common Stock Offering, to serve as
non-executive Chairman of the Board of the Company. The Company is contemplating
entering into a consulting agreement with Mr. Ranieri pursuant to which he would
serve as a consultant to the Company for a three year period.

FUTURE TAX BENEFITS

In connection with the Acquisition and the Assistance Agreement, the
Company succeeded to and recorded substantial NOLs which have resulted in
certain tax benefits. As of March 31, 1996, the Company had NOLs of $808.0
million available to reduce taxable income in future years. Pursuant to the Tax
Benefits Agreement (as defined below), the Bank is required to pay to the FRF a
certain portion of net tax benefits obtained through the taxable year ending
nearest to September 30, 2003. See "Regulation -- Taxation -- FSLIC Assistance".

The Common Stock Offering is structured with the intent to preserve the
beneficial tax attributes of the Company as described below. See "Regulation --
Taxation". Accordingly, certain of the Selling Stockholders have agreed to limit
their further disposition of Common Stock for up to three years following the
Common Stock Offering except with approval of the Company Board. See "Common
Stock Offering: Selling Stockholders". The limitations on transfers will allow
the Company to record a $101.7 million tax benefit in the quarter ended June 30,
1996. See "Risk Factors -- Limitations on Use of Tax Losses; Restrictions on
Transfers of Stock" and Note 21 to the Consolidated Financial Statements.

OFFERING OF COMMON STOCK

The Company has recently filed a registration statement with the Commission
relating to the Common Stock Offering. See "Management -- Security Ownership of
Certain Beneficial Owners and Management" and "Common Stock Offering: Selling
Stockholders".

CLAIMS RELATED TO FORBEARANCE AGREEMENT

In connection with the Acquisition, the FHLB approved the Forbearance
Agreement. Under the terms of the Forbearance Agreement, the FSLIC agreed to
waive or forbear from the enforcement of certain regulatory provisions with
respect to regulatory capital requirements, liquidity requirements, accounting
requirements and other matters. Following enactment of FIRREA, the OTS took the
position that the capital standards set forth in FIRREA apply to all savings
institutions, including those institutions that had been operating under
previously granted capital and accounting forbearances, and that FIRREA
eliminated these forbearances. On July 25, 1995,

the Bank, the Company, and certain of their then-direct and indirect parent
entities filed suit against the United States in the Court of Federal Claims for
alleged failures of the United States to honor certain contractual obligations,
including obligations related to the Forbearance Agreement. The lawsuit is in a
preliminary stage. Discovery has been stayed pending the United States Supreme
Court's review of UNITED STATES V. WINSTAR CORP, an action by another thrift
raising similar issues. The Company is unable to predict the outcome of its suit
against the United States and the amount of judgment for damages, if any, that
may be entered in favor of the Company. Consequently, no assurances can be given
as to the results of this suit. See "Legal Proceedings".

PURPOSE OF THE EXCHANGE OFFER

The Company's purpose in engaging in the Exchange Offer is to satisfy the
condition pursuant to which the interest rate on the Rule 144A Notes will revert
to 8.05% per annum. Because the Company did not consummate the Exchange Offer by
October 14, 1993, the interest rate on the Rule 144A Notes increased to 8.55%
per annum. Because the Company did not consummate the Exchange Offer by February
11, 1994, the interest rate on the Rule 144A Notes increased to 9.05% per annum.
The interest rate on the Rule 144A Notes will revert to 8.05% per annum from and
including the date on which the Exchange Offer is consummated. See "Description
of the Notes". The terms of the Company's obligations with respect to the
Exchange Offer are set forth in the Exchange and Registration Rights attached as
Annex A. The Exchange Offer should provide holders of Rule 144A Notes with the
ability to effect, for federal income tax purposes, a tax-free exchange of such
Rule 144A Notes.

Based on interpretations by the staff of the Commission, the Exchange Offer
provides holders of Rule 144A Notes with Exchange Notes that will generally be
freely transferable by holders thereof (other than any holder who is an
"affiliate" or "promoter" of the Company within the meaning of Rule 405 under
the Securities Act), who may offer for resale, resell or otherwise transfer such
Exchange Notes without complying with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of each such holder's business and such holders have no
arrangement or understanding with any person to participate in a distribution of
the Exchange Notes. By tendering Rule 144A Notes and executing the Letter of
Transmittal, the holder thereof is deemed to represent and agree that it
acquired the Exchange Notes in the ordinary course of its business and that it
is not engaged in, and does not intend to engage in, a distribution of the
Exchange Notes. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Rule 144A Notes, where such Rule 144A Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See "Plan of Distribution".
The Company has not sought, and does not intend to seek a no-action letter from
the staff of the Commission with respect to the effects of the Exchange Offer.

The Rule 144A Notes also may generally be transferable. See "Risk
Factors -- Restrictions on Transfer".

THE EXCHANGE OFFER

TERMS OF THE OFFER

The Company hereby offers, upon the terms and conditions set forth herein
and in the related Letter of Transmittal, to exchange Exchange Notes for a like
principal amount of outstanding Rule 144A Notes. An aggregate of $115 million
principal amount of Rule 144A Notes are outstanding. The Exchange Offer is not
conditioned upon any minimum principal amount of Rule 144A Notes being tendered.

The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1996, unless extended. The term "Expiration Date" means
5:00 p.m., New York City time, on , 1996, unless the Company, in its sole
discretion, notifies the Exchange Agent that the period of the Exchange Offer
has been extended, in which case the term "Expiration Date" means the latest
time and date on which the Exchange Offer as so extended will expire. See "--
Expiration and Extension".

Holders of Rule 144A Notes who wish to exchange Rule 144A Notes for
Exchange Notes and who validly tender Rule 144A Notes to the Exchange Agent or
validly tender Rule 144A Notes by complying with the book-entry transfer
procedures described below and, in each case, who furnish the Letter of
Transmittal and any other

required documents to the Exchange Agent, will have Exchange Notes mailed to
them by the Exchange Agent, promptly after such tender is accepted by the
Company. Subject to the terms and conditions of the Exchange Offer, Rule 144A
Notes which have been validly tendered prior to the Expiration Date will be
accepted on or promptly after the Expiration Date. Subject to the applicable
rules of the Commission, the Company, however, reserves the right, prior to the
first acceptance of tendered Rule 144A Notes, to delay acceptance of tendered
Rule 144A Notes, or to terminate the Exchange Offer, subject to the provisions
of Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which requires that a tender offeror pay the consideration
offered or return the tendered securities promptly after the termination or
withdrawal of a tender offer.

In addition, the Company reserves the right to waive any condition or
otherwise amend the Exchange Offer in any respect consistent with the Indenture
prior to the acceptance of tendered Rule 144A Notes. If any amendment by the
Company of the Exchange Offer or waiver by the Company of any condition thereto
constitutes a material change in the information previously disclosed to the
holders of Rule 144A Notes, the Company will, in accordance with the applicable
rules of the Commission, disseminate promptly disclosure of such change in a
manner reasonably calculated to inform such holders of such change. If it is
necessary to permit an adequate dissemination of information regarding such
material change, the Company will extend the Exchange Offer to permit an
adequate time for holders of Rule 144A Notes to consider the additional
information.

CERTAIN EFFECTS OF THE EXCHANGE OFFER

Because the Exchange Offer is for any and all Rule 144A Notes, the number
of Rule 144A Notes tendered and exchanged in the Exchange Offer will reduce the
principal amount of Rule 144A Notes outstanding. As a result, the liquidity of
any remaining Rule 144A Notes may be substantially reduced. The Rule 144A Notes
are currently eligible for sale pursuant to Rule 144A through the NASD's PORTAL
System. See "Risk Factors -- Restrictions on Transfer".

EXPIRATION AND EXTENSION

The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1996, unless extended by the Company. The Exchange Offer may
be extended by oral or written notice from the Company to the Exchange Agent at
any time or from time to time, on or prior to the date then fixed for the
expiration of the Exchange Offer. Public announcement of any extension of the
Exchange Offer will be timely made by the Company, but, unless otherwise
required by law or regulation, the Company will not have any obligation to
communicate such public announcement other than by making a release to the Dow
Jones News Service.

CONDITIONS

Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company will not be required to cause the
issuance of Exchange Notes in respect of any validly tendered Rule 144A Notes
not accepted and, prior to the acceptance of tendered Rule 144A Notes, may
terminate the Exchange Offer (by oral or written notice to the Exchange Agent
and by timely public announcement communicated, unless otherwise required by
applicable law or regulation, by making a release to the Dow Jones News Service)
and, subject to compliance with the applicable rules of the Commission, delay
the acceptance of the tendered Rule 144A Notes, if any material change occurs
which is likely to affect the Exchange Offer, including, but not limited to, the
following:

(a) there shall be instituted or threatened any action or proceeding
before any court or governmental agency challenging the Exchange Offer or
otherwise directly or indirectly relating to the Exchange Offer;

(b) there shall occur any development in any pending action or
proceeding which, in the sole judgment of the Company, would or might
prohibit, restrict or delay consummation of the Exchange Offer;

(c) any statute, rule or regulation shall have been proposed or
enacted, or any action shall have been taken by any governmental authority
which, in the sole judgment of the Company, would or might prohibit,
restrict or delay consummation of the Exchange Offer;

(d) there exists, in the sole judgment of the Company, any actual or
threatened legal impediment (including a default or prospective default
under an agreement, indenture or other instrument or obligation to which
the Company is a party or by which it is bound) to the consummation of the
Exchange Offer; or

(e) prior to the consummation of the Exchange Offer, Commission
interpretations are changed such that the Exchange Notes which would be
received by holders in the Exchange Offer in exchange for Rule 144A Notes
would not be, upon receipt, transferable by each such holder (other than
affiliates or promoters of the Company) without restriction under the
Securities Act.

Subject to the obligations under the Indenture to use its best efforts to
consummate the Exchange Offer, the Company expressly reserves the right, at any
time prior to the acceptance of tendered Rule 144A Notes, to terminate the
Exchange Offer and not accept for exchange any Rule 144A Notes upon the
occurrence of any of the foregoing conditions. In addition, the Company may
amend the Exchange Offer at any time prior to the acceptance of tendered Rule
144A Notes if any of the conditions set forth above occur. Moreover, regardless
of whether any of the foregoing conditions has occurred, the Company reserves
the right to amend the Exchange Offer in any manner consistent with its
obligations under the Indenture prior to the acceptance of tendered Rule 144A
Notes, although it has no current intention to do so.

The foregoing conditions are for the sole benefit of the Company and may be
waived by the Company, in whole or in part, in its sole discretion. Any
determination made by the Company concerning an event, development or
circumstance described or referred to above will be final and binding on all
parties to the Exchange Offer.

If the event referred to in clause (e), above, shall occur, the Company
shall be under no continuing obligation under the Indenture to consummate the
Exchange Offer, but in lieu thereof will be obligated to file and use its best
efforts to secure and maintain the effectiveness under the Securities Act of a
"shelf" registration statement providing for the resale of Rule 144A Notes. See
"Description of the Senior Notes -- Registration Covenant; Exchange Offer" and
Annex A hereto.

HOW TO TENDER

A holder of Rule 144A Notes may tender Rule 144A Notes by (a) properly
completing and signing the Letter of Transmittal or a facsimile thereof (all
references in this Prospectus to the Letter of Transmittal shall be deemed to
include a facsimile thereof) and delivering the same, together with the Rule
144A Notes being tendered (or a confirmation of an appropriate book-entry
transfer), to the Exchange Agent on or prior to the Expiration Date, or (b)
requesting a broker, dealer, bank, trust company or other nominee to effect the
transaction for such holder prior to the Expiration Date.

If Exchange Notes are to be delivered to an address other than that of the
registered holder appearing on the Note Register, the signature on the Letter of
Transmittal must be guaranteed by a commercial bank or trust company having an
office or correspondent in the United States, or by a member firm of a national
securities exchange or the National Association of Securities Dealers, Inc. (any
of the foregoing is hereinafter referred to as an "Eligible Institution").
Exchange Notes will not be issued in the name of a person other than that of the
registered holder of the Rule 144A Notes appearing on the Note Register.

The Exchange Agent will establish an account with respect to the Rule 144A
Notes at DTC within two business days after the date of this Prospectus, and any
financial institution which is a participant in DTC may make book-entry delivery
of the Rule 144A Notes by causing DTC to transfer such Rule 144A Notes into the
Exchange Agent's account in accordance with DTC's procedure for such transfer.
Although delivery of Rule 144A Notes may be effected through book-entry transfer
into the Exchange Agent's account at DTC, the Letter of Transmittal, with any
required signature guarantees and any other required documents, must in any case
be transmitted to and received by the Exchange Agent on or prior to the
Expiration Date at one of its addresses set forth under " -- Exchange Agent", or
the guaranteed delivery procedure described below must be complied with.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
All references in this Prospectus to deposit or delivery of Rule 144A Notes
shall be deemed to include DTC's book-entry delivery method.

THE METHOD OF DELIVERY OF RULE 144A NOTES AND ALL OTHER DOCUMENTS,
INCLUDING DELIVERY THROUGH DTC, IS AT THE ELECTION AND RISK OF THE HOLDER. IF
SENT BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED,
BE USED, AND PROPER INSURANCE BE OBTAINED.

If a holder desires to tender Rule 144A Notes pursuant to the Exchange
Offer and such holder's Rule 144A Notes are not immediately available or time
will not permit all of the above documents to reach the Exchange Agent prior to
the Expiration Date, or such holder cannot complete the procedure of book-entry
transfer on a timely basis, such tender may be effected if the following
conditions are satisfied:

(a) such tenders are made by or through an Eligible Institution;

(b) a properly completed and duly executed Notice of Guaranteed
Delivery, in substantially the form provided by the Company, is received by
the Exchange Agent as provided below on or prior to the Expiration Date;
and

(c) the Rule 144A Notes, in proper form for transfer (or confirmation
of book-entry transfer of such Rule 144A Notes into the Exchange Agent's
account at DTC as described above), together with a properly completed and
duly executed Letter of Transmittal and all other documents required by the
Letter of Transmittal, are received by the Exchange Agent within five New
York Stock Exchange, Inc. trading days after the date of execution of such
Notice of Guaranteed Delivery.

The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or mail to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery.

A tender will be deemed to have been received as of the date when the
tendering holder's duly signed Letter of Transmittal accompanied by Rule 144A
Notes (or a timely confirmation received of a book-entry transfer of Rule 144A
Notes into the Exchange Agent's account at DTC) or a Notice of Guaranteed
Delivery from an Eligible Institution is received by the Exchange Agent.
Issuances of Exchange Notes in exchange for Rule 144A Notes tendered pursuant to
a Notice of Guaranteed Delivery by an Eligible Institution will be made only
against delivery of the Letter of Transmittal (and any other required documents)
and the tendered Rule 144A Notes (or a timely confirmation received of a
book-entry transfer of Rule 144A Notes into the Exchange Agent's account at DTC)
with the Exchange Agent.

Partial tenders of Rule 144A Notes may be made only if (i) the principal
amount tendered is equal to $1,000 or an integral multiple thereof; and (ii) the
remaining untendered portion of such Rule 144A Note is in a principal amount of
$250,000, or any integral multiple of $1,000 in excess of such amount. Holders
tendering less than the entire principal amount of any Rule 144A Note they hold
in accordance with the foregoing restrictions must appropriately indicate such
fact on the Letter of Transmittal accompanying the tendered Rule 144A Note.

With respect to tenders of Rule 144A Notes, the Company reserves full
discretion to determine whether the documentation is complete and generally to
determine all questions as to tenders, including the date of receipt of a
tender, the propriety of execution of any document, and other questions as to
the validity, form, eligibility or acceptability of any tender. The Company
reserves the right to reject any tender not in proper form or otherwise not
valid or the acceptance of exchange of which may, in the opinion of the
Company's counsel, be unlawful or to waive any irregularities or conditions, and
the Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions on the Letter of Transmittal) will be final. The
Company shall not be obligated to give notice of any defects or irregularities
in tenders and shall not incur any liability for failure to give any such
notice. The Exchange Agent may, but shall not be obligated to, give notice of
any irregularities or defects in tenders, and shall not incur any liability for
any failure to give any such notice. Rule 144A Notes shall not be deemed to have
been duly or validly tendered unless and until all defects and irregularities
have been cured or waived. All improperly tendered Rule 144A Notes, as well as
Rule 144A Notes in excess of the principal amount tendered for exchange, will be
returned (unless irregularities and defects are timely cured or waived), without
cost to the tendering holder (or, in the case of Rule 144A Notes delivered by
book-entry transfer within DTC, will be credited to the account maintained
within DTC by the participant in DTC which delivered such shares), promptly
after the Expiration Date.

TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL

The Letter of Transmittal contains, among other things, certain terms and
conditions, which are summarized below and are part of the Exchange Offer.

Tendering Rule 144A Notes and execution of the Letter of Transmittal are
deemed to constitute the representation and agreement that the tendering holder
of Rule 144A Notes acquired the Exchange Notes in the ordinary course of its
business and it is not engaged in, and does not intend to engage in, the
distribution of the Exchange Notes.

Rule 144A Notes tendered in exchange for Exchange Notes (or a timely
confirmation of a book-entry transfer of such Rule 144A Notes into the Exchange
Agent's account at DTC) must be received by the Exchange Agent, with the Letter
of Transmittal and any other required documents, by 5:00 p.m., New York City
time, on or prior to , 1996, unless extended, or within the time periods set
forth in "-- How to Tender" pursuant to a Notice of Guaranteed Delivery from an
Eligible Institution. The party tendering the Rule 144A Notes for exchange (the
"Holder") sells, assigns and transfers the Rule 144A Notes to the Exchange
Agent, as agent of the Company, and irrevocably constitutes and appoints the
Exchange Agent as the Holder's agent and attorney-in-fact to cause the Rule 144A
Notes to be transferred and exchanged. The Holder warrants that it has full
power and authority to tender, exchange, sell, assign, and transfer the Rule
144A Notes and to acquire the Exchange Notes issuable upon the exchange of such
tendered Rule 144A Notes, that the Exchange Agent, as agent of the Company, will
acquire good and unencumbered title to the tendered Rule 144A Notes, free and
clear of all liens, restrictions, charges and encumbrances, and that the Rule
144A Notes tendered for exchange are not subject to any adverse claims when
accepted by the Exchange Agent, as agent of the Company. The Holder also
warrants that it will, upon request, execute and deliver any additional
documents deemed by the Company or the Exchange Agent to be necessary or
desirable to complete the exchange, sale, assignment and transfer of the Rule
144A Notes. All authority conferred or agreed to be conferred in the Letter of
Transmittal by the Holder will survive the death or incapacity of the Holder and
any obligation of the Holder shall be binding upon the heirs, personal
representatives, successors and assigns of such Holder.

Signature(s) on the Letter of Transmittal will be required to be guaranteed
as set forth above in "-- How to Tender". All questions as to the validity,
form, eligibility (including time of receipt) and acceptability of any tender
will be determined by the Company, in its sole discretion, and such
determination will be final and binding. Unless waived by the Company,
irregularities and defects must be cured by the Expiration Date. The Company
will pay all security transfer taxes, if any, applicable to the transfer and
exchange of Rule 144A Notes tendered.

WITHDRAWAL RIGHTS

All tenders of Rule 144A Notes may be withdrawn at any time prior to
acceptance thereof on the Expiration Date. To be effective, a notice of
withdrawal must be timely received by the Exchange Agent at the address set
forth under "-- Exchange Agent". Any notice of withdrawal must specify the
person named in the Letter of Transmittal as having tendered the Rule 144A Notes
to be withdrawn. If the Rule 144A Notes have been physically delivered to the
Exchange Agent, the tendering holder must also submit the serial number shown on
the particular Rule 144A Notes to be withdrawn. If the Rule 144A Notes have been
delivered pursuant to the book-entry procedures set forth under "-- How to
Tender", any notice of withdrawal must specify the name and number of the
participant's account at DTC to be credited with the withdrawn Rule 144A Notes.
The Exchange Agent will return the properly withdrawn Rule 144A Notes as soon as
practicable following receipt of notice of withdrawal. All questions as to the
validity, including time of receipt, of notices of withdrawals will be
determined by the Company, and such determination will be final and binding on
all parties.

ACCEPTANCE OF TENDERS

Subject to the terms and conditions of the Exchange Offer, including the
reservation of certain rights by the Company, Rule 144A Notes tendered (either
physically or through book-entry delivery as described in "-- How to Tender")
with a properly executed Letter of Transmittal and all other required
documentation, and not withdrawn, will be accepted promptly after the Expiration
Date. Subject to such terms and conditions, Exchange

Notes to be issued in exchange for properly tendered Rule 144A Notes will be
mailed by the Exchange Agent promptly after the acceptance of the tendered Rule
144A Notes. Acceptance of tendered Rule 144A Notes will be effected by the
delivery of a notice to that effect by the Company to the Exchange Agent.
Subject to the applicable rules of the Commission, the Company, however,
reserves the right, prior to the acceptance of tendered Rule 144A Notes, to
delay acceptance of tendered Rule 144A Notes upon the occurrence of any of the
conditions set forth under the caption "-- Conditions". The Company confirms
that its reservation of the right to delay acceptance of tendered Rule 144A
Notes is subject to the provisions of Rule 14e-1(c) under the Exchange Act which
requires that a tender offeror pay the consideration offered or return the
tendered securities promptly after the termination or withdrawal of a tender
offer.

Although the Company does not currently intend to do so, if it modifies the
terms of the Exchange Offer, such modified terms will be available to all
holders of Rule 144A Notes, whether or not their Rule 144A Notes have been
tendered prior to such modification. Any material modification will be disclosed
in accordance with the applicable rules of the Commission and, if required, the
Exchange Offer will be extended to permit holders of Rule 144A Notes adequate
time to consider such modification.

The tender of Rule 144A Notes pursuant to any one of the procedures set
forth in "-- How to Tender" will constitute an agreement between the tendering
holder and the Company upon the terms and subject to the conditions of the
Exchange Offer.

EXCHANGE AGENT

The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Letters of Transmittal must be addressed to the Exchange Agent as
follows:

FACSIMILE TRANSMISSION ADDRESS FOR MAILING AND
TELEPHONE NUMBER: HAND DELIVERIES:
(212) 815-3518 The Bank of New York
101 Barclay Street (7 East)
CONFIRM BY TELEPHONE: Reorganization Section
(212) 815-2742 New York, New York 10286
Attention: Enrique Lopez

Delivery to other than the above address will not constitute valid
delivery.

SOLICITATION OF TENDERS; EXPENSES

Except as described under "-- Exchange Agent", the Company has not retained
any agent in connection with the Exchange Offer and will not make any payments
to brokers, dealers or other persons for soliciting or recommending acceptances
of the Exchange Offer. The Company, will, however, reimburse the Exchange Agent
for its reasonable out-of-pocket expenses in connection therewith. The Company
will also pay brokerage houses and other custodians, nominees and fiduciaries
the reasonable out-of-pocket expenses incurred by them in forwarding copies of
this Prospectus and related documents to the beneficial owners of the Rule 144A
Notes and in handling or forwarding tenders for their customers.

FEDERAL INCOME TAX CONSIDERATIONS

In the opinion of Bryan Cave LLP, counsel to the Company, under federal
income tax law, a holder of Rule 144A Notes will not recognize gain or loss upon
an exchange of Rule 144A Notes for Exchange Notes pursuant to the Exchange
Offer. A holder's tax basis in the Exchange Notes received pursuant to the
Exchange Offer will be the same as such holder's basis in the Rule 144A Notes
exchanged therefor and a holder's holding period for Exchange Notes received
pursuant to the Exchange Offer will include such holder's holding period for the
Rule 144A Notes if such Rule 144A Notes were held as capital assets at the time
of the exchange.

Each exchanging holder should consult with his individual tax advisor as to
any foreign, state and local tax consequences of the Exchange Offer as well as
to the effect of his particular facts and circumstances on the matters discussed
herein.

USE OF PROCEEDS

The Company will not receive any proceeds from the issuance of the Exchange
Notes offered hereby. In consideration for issuing the Exchange Notes as
contemplated in this Prospectus, the Company will receive, in exchange, Rule
144A Notes in like principal amount. The form and terms of the Exchange Notes
are identical in all material respects to the form and terms of the Rule 144A
Notes, except as otherwise described herein under "The Exchange Offer". The Rule
144A Notes surrendered in exchange for the Exchange Notes will be retired and
cancelled and cannot be reissued. Accordingly, issuance of the Exchange Notes
will not result in any increase in the outstanding debt of the Company.

DIVIDEND POLICY

The Company Board currently intends to declare and pay quarterly dividends
on its Common Stock. It is expected that the first quarterly dividend payment
will be $ per share (a rate of $ annually), with the initial dividend to be
declared and paid in the quarter of fiscal year . The declaration and payment of
dividends by the Company are subject to the discretion of the Company Board and
limitations imposed by the Indenture on Restricted Payments (as defined in the
Indenture), including dividends. At March 31, 1996, pro forma after giving
effect to the Restructuring, the Company would be permitted to pay $62.7 million
in dividends on its capital stock. The Company's ability to pay dividends and to
meet its other cash obligations, including debt service on the Senior Notes, is
dependent on the receipt of dividends from the Bank. The declaration of
dividends by the Bank on all classes of its capital stock is subject to the
discretion of the Board of Directors of the Bank, the terms of the Bank
Preferred Stock, applicable regulatory requirements and compliance with the
covenants of the Senior Notes. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Capital Resources and
Liquidity". Any determination as to the payment of dividends will depend upon,
among other things, general business conditions, the Company's financial
results, contractual, legal and regulatory restrictions regarding the payment of
dividends by the Company's subsidiaries, the credit ratings of the Company and
such other factors as the Company Board may consider to be relevant. Dividends
may not be paid on the Bank Common Stock if full dividends on the Bank Preferred
Stock have not been paid for the four most recent quarterly dividend periods.
Thus, if for any reason the Bank failed to declare and pay full quarterly
dividends on the Bank Preferred Stock, the Company would not receive any cash
dividends from the Bank until four full quarterly dividends on the Bank
Preferred Stock had been paid. See "Risk Factors -- Source of Payment".

CAPITALIZATION

The following table sets forth the historical capitalization of the Company
at March 31, 1996 and the pro forma capitalization of the Company at March 31,
1996 after giving effect to (i) the Restructuring and an associated 1,800 to one
Common Stock conversion, (ii) a $100 million dividend paid in May 1996 and a
$5.9 million contractually required payment to the FDIC, (iii) a $101.7 million
tax benefit recorded in June 1996, (iv) a $6.2 million charge, after tax, in
connection with the Executive Management Incentive Compensation Plans (as
defined below) and (v) estimated expenses related to the Common Stock Offering.
See Note 21 to the Consolidated Financial Statements. In addition to the
long-term debt of the Company reflected below, at March 31, 1996, the Bank had
long-term debt consisting of deposits, FHLB advances, and certain other funding
liabilities incurred in the ordinary course of business. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Capital Resources and Liquidity" and Notes 8, 9, 10 and 11 to the Consolidated
Financial Statements.

AT MARCH 31, 1996
---------------------------
HISTORICAL PRO FORMA
----------- ----------

(IN THOUSANDS)
Long-Term Debt -- Senior Notes(1).... $ 115,000 $115,000
Minority Interest(2)................. 185,500 185,500
Stockholders' Equity:
Preferred Stock(3).............. -- --
Common Stock(4)................. 2 2
Paid-in capital(5).............. 118,009 122,009
Retained earnings............... 411,498 401,098
Unrealized gains (losses) on
securities and mortgage-backed
securities available for sale,
net of tax..................... (3,068) (3,068)
----------- ----------
Total stockholders' equity...... 526,441 520,041
----------- ----------
Total Consolidated
Capitalization........... $ 826,941 $820,541
=========== ==========
Ratio of equity to assets............ 4.67% 4.62%
Ratio of tangible equity to tangible
assets............................... 4.48% 4.42%
Shares outstanding(6)
Class A......................... 23,828,400
Class B......................... -- --
Class C......................... 5,034,600
Book value per common share(6)....... $ 18.24 --
Tangible book value per share(6)..... $ 17.44 --
Regulatory capital of the Bank(7)(8)
Tangible Capital
Amount..................... $ 770,764 $658,664
Ratio...................... 6.88% 5.89%
Core Capital
Amount..................... $ 780,227 $668,127
Ratio...................... 6.96% 5.97%
Total Risk-Based Capital
Amount..................... $ 816,772 $704,672
Ratio...................... 14.20% 12.12%

- ------------

(1) The Senior Notes currently bear a stepped up rate of 9.05% PER ANNUM pending
consummation of the Exchange Offer, following which the rate will revert to
8.05% PER ANNUM.

(2) Minority interest consists of $185.5 million stated value of the Bank
Preferred Stock. In addition, the Warrants represent a potential additional
minority interest in the Bank. See Notes 7 and 16 to the Consolidated
Financial Statements.

(FOOTNOTES CONTINUED ON FOLLOWING PAGE)

(3) The Company had 2,500 shares of Preferred Stock authorized, none of which
were issued as of March 31, 1996.

(4) The Company has reserved shares of its Common Stock for issuance
and to be available for grants under three separate plans. See
"Management -- The 1996 Incentive Compensation Plan", " -- Executive
Management Compensation Plan" and " -- The Director Stock Compensation
Plan".

(5) Offering expenses related to the Common Stock Offering are estimated to be
$2,000,000.

(6) Historical and pro forma per share results have been restated to reflect an
1,800 to one Common Stock conversion, effective June 18, 1996, in connection
with the Restructuring. Pro forma per share amounts also include the effects
of stock issued pursuant to the 1996 Incentive Compensation Plan.

(7) The Bank's portion of the $101.7 million tax benefit recorded in June 1996
was $85.2 million and has been excluded for purposes of computing the Bank's
regulatory capital ratios. OTS regulations limit the amount of deferred tax
asset an institution may include in its regulatory capital.

(8) The Bank's pro forma regulatory capital ratios reflect a $100 million
dividend payment from the Bank to the Company and a related contractually
required payment of $5.9 million to the FDIC. These payments were made in
May 1996.

RATIOS OF EARNINGS TO FIXED CHARGES

"Fixed charges" includes interest expense, a portion (generally, one-third)
of rental expense and amortization of debt expense. "Earnings", for purposes of
the ratio, includes consolidated pre-tax earnings, plus fixed charges as
described above.

BANK UNITED CORP.
CONSOLIDATED RATIOS

<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED SEPTEMBER 30,
MARCH 31, -----------------------------------------------------
1996 1995 1994 1993 1992 1991
------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges......................... 1.20 1.16 1.26 1.40 1.16 1.06
Ratio of earnings to combined fixed charges and Bank
Preferred Stock dividends................................ 1.14 1.13 1.21 1.35 1.16 1.06
</TABLE>

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The following selected consolidated financial and other data as of and for
each of the years in the five-year period ended September 30, 1995 are derived
from the Company's audited Consolidated Financial Statements. The information
set forth below should be read in conjunction with the Consolidated Financial
Statements and the Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations". The Consolidated Statements of
Financial Condition as of September 30, 1995 and 1994, and the Consolidated
Statements of Operations for each of the years in the three year period ended
September 30, 1995, and the report thereon of Deloitte & Touche LLP are included
elsewhere in this Prospectus. The selected consolidated financial and other data
as of and for the six months ended March 31, 1996 and 1995 are derived from the
unaudited consolidated financial statements included in the Consolidated
Financial Statements which, in the opinion of management, contain all
adjustments (consisting only of normal recurring adjustments), which are
necessary for a fair presentation of the results for such periods. The results
of operations for the six months ended March 31, 1996 are not necessarily
indicative of the results of operations to be obtained for the entire fiscal
year.

FIVE-YEAR CONSOLIDATED SUMMARY OF SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
AT MARCH 31, AT SEPTEMBER 30,
---------------------- ------------------------------------------------------
1996 1995 1995 1994 1993 1992(1) 1991(1)
---------- ---------- ---------- --------- --------- --------- ---------

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF FINANCIAL CONDITION:
ASSETS(2)
Cash and cash equivalents............ $ 135,691 $ 90,912 $ 112,931 $ 76,938 $ 65,388 $ 94,723 $ 217,630
Securities purchased under agreements
to resell and federal funds sold... 659,279 636,274 471,052 358,710 547,988 206,000 1,632,600
Trading account assets............... 1,267 1,044 1,081 1,011 1,006 94,691 --
Securities........................... 58,351 114,254 116,013 114,115 43,430 4,909 6,800
Mortgage-backed securities........... 1,954,070 2,600,876 2,398,263 2,828,903 2,175,925 833,425 419,064
Loans................................ 7,878,080 6,161,432 8,260,240 5,046,174 4,862,379 4,101,716 3,431,154
Covered Assets and related
assets(3)............................ -- -- -- -- 392,511 610,901 779,304
All other assets..................... 579,898 539,985 623,954 484,310 351,929 308,918 390,295
---------- ---------- ---------- --------- --------- --------- ---------
Total assets................. $11,266,636 $10,144,777 $11,983,534 $8,910,161 $8,440,556 $6,255,283 $6,876,847
========== ========== ========== ========= ========= ========= =========
LIABILITIES, MINORITY INTEREST, AND
STOCKHOLDERS' EQUITY(2)
Deposits............................. $4,963,321 $5,015,713 $5,182,220 $4,764,204 $4,839,388 $4,910,760 $6,054,474
FHLB advances........................ 4,139,023 3,284,373 4,383,895 2,620,329 2,185,445 632,345 287,345
Securities sold under agreements to
repurchase......................... 949,936 839,939 1,172,533 553,000 310,000 -- --
Note payable to related party........ -- -- -- -- -- 4,090 4,090
Long-term debt ("15.75% Notes").... -- -- -- -- -- 102,000 107,000
Senior Notes......................... 115,000 115,000 115,000 115,000 115,000 -- --
All other liabilities................ 387,415 327,559 448,283 320,766 516,020 373,715 262,178
---------- ---------- ---------- --------- --------- --------- ---------
Total liabilities............ 10,554,695 9,582,584 11,301,931 8,373,299 7,965,853 6,022,910 6,715,087
---------- ---------- ---------- --------- --------- --------- ---------
Minority interest -- Bank
Preferred Stock(4)......... 185,500 85,500 185,500 85,500 85,500 -- --
Total stockholders' equity... 526,441 476,693 496,103 451,362 389,203 232,373 161,760
---------- ---------- ---------- --------- --------- --------- ---------
Total liabilities, minority
interest, and
stockholders' equity..... $11,266,636 $10,144,777 $11,983,534 $8,910,161 $8,440,556 $6,255,283 $6,876,847
========== ========== ========== ========= ========= ========= =========

AT OR FOR
THE SIX MONTHS
ENDED MARCH 31, AT OR FOR THE YEAR ENDED SEPTEMBER 30,
---------------------- ------------------------------------------------------
1996 1995 1995 1994 1993 1992(1) 1991(1)
---------- ---------- ---------- --------- --------- --------- ---------

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
SUMMARY OF OPERATIONS(2)
Interest income...................... $ 421,221 $ 327,586 $ 746,759 $ 494,706 $ 482,490 $ 502,854 $ 422,184
Interest expense..................... 309,289 239,960 552,760 320,924 300,831 348,291 330,659
---------- ---------- ---------- --------- --------- --------- ---------
Net interest income.............. 111,932 87,626 193,999 173,782 181,659 154,563 91,525
Provision for credit losses.......... 5,850 4,157 24,293 6,997 4,083 21,133 4,122
---------- ---------- ---------- --------- --------- --------- ---------
Net interest income after
provision for credit losses.... 106,082 83,469 169,706 166,785 177,576 133,430 87,403
Non-interest income
Net gains (losses)
Sales of single family
servicing rights and single
family warehouse loans..... 19,157 38,464 60,495 63,286 67,403 67,223 30,541
Securities and
mortgage-backed
securities................. 2,863 8 26 10,404 43,702 2,022 1,440
Other loans.................. 3,485 (380) (1,210) 163 1,496 4,759 756
Loan servicing fees and
charges........................ 22,107 22,813 43,508 31,741 21,780 20,823 6,076
Other fees and charges........... 6,997 5,748 12,162 13,295 12,310 8,963 6,117
---------- ---------- ---------- --------- --------- --------- ---------
Total non-interest income........ 54,609 66,653 114,981 118,889 146,691 103,790 44,930
---------- ---------- ---------- --------- --------- --------- ---------
Non-interest expense
Compensation and benefits........ 39,898 43,192 83,520 86,504 81,472 69,476 46,580
Amortization of intangibles...... 9,801 10,718 21,856 18,247 24,469 22,832 14,789
Other............................ 49,605 47,735 89,200 94,842 96,023 88,107 52,258
---------- ---------- ---------- --------- --------- --------- ---------
Total non-interest expense....... 99,304 101,645 194,576 199,593 201,964 180,415 113,627
---------- ---------- ---------- --------- --------- --------- ---------
Income before income taxes,
minority interest, and
extraordinary loss............. 61,387 48,477 90,111 86,081 122,303 56,805 18,706
Income tax expense (benefit)(5)...... 25,278 20,186 37,415 (31,899) (26,153) 200 (409)
---------- ---------- ---------- --------- --------- --------- ---------
Income before minority interest
and extraordinary loss......... 36,109 28,291 52,696 117,980 148,456 56,605 19,115
Less minority interest
Bank Preferred Stock
dividends(4)................... 9,126 4,326 10,600 8,653 6,537 -- --
Payments in lieu of
dividends(6)................... 224 306 377 357 -- -- --
---------- ---------- ---------- --------- --------- --------- ---------
Income before extraordinary
loss........................... 26,759 23,659 41,719 108,970 141,919 56,605 19,115
Extraordinary loss(7)................ -- -- -- -- 14,549 -- --
---------- ---------- ---------- --------- --------- --------- ---------
Net income....................... $ 26,759 $ 23,659 $ 41,719 $ 108,970 $ 127,370 $ 56,605 $ 19,115
========== ========== ========== ========= ========= ========= =========
Operating earnings(8)................ $ 55,039 $ 48,849 $ 91,295 $ 75,514 $ 77,105 $ 50,024 $ 16,510
Earnings per common share(9)
Income before extraordinary
loss........................... $ 0.87 $ 0.76 $ 1.35 $ 3.55 $ 4.61 $ 1.85 $ 0.71
Extraordinary loss............... -- -- -- -- 0.50 -- --
---------- ---------- ---------- --------- --------- --------- ---------
Net income....................... $ 0.87 $ 0.76 $ 1.35 $ 3.55 $ 4.11 $ 1.85 $ 0.71
========== ========== ========== ========= ========= ========= =========
Book value per common share(9)....... $ 18.24 $ 16.52 $ 17.19 $ 15.64 $ 13.48 $ 8.19 $ 6.87

CERTAIN RATIOS AND OTHER DATA(2)(10)
Regulatory capital ratios of the
Bank(11):
Tangible Capital................. 6.88% 5.65% 6.20% 6.01% 6.17% 4.24% 2.64%
Core Capital..................... 6.96 5.77 6.29 6.17 6.43 5.04 3.59
Total Risk-Based Capital......... 14.20 12.43 13.45 14.02 14.87 12.19 9.37
Return on average assets............. 0.46 0.50 0.40 1.32 1.74 0.89 0.42
Return on average common equity...... 10.45 10.23 8.77 26.32 44.87 28.18 13.95
Stockholders' equity to assets....... 4.67 4.70 4.14 5.07 4.61 3.71 2.35
Tangible stockholders' equity to
tangible assets.................... 4.48 4.40 3.93 4.68 4.14 2.58 1.10
Net yield on interest-earning
assets(12)......................... 2.00 1.92 1.92 2.20 2.61 2.60 2.16
Interest rate spread(12)............. 1.66 1.61 1.61 1.95 2.41 2.54 2.15

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
CERTAIN RATIOS AND OTHER DATA --
CONTINUED(2)(10)
Average interest-earning assets to
average interest-bearing
liabilities........................ 1.06x 1.06x 1.06x 1.06x 1.04x 1.01x 1.00x
Non-interest expense to average total
assets............................. 1.72% 2.13% 1.86% 2.41% 2.76% 2.85% 2.50%
Net operating expense ratio(13)...... 0.77 0.74 0.76 0.97 0.76 1.21 1.51
Efficiency ratio(14)................. 60.16 62.45 59.50 66.38 65.11 63.98 75.14
Nonperforming assets to total
assets............................. 1.10 1.04 0.84 1.09 0.72 0.89 0.59
Nonaccrual loans to total loans...... 1.21 1.29 0.91 1.51 0.85 0.92 0.98
Allowance for credit losses to net
nonaccrual loans................... 38.00 31.43 48.74 30.73 71.71 74.04 30.00
Allowance for credit losses to
nonperforming assets............... 29.36 23.62 36.65 24.18 49.28 50.54 25.05
Allowance for credit losses to total
loans.............................. 0.46 0.40 0.44 0.46 0.61 0.68 0.29
Net loan charge-offs to average
loans.............................. 0.15 0.09 0.16 0.30 0.05 0.07 0.04
Full-time equivalent employees....... 2,642 2,684 2,663 2,894 3,122 2,720 2,023
Number of Community Banking
branches(1)........................ 67 64 65 62 62 65 74
Number of Commercial Banking
origination offices................ 9 8 9 5 3 2 1
Number of Mortgage Banking
origination offices................ 112 131 122 145 109 93 72
Mortgage Banking servicing
portfolio.......................... $11,594,485 $12,031,533 $12,532,472 $8,920,760 $8,073,226 $7,187,000 $4,681,712
Mortgage Banking originations........ 2,021,127 1,553,255 3,447,250 5,484,111 6,737,762 6,118,363 3,195,873
Financial Markets loans purchased.... 80,948 769,995 2,640,755 1,312,827 1,202,970 912,847 1,885,956
</TABLE>

- ------------

(1) The Bank acquired from the RTC $2.2 billion in deposit liabilities during
fiscal 1991. Pursuant to the Bank's plan of acquisition, rates on these
deposits were reduced after acquisition and, as expected, approximately
$766 million of deposits were withdrawn from the Bank during fiscal 1992.
Also, the Bank consolidated overlapping branch locations that resulted from
these acquisitions. See "The Company -- History".

(3) Reflects assets governed under the Assistance Agreement between the Bank
and the FRF. See "Business -- The Assistance Agreement".

(4) During fiscal 1993, the Bank issued Bank Preferred Stock, Series A, and
during fiscal 1995, the Bank issued Bank Preferred Stock, Series B. None of
the shares of Bank Preferred Stock are owned by the Company. Certain
Selling Stockholders and directors and management of the Company own shares
of the Bank Preferred Stock. See "Management -- Security Ownership of
Certain Beneficial Owners and Management -- Principal Stockholders, Bank
Preferred Stock".

(5) Fiscal 1994 and 1993 include tax benefits recognized as a result of
Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes". See Note 13 to the Consolidated Financial
Statements. A tax benefit in the amount of $101.7 million was recognized in
the third quarter of fiscal 1996.

(6) All of the outstanding Bank Common Stock is currently owned by the Company.
The Bank has issued to the FDIC Warrants to acquire 158,823 shares of Bank
Common Stock (representing 5.56% of the Bank Common Stock as of March 31,
1996 and September 30, 1995, assuming exercise in full of the Warrants), at
an exercise price of $0.01 per share. Payments in lieu of dividends relate
to the Warrants. See "Business -- The Assistance Agreement -- Warrant
Agreement" and Note 16 to the Consolidated Financial Statements.

(7) Reflects costs and charges associated with the issuance of the Senior
Notes. See Note 11 to the Consolidated Financial Statements.

(8) Operating earnings represents income before taxes, minority interest, and
extraordinary loss and excludes net gains (losses) on securities, MBS, and
other loans.

(9) Per share results have been restated to reflect an 1,800 to one Common
Stock conversion effective June 1996 in connection with the Restructuring.
See Note 21 to the Consolidated Financial Statements.

(10) Ratio, yield, and rate information are based on weighted average daily
balances for the six months ended March 31, 1996 and 1995 and fiscal 1995,
1994, and 1993 and average monthly balances for prior periods, with the
exception of return on average common equity, which is based on average
monthly balances for all periods presented. Interim rates and yields are
annualized.

(11) Regulatory capital ratios presented are those of the Bank. No regulatory
capital ratios are presented for the Company because there are no such
applicable requirements for savings and loan holding companies such as the
Company. For a discussion of the regulatory capital requirements applicable
to the Bank, see "Regulation -- Safety and Soundness Regulations -- Capital
Requirements".

(12) Net yield on interest-earning assets represents net interest income as a
percentage of average interest-earning assets. Interest rate spread
represents the difference between the average yield on interest-earning
assets and the average rate on interest-bearing liabilities.

(13) Net operating expense ratio represents total non-interest expense less
total non-interest income as a percentage of average assets for each
period.

(14) Efficiency ratio represents non-interest expenses (excluding goodwill
amortization) divided by net interest income plus non-interest income,
excluding net gains (losses) on securities, MBS and other loans.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DISCUSSION OF RESULTS OF OPERATIONS

OVERVIEW.

SIX MONTHS ENDED MARCH 31, 1996 COMPARED TO THE SIX MONTHS ENDED MARCH 31,
1995. Net income was $26.8 million for the six months ended March 31, 1996,
compared to $23.7 million for the six months ended March 31, 1995. The increase
primarily reflects the higher levels of interest-earning assets for the six
months ended March 31, 1996, partially offset by the effect of increased
dividends paid by the Bank on the Bank Preferred Stock (reflected as minority
interest on the Consolidated Statements of Operations) and lower gains on sales
of single family MSRs and single family warehouse loans. Loan servicing fees and
charges decreased during the six months ended March 31, 1996 as compared to the
six months ended March 31, 1995. As of March 31, 1996, the principal balances of
the single family servicing portfolio was $11.6 billion.

Operating earnings represents income before taxes, minority interest, and
extraordinary losses and excludes net gains (losses) on securities, MBS, and
other loans. Operating earnings were $55.0 million for the six months ended
March 31, 1996, compared to $48.8 million for the six months ended March 31,
1995. This increase primarily reflects the higher levels of interest-earning
assets, partially offset by a decrease in gains on sales of single family MSRs
and warehouse loans, as noted above.

1995 COMPARED TO 1994. Net income was $41.7 million for fiscal 1995,
compared to $109.0 million for fiscal 1994. The decrease primarily reflects the
effect of a tax benefit of $58.2 million recognized in fiscal 1994 for the
expected utilization of NOLs under SFAS No. 109, a lower interest rate spread
realized on its interest-earning assets, lower gains on sales of securities and
MBS and higher provisions for credit losses in fiscal 1995. Net income for
fiscal 1995 was favorably impacted by the effect of higher levels of
interest-earning assets during fiscal 1995 compared to fiscal 1994 and an
increase in the single family servicing portfolio. The single family servicing
portfolio increased to $12.5 billion at September 30, 1995 compared to $8.9
billion at September 30, 1994, contributing to increased loan servicing fees and
charges during fiscal 1995.

Operating earnings were $91.3 million for fiscal 1995, compared to $75.5
million for fiscal 1994. This increase primarily reflects the higher levels of
interest-earning assets and increased loan servicing fees and charges, partially
offset by higher provisions for credit losses, as noted above.

1994 COMPARED TO 1993. Net income was $109.0 million for fiscal 1994,
compared to $127.4 million for fiscal 1993. The decrease is primarily a result
of lower gains on sales of securities and MBS in fiscal 1994, unfavorable
changes in net interest rate spread and higher provisions for credit losses in
fiscal 1994. Net income for fiscal 1994 was favorably impacted by an increase in
the single family servicing portfolio. The single family servicing portfolio
increased to $8.9 billion at September 30, 1994, from $8.1 billion at September
30, 1993, contributing to increased loan servicing fees and charges during
fiscal 1994. Tax benefits of $58.2 million and $44.2 million were recognized in
fiscal 1994 and 1993, respectively, for the expected utilization of NOLs under
SFAS No. 109.

Operating earnings were $75.5 million for fiscal 1994, compared to $77.1
million for fiscal 1993. This decrease primarily reflects the effect of
unfavorable changes in the net interest rate spread and higher provisions for
credit losses, partially offset by increased loan servicing fees and charges, as
noted above.

The following table sets forth a reconciliation of Bank and Company net
income.

<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
-------------------- ---------------------------------
BANK 1996 1995 1995 1994 1993
- ------------------------------------- --------- --------- --------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net income........................... $ 41,358 $ 33,516 $ 62,708 $ 124,761 $ 163,671
Preferred stock dividends............ (9,126) (4,326) (10,600) (8,653) (6,537)
--------- --------- --------- ---------- ----------
Net income available for Bank's
common stock..................... 32,232 29,190 52,108 116,108 157,134
Dividends to Company................. (3,810) (5,209) (6,409) (11,435) (15,224)
Payments in lieu of dividends........ (224) (306) (377) (357) --
--------- --------- --------- ---------- ----------
Undistributed income of Bank......... 28,198 23,675 45,322 104,316 141,910
--------- --------- --------- ---------- ----------
COMPANY
Dividends from Bank.................. 3,810 5,209 6,409 11,435 15,224
Interest expense..................... (5,205) (5,202) (10,407) (10,177) (14,261)
Other (expense) income, net.......... (44) (23) 395 3,396 (954)
Extraordinary loss................... -- -- -- -- (14,549)
--------- --------- --------- ---------- ----------
Net (loss) income of Company
without including undistributed
income of Bank.................. (1,439) (16) (3,603) 4,654 (14,540)
--------- --------- --------- ---------- ----------
Consolidated net income(1)........... $ 26,759 $ 23,659 $ 41,719 $ 108,970 $ 127,370
========= ========= ========= ========== ==========
</TABLE>
- ------------

(1) See Note 21 to the Consolidated Financial Statements for the effect of a
dividend paid and a tax benefit recorded during the third quarter of fiscal
1996 and other subsequent events.

NET INTEREST INCOME

Net interest income is based on the relative amounts of interest-earning
assets and interest-bearing liabilities and the spread between the yields earned
on assets and rates paid on liabilities. Net interest rate spread is affected by
changes in general market interest rates, including changes in the relationship
between short- and long-term interest rates (the yield curve), the effects of
periodic caps on the Bank's adjustable-rate mortgage and MBS portfolios and the
interest rate sensitivity position or "gap". The Bank has traditionally managed
its business to limit its overall exposure to changes in interest rates. See
"Business -- Business Strategy". Nevertheless, different aspects of its business
remain subject, in varying degrees, to risk from interest rate changes.

AVERAGE BALANCES AND AVERAGE YIELDS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
FOR THE SIX MONTHS ENDED MARCH 31, SEPTEMBER 30,
--------------------------------------------------------------- ---------------------
1996 1995 1995
------------------------------ ------------------------------ ---------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE
BALANCE INTEREST RATE(3) BALANCE INTEREST RATE(3) BALANCE INTEREST
---------- --------- ------- --------- --------- -------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Short-term interest-earning
assets........................... $ 575,936 $ 17,360 5.93% $ 462,791 $ 14,415 6.16% $ 466,276 $ 29,675
Trading account assets............. 1,148 35 6.10 1,063 29 5.46 1,079 62
Securities(1)...................... 84,659 2,112 4.99 117,075 2,950 5.05 116,934 5,893
Mortgage-backed securities(1)...... 2,177,645 70,699 6.49 2,734,073 87,134 6.37 2,618,990 173,155
Loans(2)........................... 8,092,849 323,930 8.01 5,751,629 218,370 7.59 6,707,868 526,528
FHLB stock......................... 227,895 7,085 6.22 155,307 4,688 6.05 180,416 11,446
Covered Assets and related assets..... -- -- -- -- -- -- -- --
---------- --------- ------- --------- --------- --- ---------- ---------
TOTAL INTEREST-EARNING ASSETS.... 11,160,132 421,221 7.55 9,221,938 327,586 7.10 10,091,563 746,759
Non-interest-earning assets.......... 379,397 310,660 345,500
---------- --------- ----------
Total assets..................... $11,539,529 $9,532,598 $10,437,063
========== ========= ==========
INTEREST-BEARING LIABILITIES:
Deposits:
Transaction accounts............. $ 243,668 1,440 1.18 $ 228,716 1,694 1.49 $ 225,799 3,384
Insured money fund accounts...... 1,316,051 33,013 5.02 995,160 23,567 4.75 1,032,873 57,848
Savings accounts................. 145,427 1,883 2.59 193,759 2,620 2.71 171,308 4,715
Certificates of deposits......... 3,358,442 102,174 6.08 3,436,942 94,623 5.52 3,560,420 198,419
---------- --------- ------- --------- --------- --- ---------- ---------
Total deposits............... 5,063,588 138,510 5.47 4,854,577 122,504 5.06 4,990,400 264,366
---------- --------- ------- --------- --------- --- ---------- ---------
FHLB advances...................... 4,346,960 136,501 6.18 3,068,768 92,281 5.95 3,560,844 224,767
Reverse repurchase agreements and
federal funds purchased.......... 982,169 29,073 5.82 675,452 19,973 5.85 888,453 53,220
Note payable to related party...... -- -- -- -- -- -- -- --
Long-term debt..................... -- -- -- -- -- -- -- --
Senior Notes....................... 115,000 5,205 9.05 115,000 5,202 9.05 115,000 10,407
Other.............................. -- -- -- -- -- -- -- --
---------- --------- ------- --------- --------- --- ---------- ---------
TOTAL INTEREST-BEARING
LIABILITIES.................... 10,507,717 309,289 5.89 8,713,797 239,960 5.49 9,554,697 552,760
Non-interest-bearing liabilities
and stockholders' equity......... 1,031,812 -- -- 818,801 -- -- 882,366 --
---------- --------- ----------
Total liabilities and
stockholders' equity........... $11,539,529 -- -- $9,532,598 -- -- $10,437,063 --
========== ========= ==========
Net interest income/interest rate
spread............................. -- $ 111,932 1.66% -- $ 87,626 1.61% -- $ 193,999
========= ======= ========= === =========
Net yield on interest-earning
assets............................. -- -- 2.00% -- -- 1.92% -- --
======= ===
Ratio of average interest-earning
assets to average interest-bearing
liabilities........................ 1.06 -- -- 1.06 -- -- 1.06 --
</TABLE>

<TABLE>
<CAPTION>
1994 1993
---------------------------- ----------------------------
YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
------ --------- --------- ------ --------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Short-term interest-earning
assets........................... 6.36% $ 461,530 $ 19,019 4.12% $ 408,972 $ 14,301 3.50 %
Trading account assets............. 5.75 1,026 (144) (14.04) 176,617 6,224 3.52
Securities(1)...................... 5.04 108,751 5,007 4.60 1,707 63 3.69
Mortgage-backed securities(1)...... 6.61 2,595,163 151,972 5.86 1,336,709 83,525 6.25
Loans(2)........................... 7.85 4,524,158 308,804 6.83 4,488,405 344,515 7.68
FHLB stock......................... 6.34 132,277 5,558 4.20 89,927 3,095 3.44

Covered Assets and related assets.. -- 74,547 4,490 6.02 469,742 30,767 6.55
------ --------- --------- ------ --------- --------- ------
TOTAL INTEREST-EARNING ASSETS.... 7.40 7,897,452 494,706 6.26 6,972,079 482,490 6.92
Non-interest-earning assets.......... 386,175 346,698
--------- ---------
Total assets..................... $8,283,627 $7,318,777
========= =========
INTEREST-BEARING LIABILITIES:
Deposits:
Transaction accounts............. 1.50 $ 237,537 3,753 1.58 $ 230,649 4,843 2.10
Insured money fund accounts...... 5.60 582,126 18,508 3.18 476,835 13,471 2.83
Savings accounts................. 2.75 284,885 7,311 2.57 341,785 7,055 2.06
Certificates of deposits......... 5.57 3,662,043 179,462 4.90 3,816,152 200,614 5.26
------ --------- --------- ------ --------- --------- ------
Total deposits............... 5.30 4,766,591 209,034 4.39 4,865,421 225,983 4.64
------ --------- --------- ------ --------- --------- ------
FHLB advances...................... 6.31 2,285,630 91,060 3.98 1,344,129 48,594 3.62
Reverse repurchase agreements and
federal funds purchased.......... 5.99 274,666 10,574 3.85 346,009 11,180 3.23
Note payable to related party...... -- -- -- -- 3,595 601 16.72
Long-term debt..................... -- -- -- -- 63,715 10,214 16.03
Senior Notes....................... 9.05 115,000 10,177 8.85 42,806 3,446 8.05
Other.............................. -- 3,350 79 2.36 11,123 813 7.31
------ --------- --------- ------ --------- --------- ------
TOTAL INTEREST-BEARING
LIABILITIES.................... 5.79 7,445,237 320,924 4.31 6,676,798 300,831 4.51
Non-interest-bearing liabilities
and stockholders' equity......... -- 838,390 -- -- 641,979 -- --
--------- ---------
Total liabilities and
stockholders' equity........... -- $8,283,627 -- -- $7,318,777 -- --
========= =========
Net interest income/interest rate
spread............................. 1.61% -- $ 173,782 1.95% -- $ 181,659 2.41 %
====== ========= ====== ========= ======
Net yield on interest-earning
assets............................. 1.92% -- -- 2.20% -- -- 2.61 %
====== ====== ======
Ratio of average interest-earning
assets to average interest-bearing
liabilities........................ -- 1.06 -- -- 1.04 -- --
</TABLE>
- ------------
(1) For purposes of computing yields, the effects of SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities", have been excluded
from the average balances.

(2) Includes nonaccrual loans.

(3) Annualized

The following table analyzes net interest income in terms of changes in the
volume of interest-earning assets and interest-bearing liabilities and changes
in yields and rates. The table reflects the extent to which changes in the
interest income and interest expense are attributable to changes in volume
(changes in volume multiplied by prior year rate) and changes in rate (changes
in rate multiplied by prior year volume). Changes attributable to the combined
impact of volume and rate have been allocated proportionately to changes due to
volume and changes due to rate.

RATE/VOLUME ANALYSIS

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
------------------------------- -----------------------------------------------------
1996 VS. 1995 1995 VS. 1994 1994 VS. 1993
------------------------------- ------------------------------- --------------------
VOLUME RATE NET VOLUME RATE NET VOLUME RATE
--------- --------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Short-term interest-earning
assets........................... $ 3,496 $ (551) $ 2,945 $ 198 $ 10,458 $ 10,656 $ 1,984 $ 2,734
Trading account assets............. 2 4 6 (7) 213 206 (1,058) (5,310)
Securities......................... (801) (37) (838) 390 496 886 4,924 20
Mortgage-backed securities......... (18,037) 1,602 (16,435) 1,418 19,765 21,183 73,970 (5,523)
Loans.............................. 93,144 12,416 105,560 166,278 51,446 217,724 2,725 (38,436)
FHLB stock......................... 2,266 131 2,397 2,453 3,435 5,888 1,677 786
Covered assets and related
assets........................... -- -- -- (4,490) -- (4,490) (23,971) (2,306)
--------- --------- --------- --------- --------- --------- --------- ---------
Total........................ 80,070 13,565 93,635 166,240 85,813 252,053 60,251 (48,035)
--------- --------- --------- --------- --------- --------- --------- ---------
INTEREST EXPENSE
Deposits........................... 5,554 10,452 16,006 10,219 45,113 55,332 (4,640) (12,309)
FHLB advances...................... 40,476 3,744 44,220 65,246 68,461 133,707 37,186 5,280
Reverse repurchase agreements and
federal funds purchased.......... 9,189 (89) 9,100 34,151 8,495 42,646 (2,535) 1,929
Note payable to related party...... -- -- -- -- -- -- (601) --
Long-term debt..................... -- -- -- -- -- -- (10,214) --
Senior Notes....................... -- 3 3 -- 230 230 6,357 374
Other.............................. -- -- -- (79) -- (79) (373) (361)
--------- --------- --------- --------- --------- --------- --------- ---------
Total........................ 55,219 14,110 69,329 109,537 122,299 231,836 25,180 (5,087)
--------- --------- --------- --------- --------- --------- --------- ---------
NET CHANGE IN NET INTEREST
INCOME........................... $ 24,851 $ (545) $ 24,306 $ 56,703 $ (36,486) $ 20,217 $ 35,071 $ (42,948)
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>

NET
---------

INTEREST INCOME
Short-term interest-earning
assets........................... $ 4,718
Trading account assets............. (6,368)
Securities......................... 4,944
Mortgage-backed securities......... 68,447
Loans.............................. (35,711)
FHLB stock......................... 2,463
Covered assets and related
assets........................... (26,277)
---------
Total........................ 12,216
---------
INTEREST EXPENSE
Deposits........................... (16,949)
FHLB advances...................... 42,466
Reverse repurchase agreements and
federal funds purchased.......... (606)
Note payable to related party...... (601)
Long-term debt..................... (10,214)
Senior Notes....................... 6,731
Other.............................. (734)
---------
Total........................ 20,093
---------
NET CHANGE IN NET INTEREST
INCOME........................... $ (7,877)
=========

SIX MONTHS ENDED MARCH 31, 1996 COMPARED TO THE SIX MONTHS ENDED MARCH 31,
1995. Net interest income increased $24.3 million or 28% to $111.9 million for
the six months ended March 31, 1996, compared to $87.6 million for the six
months ended March 31, 1995. The increase in net interest income is primarily
attributable to a $1.9 billion, or 21%, increase in average interest-earning
assets and, to a lesser extent, to a five basis point increase in the net
interest rate spread.

Interest-earning assets are primarily comprised of single family mortgage
loans and MBS. Interest-bearing liabilities primarily include deposits and FHLB
advances. The increase in average interest-earning assets during the six months
ended March 31, 1996 can be principally attributed to single family loan
purchases during the second half of fiscal 1995, approximating $1.9 billion. The
increase in average interest-earning assets was funded primarily with FHLB
advances and reverse repurchase agreements. See " -- Discussion of Financial
Condition".

Approximately 79% of the Company's interest-earning assets at March 31,
1996 were adjustable-rate assets, a portion of which are tied to indices that
normally lag the changes in market interest rates. Substantially all of the
Company's adjustable-rate assets are subject to periodic and/or lifetime
interest rate caps. Periodic caps limit the amount by which the interest rate on
a particular mortgage loan may increase at its next interest rate reset date. In
a rising-rate environment, the interest rate spread may be negatively impacted
when the repricing of interest-earning assets is limited by caps on periodic
interest rate adjustments, compared to market interest rate movements.

The periodic caps on loans and MBS with adjustable rates limited the
increase in income relative to the cost of deposits and borrowings, as market
interest rates increased during the six months ended March 31, 1995. Net
interest rate spread for the six months ended March 31, 1996 reflects an
improvement over the six months ended March 31, 1995 due to a lessening of the
impact of caps as market interest rates began to level off during the first six
months of fiscal 1996. As of March 31, 1996, substantially all of the mortgages
subject to caps would have no limitation on their next scheduled rate reset. The
net interest rate spread was also positively impacted during the six months
ended March 31, 1996 due to higher yields earned on loans purchased in the later
part of fiscal 1995.

1995 COMPARED TO 1994. Net interest income increased $20.2 million, or 12%,
to $194.0 million for fiscal 1995, compared to $173.8 million for fiscal 1994.
Average interest-earning assets increased $2.2 billion, or 28%, during the
period, principally attributed to single family loan purchases during the second
half of fiscal 1995. The increase in average interest-earning assets was funded
primarily with FHLB advances and reverse repurchase agreements. Increased net
interest income resulting from higher volumes of interest-earning assets was
offset, to some extent, by unfavorable changes in the net spread between the
yield on interest-earning assets and cost of funds. The net interest rate spread
decrease of 34 basis points was the result of the rapid rise in market interest
rates during the early part of fiscal 1995. Increases in market interest rates
and the effect of lagging rate indices and caps on adjustable-rate assets and
the sale of higher yielding assets in fiscal 1994 all contributed to the drop in
net interest rate spread.

1994 COMPARED TO 1993. Net interest income decreased $7.9 million, or 4%,
to $173.8 million for fiscal 1994, compared to $181.7 million for fiscal 1993.
This decrease was principally the result of unfavorable changes in net spread
between the yield on interest-earning assets and the cost of funds. Net interest
rate spread decreased 46 basis points primarily as a result of a reduction in
the yield on interest-earning assets from the sales and securitizations of high
yielding assets. In connection with the securitization of loans from the Bank's
own portfolio, the Bank sold the higher-yielding subordinated classes and
retained the lower-yielding, higher quality securities. Although general market
rates increased during the later portion of fiscal 1994, proceeds from sales and
increased prepayments could not be reinvested at the same rates as the assets
sold or prepaid. Partially offsetting the decrease in net interest rate spread
was a $925.4 million, or 13%, increase in average interest-earning assets during
fiscal 1994 reflecting growth in the loan and MBS portfolios, funded primarily
with FHLB advances.

PROVISION FOR CREDIT LOSSES

SIX MONTHS ENDED MARCH 31, 1996 COMPARED TO THE SIX MONTHS ENDED MARCH 31,
1995. The provision for credit losses increased to $5.9 million for the six
months ended March 31, 1996 from $4.2 million for the six months ended March 31,
1995. Loss experience on the unsecured consumer line of credit portfolio
resulted in increased consumer provisions of $3.0 million for the six months
ended March 31, 1996, compared to $1.8 million for the six months ended March
31, 1995, reflecting increased volume and increased charge-offs. Consumer loans
increased to $130.4 million at March 31, 1996, from $109.4 million at March 31,
1995, while consumer charge-offs increased to $3.0 million for the six months
ended March 31, 1996, from $1.2 million for the six months ended March 31, 1995.
See " -- Asset Quality" and Note 5 to the Consolidated Financial Statements.

1995 COMPARED TO 1994. The provision for credit losses increased to $24.3
million for fiscal 1995 compared to $7.0 million for fiscal 1994. This increase
primarily resulted from increased provisions for credit losses for single family
loans, which increased to $18.5 million for fiscal 1995 compared to $2.4 million
for fiscal 1994, primarily as a result of an increase in the single family loans
portfolio to $7.1 billion at September 30, 1995 from $4.2 billion at September
30, 1994, which included loan purchases totaling $2.7 billion and originations
retained for portfolio of $1.0 billion during fiscal 1995. The growth in the
consumer lending business and loss experience on the unsecured consumer line of
credit portfolio also increased consumer provisions to $4.2 million for fiscal
1995, from $2.8 million for fiscal 1994. Consumer loans increased to $123.1
million at September 30, 1995, from $108.2 million at September 30, 1994, while
consumer charge-offs increased to $2.8 million for fiscal 1995, from $1.3
million for fiscal 1994. See " -- Asset Quality" and Note 5 to the Consolidated
Financial Statements.

1994 COMPARED TO 1993. The provision for credit losses increased to $7.0
million for fiscal 1994 compared to $4.1 million for fiscal 1993. The higher
provision during fiscal 1994 is due primarily to the growth in the consumer
lending business and loss experience on the unsecured consumer line of credit
portfolio. Consumer loans increased to $108.2 million at September 30, 1994,
from $57.9 million at September 30, 1993, and the consumer provision increased
to $2.8 million for fiscal 1994 from $264,000 for fiscal 1993. Consumer
charge-offs increased to $1.4 million for fiscal 1994 from $72,000 for fiscal
1993. Although single family loan purchases totaled $1.4 billion for fiscal 1994
and originations retained for portfolio were $1.3 billion for fiscal 1994, the
effect of these purchases and originations on the provision for credit losses
was partially offset by the effect of securitizations of $1.2 billion of loans
into MBS. The securitization process resulted in lower allowance requirements
because of the credit enhancement as a result of selling the subordinated
securities. See " -- Asset Quality" and Note 5 to the Consolidated Financial
Statements.

NON-INTEREST INCOME

Non-interest income includes gains from sales of single family servicing
rights and single family warehouse loans, gains (losses) on securities and MBS,
gains (losses) on other loans, loan servicing fees and charges, and other fees
and charges.

NON-INTEREST INCOME AND PRINCIPAL SOLD

<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED MARCH 31, SEPTEMBER 30,
-------------------------- ----------------------------------------
1996 1995 1995 1994 1993
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NON-INTEREST INCOME
Net gains (losses)
Sales of single family servicing
rights........................ $ -- $ 28,304 $ 34,080 $ 67,198 $ 63,257
Single family warehouse loans... 19,157 10,160 26,415 (3,912) 4,146
------------ ------------ ------------ ------------ ------------
19,157 38,464 60,495 63,286 67,403
Securities and mortgage-backed
securities.................... 2,863 8 26 10,404 43,702
Other loans..................... 3,485 (380) (1,210) 163 1,496
Loan servicing fees and charges.... 22,107 22,813 43,508 31,741 21,780
Other fees and charges............. 6,997 5,748 12,162 13,295 12,310
------------ ------------ ------------ ------------ ------------
Total non-interest
income................... $ 54,609 $ 66,653 $ 114,981 $ 118,889 $ 146,691
============ ============ ============ ============ ============
PRINCIPAL SOLD
MSRs............................... $ 875,235 $ 2,028,813 $ 2,854,114 $ 4,521,491 $ 4,572,361
Single family warehouse loans...... 1,516,799 902,509 2,100,662 4,786,413 6,244,262
</TABLE>

SIX MONTHS ENDED MARCH 31, 1996 COMPARED TO SIX MONTHS ENDED MARCH 31,
1995. Non-interest income was $54.6 million for the six months ended March 31,
1996 compared to $66.7 million for the six months ended March 31, 1995,
resulting in a decrease of $12.1 million. During the six months ended March 31,
1996 and 1995, $875.2 million and $2.0 billion, respectively, of single family
MSRs were sold. The decrease in single family servicing sales during the six
months ended March 31, 1996 reflects management's decision to retain a greater
portion of MSRs in response to the implementation of SFAS No. 122, "Accounting
for Mortgage Servicing Rights, an Amendment of FASB Statement No. 65". See
"Business -- Loan Servicing Portfolio". The 1995 period includes substantial
gains on sales of servicing rights originated in prior years. Excluding gains
from sales of single family MSRs and single family warehouse loans, non-interest
income increased $7.3 million for the six months ended March 31, 1996 compared
to the six months ended March 31, 1995, primarily due to increased gains on
sales of securities and MBS and other loans.

Gains on sales of single family warehouse loans were $19.2 million during
the six months ended March 31, 1996, compared to $10.2 million during the six
months ended March 31, 1995, reflecting an increase in the volume of single
family warehouse loans sold.

Net gains on securities and MBS were $2.9 million and $8,000 for the six
months ended March 31, 1996 and 1995, respectively. During the six months ended
March 31, 1996, the net gains on MBS were from the sale of $198.8 million of
MBS. See " -- Discussion of Financial Condition".

Net gains (losses) on other loans were $3.5 million and $(380,000) for the
six months ended March 31, 1996 and 1995, respectively. During the six months
ended March 31, 1996, the Bank sold $93.7 million of single family loans held by
the Financial Markets Group for a gain of $1.5 million and $164.5 million of
multi-family loans for a gain of $2.6 million. See " -- Discussion of Financial
Condition".

During the six months ended March 31, 1996 loan servicing fees and charges
decreased $706,000, or 3% from the prior year period. This decrease is due to a
slight decrease in the portfolio of single family loans serviced for others,
$6.4 billion at March 31, 1996 compared to $6.9 billion at March 31, 1995.

Other fees and charges were $7.0 million in the first six months of fiscal
1996 compared to $5.7 million in the first six months of fiscal 1995. The
increase was primarily due to growth in mutual fund and annuity sales. The
growth in these alternative products reflected the low interest rate
environment, more experienced salespeople, and increased marketing of those
products.

1995 COMPARED TO 1994. Non-interest income was $115.0 million for fiscal
1995, a $3.9 million decrease from $118.9 million for fiscal 1994. This decrease
is attributable, in part, to a $2.8 million decrease in gains on sales of single
family MSRs and single family warehouse loans which were $60.5 million and $63.3
million, respectively, for fiscal 1995 and 1994.

In September 1995, the Company adopted SFAS No. 122, effective October 1,
1994. This statement requires that, among other things, the book value of
mortgage loans be allocated at the time of origination between the MSRs and the
related loans, provided there is a plan to sell or securitize such loans. With
the implementation of SFAS No. 122, the original cost basis of the loan is
allocated between the loan and the MSRs, thus increasing the gains on sales of
loans and reducing the gains on sales of MSRs.

The implementation of SFAS No. 122 resulted in the capitalization of $28.7
million of originated MSRs during fiscal 1995 and an increase to net income and
stockholders' equity of $9.8 million. This implementation also had the effect of
decreasing the gains on sales of single family MSRs by $17.7 million and
increasing the gains on single family warehouse loans by $34.6 million.
Excluding the effects of implementing SFAS No. 122, the gains on sales of single
family MSRs and the gains (losses) on single family warehouse loans would have
been $51.8 million and $(8.2) million, respectively. In accordance with the
requirements of SFAS No. 122, the prior year amounts have not been restated. See
Notes 1 and 6 to the Consolidated Financial Statements.

Excluding the effects of SFAS No. 122 in fiscal 1995, the gains on single
family MSRs were $51.8 million, compared to $67.2 million for fiscal 1994.
During fiscal 1995, single family MSRs were sold at an average premium of 181
basis points, compared to 149 basis points during fiscal 1994. The average
premiums on MSRs sold in fiscal 1994 were lower compared to fiscal 1995,
reflecting the lower interest rate environment during the first half of fiscal
1994. The rise in market interest rates during the second half of fiscal 1994,
and continuing through the beginning of fiscal 1995 had a positive effect on the
average premiums on servicing rights sold, reflecting an increase in the value
of the servicing portfolio due to actual and anticipated declines in
prepayments. The increase in interest rates during the second half of fiscal
1994 and during fiscal 1995 resulted in a decrease in originations. The decrease
in originations and the retention of a greater proportion of originated loans
for the Bank's own portfolio decreased the volume of MSRs available for sale
during fiscal 1995.

Excluding the effects of SFAS No. 122 in fiscal 1995, the gains (losses) on
single family warehouse loans were $(8.2) million in fiscal 1995 and $(3.9)
million in 1994. The decrease reflects the increasingly competitive pricing in
the market during that period and decreased volumes sold.

Net gains on securities and MBS were $26,000 and $10.4 million for fiscal
1995 and 1994, respectively. The gains in fiscal 1994 primarily relate to the
sale of $213.0 million of MBS created when the Bank securitized single family
loans from its own portfolio.

Loan servicing fees and charges increased $11.8 million, or 37%, during
fiscal 1995 compared to fiscal 1994. The increase was due primarily to an
increase in the portfolio of single family loans serviced for others and an
increase in the average fees collected on those loans due to a change in the
composition of that portfolio. The portfolio of single family loans serviced for
others increased to $7.2 billion at September 30, 1995, compared to $4.7 billion
at September 30, 1994, primarily due to loan originations and purchases of MSRs.
See " -- Discussion of Financial Condition". The increase in the single family
loan servicing portfolio during fiscal 1995 includes $3.4 billion of loans
associated with MSRs purchased in fiscal 1994 that were not transferred to the
Bank until fiscal 1995 and were not included in the portfolio as of September
30, 1994. See Note 6 to the Consolidated Financial Statements.

1994 COMPARED TO 1993. Non-interest income was $118.9 million for fiscal
1994 compared to $146.7 million for fiscal 1993. This $27.8 million decrease is
primarily attributable to a $33.3 million decrease in gains on securities and
MBS partially offset by a $10.0 million increase in loan servicing fees and
charges.

Gains from sales of single family MSRs totaled $67.2 million in 1994, an
increase of $3.9 million, or 6%, from 1993. Although the dollar amount of single
family servicing sales decreased slightly to $4.5 billion in 1994 from $4.6
billion in 1993, the gains on sales of single family MSRs increased as a result
of an increase in the average servicing premium realized in such sales. The
average net servicing price was 149 basis points in 1994, up from 138 basis
points in 1993. During 1994, sales of single family MSRs were reduced and an
increased amount of originations were retained for the Company's own portfolio
along with the related MSRs, which contributed to the net increase of $847.5
million in the single family servicing portfolio in 1994. During 1994, the
single family servicing portfolio increased to $8.9 billion at September 30,
1994 from $8.1 billion at September 30, 1993. As of September 30, 1994, $3.4
billion of loans associated with the MSRs purchased in 1994 had not been
transferred to the Company and thus are not included in the single family
servicing portfolio balance of $8.9 billion.

The Company realized a net loss on single family warehouse loans of $3.9
million in fiscal 1994, compared to a net gain of $4.1 million in fiscal 1993,
primarily due to the increasingly competitive pricing in the market during
fiscal 1994. Additionally, volume sold decreased to $4.8 billion during fiscal
1994 as compared to $6.2 billion during fiscal 1993.

Gains on securities and MBS were $10.4 million in fiscal 1994 and $43.7
million in fiscal 1993. These gains relate to the sale of $213.0 million and
$359.4 million of MBS in fiscal 1994 and 1993, respectively, that were created
when the Bank securitized single family loans from its own portfolio. See " --
Discussion of Financial Condition". The gains in 1993 reflect the realization of
gains on mortgages acquired at a substantial discount in connection with the
Acquisition.

Loan servicing fees and charges of $31.7 million in 1994 increased $10.0
million, or 46%, over 1993. The increase primarily reflects an increase in the
portfolio of single family loans serviced for others to $4.7 billion at
September 30, 1994 from $4.0 billion at September 30, 1993.

NON-INTEREST EXPENSE

Non-interest expense comprises the following significant items:

NON-INTEREST EXPENSE

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
--------------------- ----------------------------------
1996 1995 1995 1994 1993
--------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Compensation and benefits............ $ 39,898 $ 43,192 $ 83,520 $ 86,504 $ 81,472
Occupancy............................ 9,439 9,072 18,713 17,196 15,971
Data processing...................... 8,120 8,116 16,360 15,821 15,072
Advertising and marketing............ 4,053 4,782 9,262 10,796 8,772
Amortization of intangibles.......... 9,801 10,718 21,856 18,247 24,469
SAIF deposit insurance premiums...... 6,129 5,630 11,428 11,329 10,162
Furniture and equipment.............. 3,128 3,219 6,428 6,810 5,535
Other................................ 18,736 16,916 27,009 32,890 40,511
--------- ---------- ---------- ---------- ----------
Total non-interest expense...... $ 99,304 $ 101,645 $ 194,576 $ 199,593 $ 201,964
========= ========== ========== ========== ==========
</TABLE>

SIX MONTHS ENDED MARCH 31, 1996 COMPARED TO SIX MONTHS ENDED MARCH 31,
1995. Non-interest expense was $99.3 million for the six months ended March 31,
1996 and $101.6 million for the six months ended March 31, 1995, or 1.72% and
2.13%, respectively, of average total assets for those same periods.
Compensation and benefits was the largest component of non-interest expense,
representing $39.9 million, or 40%, of total non-interest expense for the six
months ended March 31, 1996 and $43.2 million, or 42%, for the six months ended
March 31, 1995. Loan origination volume directly impacts the level of
compensation expense. Advertising expenses were also lower in the six months
ended March 31, 1996 compared to the six months ended March 31, 1995, reflecting
advertising expenses in connection with the introduction of community banking
products in the prior period. Reduced compensation and advertising expenses were
partially offset by increased other non-interest expenses. During the six months
ended March 31, 1996, $408,000 of gains on sales of real estate owned ("REO")
properties were recognized and included in other non-interest expense. Gains of
$1.7 million were recognized in the six months ended March 31, 1995.

1995 COMPARED TO 1994. Non-interest expense was $194.6 million for fiscal
1995 compared to $199.6 million for fiscal 1994, or 1.86% and 2.41%,
respectively, of average total assets for those periods. Compensation and
benefits was $83.5 million for fiscal 1995 and $86.5 million for fiscal 1994, or
43% of total non-interest expense for both of these periods. Advertising
expenses were lower during fiscal 1995 reflecting the introduction of community
banking products in the prior year. During fiscal 1995 and 1994, $11.2 million
and $5.8 million of gains on sales of REO properties were recognized and
included in other non-interest expense. Amortization of intangibles increased in
fiscal 1995, reflecting increased amortization of MSRs due to servicing
acquisitions.

1994 COMPARED TO 1993. Non-interest expense was $199.6 million for fiscal
1994 compared to $202.0 million for fiscal 1993, or 2.41% and 2.76%,
respectively, of average total assets for those periods. Compensation and
benefits was $86.5 million, or 43%, of total non-interest expense for fiscal
1994 and $81.5 million, or 40%, for fiscal 1993. Advertising expenses were
higher during fiscal 1994 due to advertising expenses in connection with the
introduction of community banking products during that period. During fiscal
1994, $5.8 million of gains on sales of REO properties were recognized and
included in other non-interest expense. Losses on sales of REO properties of
$120,000 were recognized in fiscal 1993. Amortization of intangibles decreased
in fiscal 1994 due to the reduction of goodwill; such a reduction is required
under SFAS No. 109 for tax benefits derived from acquisitions. See "Regulation
- -- Taxation".

INCOME TAXES

The provision for income taxes is comprised of current federal income
taxes, deferred federal income taxes, state income taxes, and payments due in
lieu of taxes. The provision for income taxes was an expense of $25.3 million
and $20.2 million for the six months ended March 31, 1996 and 1995,
respectively, and an expense

of $37.4 million in fiscal 1995, compared to benefits of $31.9 million and $26.2
million in fiscal 1994 and 1993, respectively. During fiscal 1994 and 1993, tax
benefits of $58.2 million and $44.2 million, respectively, were recorded. The
benefits recorded reflect the application of SFAS No. 109, which was implemented
effective October 1, 1992. Such benefits arose due to the expected utilization
of net operating loss carryforwards against future taxable income. No tax
benefits were recorded in fiscal 1995 or the first half of fiscal 1996. See Note
13 to the Consolidated Financial Statements.

During the third quarter of fiscal 1996, the Company recorded a $101.7
million tax benefit for the expected utilization of NOLs against future taxable
income. See Note 21 to the Consolidated Financial Statements.

MINORITY INTEREST

Dividends on Bank Preferred Stock paid by the Bank increased to $9.1
million for the six months ended March 31, 1996 from $4.3 million for the six
months ended March 31, 1995, due to the Bank's issuance of Bank Preferred Stock,
Series B during the fourth quarter of fiscal 1995. These shares are not owned by
the Company and, accordingly, are reflected as minority interest in the
Consolidated Financial Statements. Certain of the Selling Stockholders and
certain directors and managers of the Company are owners of the Bank Preferred
Stock. See "Management -- Security Ownership of Certain Beneficial Owners and
Management -- Principal Stockholders, Bank Preferred Stock".

DISCUSSION OF FINANCIAL CONDITION

OVERVIEW

The Company, through its principal subsidiary, the Bank, operates a
broad-based financial services company. Historically, the Company focused on
traditional single family mortgage lending and deposit gathering, as well as
retail and wholesale mortgage banking activities. Over the past few years, the
Company's management has pursued a strategy designed to reduce the Bank's
reliance on its thrift and mortgage banking lines of business by developing
potentially higher margin community banking and commercial banking lines of
business. Over this time, the Company has increased its portfolio of
multi-family, residential construction, consumer and commercial loans and has
also increased the level of lower cost transaction and commercial deposit
accounts. In addition to its efforts to increase originations of commercial and
consumer loans, the Company plans to increase the retention of higher yielding
single family and multi-family mortgage loans that, in the past, may have
otherwise been sold or securitized.

The following chart reflects activity in the MBS portfolio.

MORTGAGE-BACKED SECURITIES

(1) Principally related to the implementation of SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". These securities were
transferred from the trading portfolio.

The following chart reflects activity in the loan portfolio.

LOANS

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
-------------------------- ----------------------------------------
1996 1995 1995 1994 1993
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Beginning balance.................... $ 8,260,240 $ 5,046,174 $ 5,046,174 $ 4,862,379 $ 4,101,716
Originations
Single family(1)................ 1,945,434 1,453,267 3,226,324 5,424,550 6,645,096
Single family residential
construction.................. 208,847 100,328 239,481 133,609 129,254
Consumer........................ 53,570 41,734 99,249 94,153 64,742
Multi-family, commercial real
estate, and business credit... 146,309 162,897 307,636 230,995 60,489
Purchases
Single family................... 145,277 772,031 2,705,858 1,373,727 1,261,849
Consumer........................ -- 68 68 24,982 9,133
Multi-family and commercial real
estate........................ 7,927 56,093 56,093 68,466 --
Net change in mortgage banker
finance line of credit.......... 32,437 (76,009) (38,124) (238,223) 385,548
Repayments......................... (1,109,850) (460,020) (1,192,156) (862,420) (957,327)
Securitized loans sold or
transferred(2).................. (1,335,333) (802,549) (1,864,313) (5,595,325) (6,439,835)
Sales.............................. (452,211) (125,145) (308,612) (457,272) (402,029)
Other.............................. (24,567) (7,437) (17,438) (13,447) 3,743
------------ ------------ ------------ ------------ ------------
Ending balance....................... $ 7,878,080 $ 6,161,432 $ 8,260,240 $ 5,046,174 $ 4,862,379
============ ============ ============ ============ ============
</TABLE>
- ------------

(1) Includes $493.2 million, $659.2 million, $1.0 billion, $1.3 billion, and
$529.0 million of loans originated for the Company's portfolio during the
six months ended March 31, 1996 and 1995, and during fiscal 1995, 1994, and
1993, respectively.

(2) Includes $1.3 billion, $802.5 million, $1.9 billion, $4.4 billion, and $5.9
billion of loans securitized by the mortgage banking segment and sold to
third parties during the six months ended March 31, 1996 and 1995 and during
fiscal 1995, 1994, and 1993, respectively.

1996 ACTIVITY. Total assets decreased by $716.9 million, or 6%, to $11.3
billion at March 31, 1996 from $12.0 billion at September 30, 1995. This
decrease primarily resulted from loan and MBS sales and repayments.

Securities purchased under agreements to resell ("repurchase agreements")
and federal funds sold increased to $659.3 million at March 31, 1996 from $471.1
million at September 30, 1995. The increase primarily reflects the Company's
decision to borrow and invest funds on a short-term basis.

Securities decreased $57.6 million, to $58.4 million at March 31, 1996 from
$116.0 million at September 30, 1995 reflecting the sale of $67.4 million in
Treasury securities.

MBS decreased $444.2 million during the six months ended March 31, 1996,
primarily due to sales and repayments. During the six months ended March 31,
1996, the Company sold $198.8 million in MBS for a gain of $2.8 million,
compared to $77.6 million in sales for a gain of $5,000 during the six months
ended March 31, 1995. The increase in repayments resulted from a decline in
market interest rates.

In November 1995, the Financial Accounting Standards Board (the "FASB")
issued "A Guide to Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities". This implementation guide provided
the Company the opportunity to reassess the appropriateness of the
classification of its securities. It further stated that reclassifications of
securities from the held to maturity category resulting from this one-time
reassessment would not call into question the intent to hold other securities to
maturity in the future. During the first quarter of fiscal 1996, the Company
reassessed its securities portfolios and reclassified $1.2 billion in MBS from
the held to maturity portfolio to the available for sale portfolio. An
unrealized gain of

$4.2 million before tax, or $2.6 million after tax, was recorded in
stockholders' equity as a result of this transfer. At March 31, 1996 and 1995,
the Company had unrealized losses on securities and MBS available for sale, net
of tax, of $3.1 million and $11.8 million, respectively. See Note 4 to the
Consolidated Financial Statements.

During the six months ended March 31, 1996, total loans decreased $382.2
million, primarily due to sales and repayments. During this period, the Bank
sold $93.7 million of single family portfolio loans for a gain of $1.5 million
and $164.5 million of multi-family loans for a gain of $2.6 million.

The increase in single family loan originations during the six months ended
March 31, 1996 resulted from a decline in market interest rates in comparison to
a year ago. The decline in market interest rates prompted borrowers to refinance
their mortgages at lower rates of interest, resulting in an increase in
repayments as well as in single family mortgage loan originations. Refinancings
approximated $831.4 million and $214.2 million, or 41%, and 14% of total single
family mortgage loan originations during the six months ended March 31, 1996 and
1995, respectively. While fundings of multi-family, commercial real estate and
business credit loans decreased $16.6 million during the six months ended March
31, 1996 as compared to the six months ended March 31, 1995, commitments to fund
multi-family loans increased $42.7 million or 58%, to $116.7 million for the six
months ended March 31, 1996, as compared to $74.0 million for the six months
ended March 31, 1995. At March 31, 1996, $64.5 million of multi-family loan
commitments had not yet been funded. The increase in commitments to fund
multi-family loans, as well as the increase in residential construction loan
originations during the six months ended March 31, 1996, as compared to the six
months ended March 31, 1995, reflects the geographic expansion of these
products.

Increased consumer loan originations during the six months ended March 31,
1996 as compared to the six months ended March 31, 1995 are primarily due to
increased home improvement loan originations evidencing increased marketing
efforts.

The decline in market interest rates during the six months ended March 31,
1996 resulted in a $32.4 million increase, to $141.8 million at March 31, 1996,
in the MBF line of credit portfolio.

Single family loan purchases were $145.3 million during the six months
ended March 31, 1996, compared to $772.0 million during the six months ended
March 31, 1995. The decrease in purchases reflects a decrease in available
products at attractive yields.

In the aggregate, FHLB advances, reverse repurchase agreements and federal
funds purchased decreased $467.5 million to $5.1 billion at March 31, 1996 from
$5.6 billion at September 30, 1995, reflecting a reduction in the Bank's asset
base.

The decrease in commercial deposits, as well as the decrease in advances
from borrowers for taxes and insurance, reflects the payment of property taxes
during the six months ended March 31, 1996. See "Business -- Commercial Banking
Group -- Mortgage Banker Finance". Consumer and wholesale deposits also
decreased, primarily due to maturities of certificates of deposit that were not
renewed.

1995 ACTIVITY. Total assets increased to $12.0 billion at September 30,
1995 from $8.9 billion at September 30, 1994, reflecting an increase of $3.1
billion. The majority of this increase occurred in the loan portfolio, primarily
as a result of single family adjustable-rate loan originations retained for the
Bank's portfolio and purchases of single family loans.

Repurchase agreements and federal funds sold increased to $471.1 million at
September 30, 1995 from $358.7 million at September 30, 1994. The increase
primarily reflected the Company's decision to borrow and invest funds on a
short-term basis.

MBS decreased $430.6 million during fiscal 1995, primarily due to
repayments of $406.7 million. The decrease in purchases to $38.7 million for
fiscal 1995 from $667.3 million for fiscal 1994 reflected lower yields available
in the marketplace on MBS during fiscal 1995. The decreased volume of MBS sales,
to $77.6 million for fiscal 1995 as compared to $213.0 million during fiscal
1994, primarily resulted from reduced sales of securitized assets. There were no
loans securitized during fiscal 1995, as compared to $1.2 billion securitized
during fiscal 1994. The $515.7 million decrease in repayments for fiscal 1995,
as compared to fiscal 1994,

reflected a decrease in prepayments resulting primarily from rising interest
rates, beginning in the second half of fiscal 1994.

At September 30, 1995 and 1994, unrealized losses on securities and MBS
available for sale, net of tax, were $6.6 million and $13.4 million,
respectively. The decrease resulted principally from a decline in market prices
due to increased interest rates in the second half of fiscal 1994 and
prepayments of certain high yielding securities. See Note 4 to the Consolidated
Financial Statements.

During fiscal 1995, loans increased $3.2 billion, primarily as a result of
the retention of single family adjustable-rate loan originations for the Bank's
portfolio and purchases of single family loans.

While the total loan portfolio increased, single family loan originations
decreased $2.2 billion, or 41%, in fiscal 1995 compared to fiscal 1994 and $1.2
billion, or 18%, in fiscal 1994 compared to fiscal 1993. The decrease in single
family loan originations during fiscal 1995 and 1994 can be attributed to higher
interest rates during those periods leading to a decline in mortgage loan
refinance activity during fiscal 1995 and 1994. Refinancings approximated $600.6
million and $2.0 billion, or 17% and 37%, respectively, of total originations in
fiscal 1995 and 1994. Despite lower origination volumes, the Bank retained a
greater percentage of originations for its portfolio due to an increase in the
proportion of adjustable-rate loans as compared to fixed-rate loans originated
by the mortgage banking segment. During fiscal 1995, 30% of single family loan
originations were retained for portfolio, as compared to 24% in fiscal 1994. The
higher market interest rates also resulted in a decline in the MBF line of
credit portfolio.

During fiscal 1994 and 1995, despite the decline in single family mortgage
loan originations, the Bank's single family loan portfolio increased as a result
of purchases from third parties. The Bank also began retaining a larger
percentage of its single family mortgage loan originations for its portfolio
than it had historically. While purchases of single family loans increased
during these periods, purchases of MBS decreased. During fiscal 1995, yields on
loan purchases were higher than yields on MBS purchased. During fiscal 1995,
$2.7 billion of single family loans yielding 8.46% were purchased, including a
$1.3 billion purchase consisting of adjustable-rate loans, compared to $38.7
million of MBS purchased at a yield of 5.93%.

Increased single family residential construction, multi-family, and
commercial real estate loan originations in fiscal 1995 reflect geographic
expansion of these products.

Total deposits increased $418.0 million, to $5.2 billion at September 30,
1995, from $4.8 billion at September 30, 1994. The majority of the increase is
due to an increase in commercial deposits from MBF customers, reflecting the
Bank's effort to build its customer base for this type of deposit.

In the aggregate, FHLB advances, reverse repurchase agreements, and federal
funds purchased increased to $5.6 billion at September 30, 1995 from $3.2
billion at September 30, 1994, primarily to fund asset originations and
purchases. In connection with the increase in FHLB advances, FHLB stock was
purchased to maintain the required balance of such stock. The Bank is in
compliance with such stock requirements at September 30, 1995.

During fiscal 1995, the Bank issued the Bank Preferred Stock, Series B.
Costs incurred in connection with the stock issuance were recorded as a
reduction to paid-in capital. The Bank's total capital was increased by $96.2
million as a result of the Offering.

1994 ACTIVITY. Total assets increased $469.6 million to $8.9 billion at
September 30, 1994 from $8.4 billion at September 30, 1993. The primary reason
for the increase was the Bank's acquisition of single family loans and MBS.

MBS increased during 1994, primarily as a result of the securitization of a
portion of the single family loan portfolio and from purchases. During fiscal
1994, $1.2 billion of single family portfolio loans were securitized by the
Company. See Note 4 to the Consolidated Financial Statements. The securitization
process created $1.2 billion in MBS. The securitization process created both
senior and subordinated MBS. Approximately $39.1 million of MBS, which were the
subordinate portions of the securitizations, were sold. The MBS that were
created and retained were rated in one of the two highest rating categories by
the rating agencies of Moody's Investors Service, Inc., Standard & Poor's
Corporation and Fitch Investors Service, Inc.

Unrealized losses on securities and MBS available for sale, net of tax,
resulted in an unrealized loss of $13.4 million at September 30, 1994, down from
an unrealized gain of $33.4 million at September 30, 1993. This decrease
resulted principally from a decline in market prices due to increased interest
rates in the second half of fiscal 1994, sales of certain securities with gains,
and prepayments of certain high yielding securities. See Notes 3 and 4 to the
Consolidated Financial Statements.

Loans also increased during 1994, principally due to originations and
purchases of single family and multi-family loans. Single family loan
originations, however, decreased $1.2 billion, or 18%, as compared to the prior
year. Conversely, multi-family originations increased $170.5 million compared to
the prior year. During 1994, the Bank retained $1.3 billion of single family
loan originations for the held to maturity portfolio. These increases in the
portfolio were offset by loan sales and with the securitization of single family
loans during the year, as discussed above. The effect of lower refinance
activity resulting from higher interest rates during the second half of 1994
contributed to the decrease in single family loan originations, and a lower MBF
line of credit portfolio.

MSRs increased $46.0 million to $56.7 million at September 30, 1994 from
$10.7 million at September 30, 1993. During 1994, the Bank acquired or entered
into contracts to acquire MSRs associated with $3.9 billion in single family
loans at a premium of $50.9 million and $31.2 million in multi-family loans at a
premium of $59,000. See Note 6 to the Consolidated Financial Statements.

On December 23, 1993, the Bank entered into the Settlement Agreement
providing, among other things, for the termination of the Assistance Agreement
and the disposition of all remaining Covered Assets (as defined below). Covered
Assets and related assets decreased $392.5 million during 1994. For a
description of the Settlement Agreement, see "Business -- The Assistance
Agreement" and Note 7 to the Consolidated Financial Statements.

Other assets increased $84.6 million during 1994 primarily due to an
increase in the Company's deferred tax asset as a result of the recognition of
additional tax benefits. See Note 13 to the Consolidated Financial Statements.

Total deposits decreased $75.2 million during fiscal 1994. Retail deposits
decreased $390.9 million to $3.9 billion at September 30, 1994, from $4.3
billion at September 30, 1993. The Company's pricing strategy decreased rates
offered on deposits, resulting in an increase in the runoff of the Company's
certificates of deposits ("CDs"). Offsetting the decrease in retail deposits was
a $402.5 million increase in commercial deposits primarily due to the
introduction of commercial banking services (I.E. cash management and deposit
services) to the Company's MBF customers during 1994.

FHLB advances, reverse repurchase agreements, and federal funds purchased
increased to $3.2 billion at September 30, 1994 from $2.5 billion at September
30, 1993, primarily to fund asset originations and purchases and to replace
reduced deposit balances.

ASSET QUALITY

The Company, like all financial institutions, is exposed to certain credit
risks related to the value of the collateral that secures loans held in its
portfolio and the ability of borrowers to repay their loans during the term
thereof. The Bank has a Credit Committee, which is comprised of senior officers
of the Bank, that closely monitors the loan and REO portfolios for potential
problems on a continuing basis and reports to the Board of Directors of the Bank
at regularly scheduled meetings.

The Bank also has established an Asset Classification Committee, which is
comprised of senior management. This committee reviews the classification of
assets and reviews the allowance for losses. This committee reviews all assets
and periodically reports its findings directly to the Board of Directors of the
Bank. The asset classification policy sets forth certain requirements with
respect to how to classify certain assets. The Bank also has an Asset Review
Department, the function of which is to provide to the Board of Directors of the
Bank an independent ongoing review and evaluation of the quality of assets.

Nonperforming assets consist of nonaccrual loans and REO. Loans are usually
placed on nonaccrual status when the loan is past due 90 days or more, or the
ability of a borrower to repay principal and interest is in doubt. The portion
of the purchase discount attributable to potential credit risk on certain
acquired delinquent single

family loans is treated as non-accretable discount. The Bank believes that these
purchase discounts are sufficient to cover losses from these portfolios and to
provide a market rate of return. At September 30, 1994 and 1993, nonaccrual
loans included $5.7 million and $9.0 million of single family loans 90 days
delinquent that were subject to government guaranty and upon which interest
continued to accrue. There were no such loans at March 31, 1996 and September
30, 1995. At March 31, 1996 and September 30, 1995, single family nonaccrual
loans included $10.1 million and $10.2 million, respectively, of loans which
were contractually current pursuant to the borrowers' court-approved bankruptcy
plans.

The following tables present the Company's nonperforming assets.

NONPERFORMING ASSETS
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, ----------------------------------
1996 1995 1994 1993
------------ ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans
Single family(1)................ $101,936 $ 83,954 $ 85,722 $ 61,451
Single family residential
construction.................... 35 505 -- --
Consumer........................ 745 563 506 427
Multi-family.................... 510 213 3,802 3,233
Commercial real estate.......... 488 -- 2,342 --
------------ ---------- ---------- ----------
103,714 85,235 92,372 65,111
------------ ---------- ---------- ----------
(Discounts)/Premiums
Accretable(2)................... (449) (560) (669) (781)
Non-accretable.................. (7,246) (9,167) (15,384) (22,684)
------------ ---------- ---------- ----------
(7,695) (9,727) (16,053) (23,465)
------------ ---------- ---------- ----------
Net nonaccrual loans....... 96,019 75,508 76,319 41,646
REO, primarily single family
properties........................... 28,266 24,904 20,684 18,954
------------ ---------- ---------- ----------
Total nonperforming
assets..................... $124,285 $ 100,412 $ 97,003 $ 60,600
============ ========== ========== ==========
</TABLE>
- ------------

(1) Originated single family nonaccrual loans to total single family nonaccrual
loans were 29.06%, 20.64%, 13.66%, and 15.44% at March 31, 1996 and at
September 30, 1995, 1994, and 1993, respectively.

(2) Accretable discount arises principally from the purchase of performing
single family residential loans in the secondary market. The discount in
effect functions principally as an additional reserve by lowering the book
value of the outstanding loans. If the accretable discount is included with
the allowance for credit losses, the resulting ratio of the allowance for
credit losses to total loans would have been 0.77% at March 31, 1996.

SELECTED ASSET QUALITY RATIOS

<TABLE>
<CAPTION>
AT OR FOR
THE SIX MONTHS AT OR FOR THE YEAR ENDED
ENDED MARCH 31, SEPTEMBER 30,
--------------- -------------------------------
1996 1995 1994 1993
--------------- --------- --------- ---------

<S> <C> <C> <C> <C>
Allowance for credit losses to net
nonaccrual loans................... 38.00% 48.74% 30.73% 71.71%
Allowance for credit losses to
nonperforming assets............... 29.36(2) 36.65 24.18 49.28
Allowance for credit losses and
non-accretable discounts to net
nonaccrual loans................... 45.55 60.88 50.89 126.18
Allowance for credit losses to total
loans.............................. 0.46 0.44 0.46 0.61
Nonperforming assets to total
assets............................. 1.10(2) 0.84 1.09 0.72
Nonaccrual loans to total loans...... 1.21 0.91 1.51 0.85
Nonperforming assets to total loans
and REO............................ 1.56 1.21 1.91 1.23
Net loan charge-offs to average
loans(1)...........................
Total........................... 0.15 0.16 0.30 0.05
Single family................... 0.09 0.08 0.04 0.05
</TABLE>
- ------------

(1) Annualized for the interim period.

(2) Excluding the $10.1 million of loans included above, which were
contractually current pursuant to the borrowers' court-approved bankruptcy
plans at March 31, 1996, the allowance for credit losses to nonperforming
assets ratio would have been 31.96% and the nonperforming assets to total
assets ratio would have been 1.01%.

PORTFOLIO OF GROSS NON-ACCRUAL LOANS BY STATE AND TYPE
AT MARCH 31, 1996

<TABLE>
<CAPTION>
SINGLE FAMILY COMMERCIAL
RESIDENTIAL REAL
STATE SINGLE FAMILY CONSTRUCTION CONSUMER MULTI-FAMILY ESTATE TOTAL
- ------------------------------------- ------------- ------------- -------- ------------ ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
California........................... $ 53,378 -$- $ 1 $-- $-- $ 53,379
Texas................................ 10,895 35 730 -- -- 11,660
Florida.............................. 8,175 -- -- -- -- 8,175
New Jersey........................... 5,143 -- -- -- -- 5,143
Illinois............................. 5,023 -- -- -- -- 5,023
New York............................. 3,388 -- -- -- -- 3,388
Connecticut.......................... 1,802 -- -- 510 488 2,800
Maryland............................. 1,828 -- -- -- -- 1,828
Pennsylvania......................... 1,798 -- -- -- -- 1,798
Virginia............................. 1,352 -- -- -- -- 1,352
Massachusetts........................ 1,082 -- -- -- -- 1,082
Louisiana............................ 1,018 -- -- -- -- 1,018
Other................................ 7,054 -- 14 -- -- 7,068
------------- ------------- -------- ------------ ---------- ---------
Total............................ $ 101,936 $ 35 $ 745 $ 510 $ 488 $ 103,714
============= ============= ======== ============ ========== =========
% of Total........................... 98.3% -- % 0.7% 0.5% 0.5% 100.0%
============= ============= ======== ============ ========== =========
</TABLE>

% OF
STATE TOTAL
- ------------------------------------- ------

California........................... 51.5%
Texas................................ 11.2
Florida.............................. 7.9
New Jersey........................... 5.0
Illinois............................. 4.8
New York............................. 3.3
Connecticut.......................... 2.7
Maryland............................. 1.8
Pennsylvania......................... 1.7
Virginia............................. 1.3
Massachusetts........................ 1.0
Louisiana............................ 1.0
Other................................ 6.8
------
Total............................ 100.0%
======
% of Total...........................

Total nonperforming assets increased $23.9 million to $124.3 million at
March 31, 1996 from $100.4 million at September 30, 1995. The single family
nonaccrual loans increased $18.0 million, reflecting, in part, the effects of
the loan purchases which occurred in the second half of 1995.

The portion of the purchase discount attributable to potential credit risk
on certain acquired delinquent single family loans is treated as non-accretable
discount. The Bank believes that these purchase discounts are sufficient to
cover losses from these portfolios and to provide a market rate of return. The
non-accretable discount decreased $2.0 million to $7.2 million at March 31, 1996
from $9.2 million at September 30, 1995. This decrease resulted primarily from
loans being foreclosed upon and transferred to REO. The non-accretable discount
related to these loans was also transferred. REO increased $3.4 million to $28.3
million at March 31, 1996 from $24.9

million at September 30, 1995. This increase primarily resulted from higher
levels of delinquencies on a larger loan portfolio.

Total nonperforming assets increased $3.4 million to $100.4 million at
September 30, 1995 from $97.0 million at September 30, 1994. The multi-family
and commercial real estate nonaccrual loans decreased $5.9 million from
September 30, 1994. This decrease resulted primarily from loans being paid in
full, and improvement in performance and cash flows. The non-accretable discount
decreased $6.2 million to $9.2 million at September 30, 1995 from $15.4 million
at September 30, 1994. This decrease resulted primarily from loans being
foreclosed upon and transferred to REO. The non-accretable discount related to
these loans was also transferred. REO increased $4.2 million to $24.9 million at
September 30, 1995 from $20.7 million at September 30, 1994. This increase
resulted primarily from increased volumes in the single family portfolio.

Total nonperforming assets increased $36.4 million to $97.0 million at
September 30, 1994 from $60.6 million at September 30, 1993. The single family
nonaccrual loans increased $24.3 million to $85.7 million at September 30, 1994
from $61.4 million at September 30, 1993. This increase resulted primarily from
the purchase, at substantial discounts, of single family loans that were
delinquent at acquisition. The Company has historically purchased nonperforming
loans as part of a larger loan purchase from the RTC, the FDIC or liquidating
institutions, and realized profits by modifying, restructuring and liquidating
the loans as necessary. The non-accretable discount decreased $7.3 million to
$15.4 million at September 30, 1994 from $22.7 million at September 30, 1993.
The decrease resulted primarily from a reallocation of approximately $11.2
million of non-accretable discounts to accretable discounts due to improved
performance of the loans, offset by an increase in non-accretable discounts
related to the purchase discussed above.

The Company adopted SFAS No. 114, "Accounting by Creditors for Impairment
of a Loan", and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan
- -- Income Recognition and Disclosures, an amendment of SFAS No. 114", effective
October 1, 1995. These statements address the accounting by creditors for
impairment of certain loans. They apply to all creditors and to all loans,
uncollateralized as well as collateralized, except for large groups of
small-balance homogeneous loans that are collectively evaluated for impairment,
loans that are measured at fair value or at lower of cost or fair value, leases
and debt securities. These statements apply to all loans that are restructured
in a troubled debt restructuring involving a modification of terms. Loans within
the scope of these statements are considered impaired when, based on current
information and events, it is probable that all principal and interest amounts
due will not be collected in accordance with the contractual terms of the loans.
At March 31, 1996, the recorded investment in impaired loans, pursuant to SFAS
No. 114, totaled $4.7 million. There was no allowance for credit losses
determined in accordance with SFAS No. 114 related to these impaired loans
because the measured values of the loans exceeded the Company's recorded
investments in the loans.

The Company's criticized and classified assets are identified pursuant to
management's asset classification policy, which was established in accordance
with regulatory guidelines.

RECONCILIATION OF CRITICIZED AND CLASSIFIED ASSETS TO
NONPERFORMING ASSETS
AT MARCH 31, 1996

<TABLE>
<CAPTION>
NONPERFORMING PERFORMING TOTAL
------------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Criticized assets:
Special Mention
Single family residential
construction..................... $ -- $ 186 $ 186
Multi-family....................... -- 10,753 10,753
Commercial real estate and business
credit........................... -- 2,501 2,501
------------- ---------- ----------
Total criticized assets....... -- 13,440 13,440
------------- ---------- ----------
Classified:
Substandard
Single family...................... 94,962 -- 94,962
Single family residential
construction..................... 35 -- 35
Consumer........................... 672 -- 672
Multi-family....................... 404 17,979 18,383
Commercial real estate and business
credit........................... 395 2,939 3,334
Real estate owned.................. 28,266 -- 28,266
------------- ---------- ----------
124,734 20,918 145,652
Doubtful -- multi-family.............. -- 350 350
Loss.................................. -- -- --
------------- ---------- ----------
Total classified assets....... 124,734 21,268 146,002
------------- ---------- ----------
Total criticized and
classified assets........... $ 124,734 $ 34,708 $ 159,442
============= ========== ==========
Total classified assets as a % of total
gross loans........................... 1.84%
Total allowance for credit losses as a %
of total classified assets............ 24.99%
</TABLE>

The Company establishes an allowance for credit losses based on
management's periodic evaluation of the loan portfolio and considers such
factors as historical loss experience, delinquency status, identification of
adverse situations that may affect the ability of obligators to repay, known and
inherent risks in the portfolio, assessment of economic conditions, regulatory
policies, and the estimated value of the underlying collateral, if any. Although
the Company's credit management systems have resulted in a very low loss
experience, there can be no assurance that such results will continue in the
future. The allowance for credit losses is based principally on delinquency
status and historical loss experience.

The following table presents the Company's allowance for credit losses.

ALLOWANCE FOR CREDIT LOSSES

<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED SEPTEMBER
MARCH 31, 30,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Beginning balance....................... $ 36,801 $ 23,454 $ 23,454 $ 29,864 $ 28,214
Provision.......................... 5,850 4,157 24,293 6,997 4,083
Charge-offs net of recoveries...... (6,162) (2,572) (10,946) (13,407) (2,433)
--------- --------- --------- --------- ---------
Ending balance.......................... $ 36,489 $ 25,039 $ 36,801 $ 23,454 $ 29,864
========= ========= ========= ========= =========
</TABLE>

ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES

<TABLE>
<CAPTION>
AT MARCH 31, AT SEPTEMBER 30,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Single family........................ $ 28,799 $ 16,784 $ 29,594 $ 15,905 $ 15,238
Single family residential
construction......................... 483 473 361 399 306
Consumer............................. 3,339 2,455 3,247 1,822 355
Multi-family......................... 3,229 2,974 3,054 2,456 1,474
Commercial real estate and business
credit............................. 183 2,112 97 2,112 11,382
Mortgage Banker Finance line of
credit............................. 412 236 410 684 944
Single family mortgage warehouse..... 44 5 38 76 165
--------- --------- --------- --------- ---------
Total........................... $ 36,489 $ 25,039 $ 36,801 $ 23,454 $ 29,864
========= ========= ========= ========= =========
</TABLE>

The allowance for credit losses decreased to $36.5 million at March 31,
1996 from $36.8 million at September 30, 1995. The single family allowance for
credit losses decreased to $28.8 million at March 31, 1996 from $29.6 million at
September 30, 1995. This decrease primarily resulted from a reduced level of
single family loans as repayments exceeded originations.

The allowance for credit losses increased to $36.8 million at September 30,
1995 from $23.5 million at September 30, 1994. The single family allowance for
credit losses increased to $29.6 million at September 30, 1995 from $15.9
million at September 30, 1994. This increase primarily resulted from an increase
in the single family loan portfolio to $7.1 billion at September 30, 1995 from
$4.2 billion at September 30, 1994 due to purchases of $2.7 billion during
fiscal 1995 and additional originations retained for portfolio of $1.0 billion.
Purchases and originations of loans result in provisions for credit losses being
provided which increase the allowance for credit loss relating to these loans.
The consumer allowance for credit losses increased to $3.2 million at September
30, 1995 from $1.8 million at September 30, 1994. This increase primarily
resulted from increased losses related to this unsecured consumer line of credit
portfolio.

The allowance for credit losses decreased to $23.5 million at September 30,
1994 from $29.9 million at September 30, 1993. The commercial real estate and
business credit allowance for credit losses decreased to $2.1 million at
September 30, 1994 from $11.4 million at September 30, 1993. This decrease
primarily resulted from a $10.1 million charge-off in fiscal 1994 related to a
single commercial real estate loan. See Note 5 to the Consolidated Financial
Statements.

The Bank charges-off loans, other than consumer loans, when all attempts
have been exhausted to resolve any outstanding loan or legal issues. For
consumer loans, all loans are charged-off when they contractually become 120
days delinquent.

The components of charge-offs and recoveries by property type for
the periods indicated are as follows:

NET LOAN CHARGEOFFS

<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED MARCH 31, SEPTEMBER 30,
-------------------- ---------------------------------
1996 1995 1995 1994 1993
--------- --------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Charge-offs
Single family................... $ (3,242) $ (1,441) $ (4,840) $ (1,722) $ (2,167)
Single family residential
construction.................. -- -- -- -- (71)
Consumer........................ (3,008) (1,190) (2,847) (1,365) (72)
Multi-family.................... -- -- -- (233) --
Commercial real estate and
business credit............... -- -- (3,389) (10,145) --
Single family mortgage
warehouse..................... -- (2) (2) -- (148)
--------- --------- ---------- ---------- ---------
Total charge-offs.......... (6,250) (2,633) (11,078) (13,465) (2,458)
========= ========= ========== ========== =========
Recoveries
Single family................... 18 27 36 20 6
Consumer........................ 70 32 94 38 19
Multi-family.................... -- 2 2 -- --
--------- --------- ---------- ---------- ---------
Total recoveries........... 88 61 132 58 25
--------- --------- ---------- ---------- ---------
Total net charge-offs...... $ (6,162) $ (2,572) $ (10,946) $ (13,407) $ (2,433)
========= ========= ========== ========== =========
Net loan charge-offs to
average loans............ 0.15% 0.09% 0.16% 0.30% 0.05%
</TABLE>

Net loan charge-offs for all loan types increased to $6.2 million for the
six months ended March 31, 1996 from $2.6 million for the six months ended March
31, 1995. The Bank's loan portfolio consists primarily of single family mortgage
loans. Net charge-offs on the single family portfolio increased to $3.2 million
for the six months ended March 31, 1996 from $1.4 million for the six months
ended March 31, 1995. This resulted in net charge-offs as a percentage of single
family loans on average of 0.09% and 0.06%, respectively, for the six months
ended March 31, 1996 and 1995 (annualized). Net charge-offs on the consumer loan
portfolio increased to $2.9 million for the six months ended March 31, 1996 from
$1.2 million for the six months ended March 31, 1995. The increase primarily
relates to the unsecured consumer line of credit portfolio.

Net loan charge-offs for all loans decreased to $10.9 million for fiscal
1995 compared to $13.4 million for fiscal 1994. Net charge-offs on the
commercial real estate and business credit portfolio decreased to $3.4 million
for fiscal 1995 compared to $10.1 million for fiscal 1994. The charge-off in
fiscal 1995 included a $3.4 million charge related to the sale of a single
commercial real estate loan. Excluding the commercial real estate loan
charge-offs, net charge-offs to average loans outstanding would have been $7.5
million and $3.3 million or 0.11% and 0.07%, respectively, for fiscal 1995
compared to fiscal 1994. Net charge-offs on the single family portfolio
increased to $4.8 million for fiscal 1995 compared to $1.7 million for fiscal
1994. This resulted in net charge-offs as a percentage of single family loans on
average of 0.08% and 0.04%, respectively, for fiscal 1995 compared to fiscal
1994. Net charge-offs on the consumer loan portfolio increased to $2.8 million
for fiscal 1995 compared to $1.3 million for fiscal 1994. This increase
primarily relates to the unsecured consumer line of credit portfolio.

Net loan charge-offs for all loans increased to $13.4 million for fiscal
1994 compared to $2.4 million for fiscal 1993. This increase reflects a $10.1
million charge-off related to a single commercial real estate loan. Excluding
this commercial real estate loan charge-off, net charge-offs to average loans
outstanding would have been $3.3 million and $2.4 million or 0.07% or 0.05%,
respectively, for fiscal 1994 compared to fiscal 1993. Net charge-offs on the
single family portfolio decreased to $1.7 million for fiscal 1994 compared to
$2.2 million for fiscal 1993. This resulted in net charge-offs as a percentage
of single family loans on average of 0.04% and

0.05%, respectively, for fiscal 1994 compared to fiscal 1993. Net charge-offs on
the consumer loan portfolio increased to $1.3 million for fiscal 1994. This
increase primarily relates to the unsecured consumer line of credit portfolio.

Excluding charge-offs associated with the single commercial real estate
loan, discussed above, net REO gains of $16.8 million exceeded net charge-offs
of $13.3 million for the three years ended September 30, 1995. REO gains have
historically been significant for the Company because of discounts attributable
to the original loan purchases.

The Company's only credit product that has had charge-offs higher than its
original formula reserves is the unsecured consumer line of credit. The Company
began offering this product in 1993. The portfolio outstandings at March 31,
1996 were $56.0 million, for which allowances for credit losses were recently
increased from 4% to 6% of total outstandings. Due to the initial growth and
loss experience in this portfolio, the Company modified its underwriting,
approval and collection processes. Net of charge-offs, the portfolio has had
positive net interest income after loss provisions. The Company believes that
its current formula reserve policy is appropriate for this product.

CAPITAL RESOURCES AND LIQUIDITY

Liquidity refers to the ability or the financial flexibility to manage
future cash flows to meet the needs of depositors and borrowers and fund
operations on a timely and cost-effective basis. The Bank is required by the OTS
to maintain average daily balances of liquid assets and short-term liquid assets
in amounts equal to 5% and 1%, respectively, of net-withdrawable deposits plus
borrowings payable on demand or with remaining maturities of one year or less.
The average daily liquidity ratio for March 1996 was 5.84%, and the average
short-term liquidity ratio for March 1996 was 3.51%.

The primary sources of funds consist of deposits, advances from the FHLB,
reverse repurchase agreements, principal repayments on loans and MBS, and
proceeds from the issuance of Bank Preferred Stock. Liquidity may also be
provided from other sources including investments in short-term high credit
quality instruments. At March 31, 1996, these instruments generally comprised
repurchase agreements, federal funds sold, trading account assets, and MBS and
securities available for sale. These instruments totaled $2.0 billion at March
31, 1996 and $933.2 million, $905.4 million, and $2.4 billion at September 30,
1995, 1994, and 1993, respectively. Funding resources are principally used to
meet ongoing commitments to fund deposit withdrawals, repay borrowings, fund
existing and continuing loan commitments and maintain liquidity. See Notes 8, 9,
10, and 12 to the Consolidated Financial Statements.

As a holding company without significant assets other than its equity
interest in the Bank, the Company's ability to pay interest and principal on the
Senior Notes and on its other debt and to fund its operations depends upon cash
dividends it receives from the Bank and is subject to limitations imposed by the
Senior Notes. The Bank's ability to pay dividends is, in turn, dependent upon
its ability to generate earnings and is subject to a number of regulatory and
other restrictions and risks. Dividends may not be paid on the Bank Common Stock
if full dividends on the Bank Preferred Stock have not been paid for the four
most recent quarterly dividend periods. Thus, if for any reason the Bank failed
to declare and pay full quarterly dividends on the Bank Preferred Stock, the
Company would not receive any cash dividends from the Bank until four full
quarterly dividends on the Bank Preferred Stock had been paid. See "-- Capital"
and Notes 11 and 15 to the Consolidated Financial Statements for a discussion of
the various dividend limitations.

DEPOSITS

Deposits have provided the Company with a source of relatively stable and
low cost funds. Average deposits funded 44% of average total assets for the six
months ended March 31, 1996, 48% for fiscal 1995, 58% for fiscal 1994, and 66%
for fiscal 1993. The relationship of the Company's deposits to its average
assets has decreased over the past three years, while overall deposit levels
have remained constant. This change in the relationship of deposit funding is
due to the opportunities for leverage created by increased capital raised by the
Company through the issuance of preferred stock, in 1993 and 1995, and earnings
retained by the Company. Additionally, other financial instrument opportunities
available to consumers, who have traditionally invested in bank deposit
products, have become more widely used as an alternative to deposit products.

The following table reflects net activity in the Company's deposit
accounts:

DEPOSIT ACCOUNT ACTIVITY

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
----------------------- -------------------------------------
1996 1995 1995 1994 1993
----------- ---------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Consumer Accounts:
Checking accounts (including
interest-bearing and
non-interest bearing)......... $ 33,995 $ 1,650 $ 4,984 $ 5,467 $ (3,437)
Savings accounts................ (6,798) (61,520) (83,089) (97,286) (94,857)
Money market accounts........... 87,129 (19,140) (24,028) (1,275) (26,918)
Time deposits................... (193,275) 82,709 35,425 (389,465) 4,296
----------- ---------- ----------- ----------- -----------
Total consumer activity.... (78,949) 3,699 (66,708) (482,559) (120,916)
Commercial deposits.................. (134,763) 267,372 482,726 384,387 63,000
Wholesale deposits................... (91,450) (94,802) (157,019) (108,196) (157,805)
----------- ---------- ----------- ----------- -----------
Total activity before interest
credited........................... (305,162) 176,269 258,999 (206,368) (215,721)
Interest credited.................... 86,263 75,240 159,017 131,184 144,349
----------- ---------- ----------- ----------- -----------
Net change in deposits..... $ (218,899) $ 251,509 $ 418,016 $ (75,184) $ (71,372)
=========== ========== =========== =========== ===========
</TABLE>

The Company has historically utilized CDs to compete for consumer deposits.
Beginning in 1995, the Company's strategy has been to increase checking and
money market deposit accounts which are the core relationships that provide a
stable source of funding for the Company. As a complement to this strategy, the
Company continues to offer traditional deposit products, such as savings
accounts and CDs. See Note 8 to the Consolidated Financial Statements.

The Company offers cash management services to its MBF customers. These
services are commercial deposit accounts comprised of (i) operating accounts of
MBF customers, (ii) escrow deposits, and (iii) principal and interest payments
on the loans serviced by the MBF customers. At March 31, 1996, these deposits
totaled $797.3 million. The Company also raises wholesale deposits from
institutional customers through its Financial Markets Group. These deposits tend
to be interest rate sensitive and are subject to withdrawal if the rates paid on
these deposits are not competitive with other market rates. While the Company
does not generally solicit brokered deposits, the Company may accept brokered
deposits when permitted by regulation and available at favorable rates.

BORROWINGS

The Company also relies upon borrowings, primarily collateralized
borrowings such as advances from the FHLB and reverse repurchase agreements, to
fund its assets. These sources of funds were the primary source of funds for the
recent asset growth and accounted for 46% of the funding of average assets for
the six months ended March 31, 1996, 43% for fiscal 1995, 31% for fiscal 1994,
and 23% for fiscal 1993. Long-term fixed and variable rate advances are obtained
from the FHLB Dallas under a security and pledge agreement that restricts the
amount of borrowings to a percentage of (i) fully disbursed single family loans,
unless assets are physically pledged to the FHLB Dallas, and (ii) total assets.
At March 31, 1996, these limitations were 65% of the outstanding principal of
single family loans and 45% of total assets. See Notes 9 and 10 to the
Consolidated Financial Statements.

NOTES PAYABLE

In May 1989, the Bank issued $110 million of 15% subordinated capital notes
to raise regulatory capital as required by the Assistance Agreement. During
September 1990, the holders exchanged their notes for senior notes issued by the
Company with an interest rate of 15.75% (the "15.75% Notes") and the Bank
prepaid the 15% subordinated capital notes. In May 1993, the Company issued $115
million of Senior Notes at an initial rate of 8.05%. Simultaneously, the 15.75%
Notes and the note payable to related party were paid off. The interest rate on
the Senior Notes was subject to increase in certain circumstances and the PER
ANNUM interest rate was increased to 8.55% in October 1993, and to 9.05% in
February 1994. The Senior Notes mature on May 15, 1998. See Note 11 to the
Consolidated Financial Statements. The Exchange Offer is intended to satisfy the
condition of the Senior Notes pursuant to which the interest rate on the Senior
Notes will revert from 9.05% to 8.05% PER ANNUM commencing with and including
the date on which the Exchange Offer is consummated.

COMMITMENTS

At March 31, 1996, the Bank had mandatory forward delivery contracts for
single family loans of $514.8 million and had warehouse loans and a mortgage
pipeline of single family loans of $379.7 million and $190.8 million available
to fill these contracts. At March 31, 1996 the Bank had $1.3 billion of
commitments to extend credit. Because such commitments may expire without being
drawn upon, the commitments do not necessarily represent future cash
requirements. Scheduled maturities of CDs and borrowings (including advances
from the FHLB and reverse repurchase agreements) during the 12 months following
March 31, 1996, total $1.2 billion and $4.8 billion, respectively. Management
believes that the Bank has adequate resources to fund all of its commitments.

CAPITAL

The Bank is subject to regulatory capital requirements as defined in the
OTS capital regulations. The Bank's capital level at March 31, 1996 and
September 30, 1995 qualified it as "well-capitalized", the highest of five tiers
under applicable regulatory definitions. See "Regulation -- Safety and Soundness
Regulations -- Capital Requirements" and Note 15 to the Consolidated
Financial Statements.

The following table sets forth the regulatory capital ratios of the Bank as
of the dates indicated. See "Regulation -- Safety and Soundness
Regulations -- Capital Requirements".

REGULATORY CAPITAL RATIOS

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, -------------------------------
1996 1995 1994 1993
------------- --------- --------- ---------
<S> <C> <C> <C> <C>
Tangible Capital..................... 6.88% 6.20% 6.01% 6.17%

Core Capital......................... 6.96% 6.29% 6.17% 6.43%
Total Risk-Based Capital............. 14.20% 13.45% 14.02% 14.87%
</TABLE>

During fiscal 1993, the Bank issued its Preferred Stock, Series A and
during fiscal 1995, the Bank issued its Preferred Stock, Series B. Shares
totalling $85.5 million were issued as a result of the Preferred Stock, Series A
offering and shares totalling $100 million were issued as a result of the
Preferred Stock, Series B offering. These shares are not owned by the Company.
Bank Preferred Stock, which is treated as core capital for regulatory purposes,
was issued to increase total capital to support further growth.

CONTINGENCIES AND UNCERTAINTIES

A petition for review has been filed in the United States Court of Appeals
for the Fifth Circuit seeking to modify, terminate, and set aside the order
approving the Acquisition, which involved substantially all the Bank's initial
assets and liabilities. The same petitioner has filed a Motion to Intervene and
a Complaint in Intervention in an action pending in the United States District
Court of Texas, also seeking to set aside the order approving the Acquisition.
The petitioner contends, in both cases, that it submitted the most favorable bid
to acquire the assets and liabilities of Old USAT and that it should have been
selected as the winning bidder.

The Company is not a party to either of these proceedings. The Bank has
intervened in the Fifth Circuit case and may file a Motion to Intervene in the
District Court of Texas case at a later date. Management believes, after
consultation with legal counsel, that the claims of the petitioner are barred by
applicable time limits, have no basis for assertion under existing law, and will
not have a material adverse effect on the Bank's or the Company's financial
condition, results of operations, or liquidity. See "Legal Proceedings".

As noted above, the Bank, in its various operations, is subject to
substantial statutory and regulatory compliance obligations. See "Regulation".
The Bank attempts in good faith to comply with the requirements of the various
statutes and regulations to which it is subject. These statutes and regulations
are complex, however, and even inadvertent noncompliance could result in civil
and, in some cases, criminal liability. In this regard, a substantial part of
the Bank's business has involved the origination, purchase, and sale of mortgage
loans. During the past several years, numerous individual claims and purported
consumer class action claims have been commenced against a number of financial
institutions, their subsidiaries, and other mortgage lending institutions,
alleging violations of various state and regulatory provisions relating to
mortgage lending and servicing, including the TILA and the RESPA.

breach of fiduciary duty, breach of contract, or violation of federal or state
laws. Claims have involved, among other things, interest rates and fees charged
in connection with loans, interest rate adjustments on adjustable-rate mortgage
loans, timely release of liens upon loan payoffs, the disclosure and imposition
of various fees and charges, and the placing of collateral protection insurance.
See "Legal Proceedings".

Each house of Congress has passed legislation which, if it were to become
law, would require recapture of a thrift's post-1987 tax bad debt reserve over a
six-taxable-year period with the opportunity to defer recapture by up to two
years if certain residential loan requirements were met. A thrift's tax bad debt
reserve as of December 31, 1987 would not be subject to recapture. There would
be no financial statement impact on the Bank or the Company from this recapture
because a deferred tax liability has already been provided for on the Bank's
post-1987 tax bad debt reserves. At September 30, 1995, the Bank had
approximately $101 million of post-1987 tax bad debt reserves. The current tax
liability resulting from recapture of these reserves would be reduced by NOLs
available to offset this income. See "Risk Factors -- Recapitalization of the
SAIF and its Impact on SAIF Premiums; Other Legislative Proposals".

As of March 31, 1996, the Company had NOLs of $808.0 million available to
reduce taxable income in future years. There can be no assurance that the tax
deductions associated with these NOLs will be allowed by the IRS. In addition,
such tax deductions would be subject to significant limitation under Section 382
of the Code if the Company undergoes an Ownership Change. In the event of an
Ownership Change, Section 382 of the Code imposes an annual limitation on the
amount of taxable income a corporation may offset with NOLs and certain
recognized built-in losses. See "Regulation -- Taxation -- Net Operating Loss
Limitations".

FEDERAL FINANCIAL ASSISTANCE

The Bank received substantial payments from the FRF pursuant to the
Assistance Agreement and the Settlement Agreement. These payments aggregated
$218.9 million in fiscal 1994, including the settlement payment of $195.3
million, and $70.9 million in fiscal 1993. Approximately $23.1 million in fiscal
1994 and $9.3 million in fiscal 1993 reflected financial assistance that was
recorded as income. Pursuant to the Settlement Agreement, all financial
assistance and related payments ceased to accrue as of December 28, 1993, and,
as of that date, the Bank no longer managed or owned any Covered Assets. There
was no material adverse effect on the Company or the Bank as a result of the
Settlement Agreement, the transfer of certain Covered Assets to the FDIC and the
retention of the remainder of such Covered Assets without financial assistance.
See "Business -- The Assistance Agreement".

RECENTLY ISSUED ACCOUNTING STANDARDS

In March 1995, FASB issued SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". This statement
establishes accounting standards for recognizing and measuring impairment of
long-lived assets (and related goodwill) to be held and used and for such assets
held for disposal. The statement is effective for financial statements with
fiscal years beginning after December 15, 1995, with earlier application
encouraged. Implementation of this pronouncement should have no material adverse
effect on the Consolidated Financial Statements.

In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation". This statement defines a fair value based method of accounting
for an employee stock option or similar equity instrument and encourages
adoption of that method for all employee stock compensation plans. However, it
also allows an entity to continue to measure compensation cost for those plans
using the intrinsic value based method currently being followed and make pro
forma disclosures of net income and earnings per share under the fair value
based method of accounting. This statement is effective for financial statements
with fiscal years beginning after December 15, 1995, with earlier application
encouraged. Management is currently evaluating the proposed alternatives under
this statement.

BUSINESS

GENERAL

The Company is a broad-based financial services provider to consumers and
businesses in Texas and other selected regional markets throughout the United
States. Through the Bank, its principal subsidiary, the Company operates 67
Texas-based community banking branches serving nearly 182,000 households and
businesses, nine commercial banking offices and a nationwide network of mortgage
offices. At March 31, 1996, the Company had consolidated total assets of $11.3
billion, total deposits of $5.0 billion and total stockholders' equity of $526.4
million. Upon completion of the Common Stock Offering, the Company will be the
largest publicly traded depository institution headquartered in Texas, in terms
of both assets and deposits.

The Company's operating structure reflects its current business strategy,
with four business groups in two business segments.

Operating earnings (loss) by business segment, for the Company, were as
follows:

OPERATING EARNINGS BY BUSINESS SEGMENT

<TABLE>
<CAPTION>
BANKING MORTGAGE BANKING BANK UNITED TOTAL OPERATING
SEGMENT SEGMENT CORP.(1) ELIMINATIONS(2) EARNINGS(3)
------- ---------------- ----------- --------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Six months ended March 31,
1996............................... $58.3 $ 2.4 $(1.9) $ (3.8) $55.0
1995............................... 37.6 17.0 (0.6) (5.2) 48.8
Years ended September 30,
1995............................... 83.3 19.4 (5.0) (6.4) 91.3
1994............................... 63.2 24.4 (0.7) (11.4) 75.5
1993............................... 60.8 31.5 -- (15.2) 77.1
</TABLE>
- ------------

(1) Principally interest expense on the Senior Notes.

(2) Reflecting the elimination of dividends received by the Company from the
Bank.

(3) Operating earnings represents income before taxes, minority interest and
extraordinary loss, and excludes net gains (losses) on securities, MBS and
other loans.

BUSINESS STRATEGY

The Company's initial strategy was to obtain assets and deposits through
the acquisition of failed thrifts and through purchases from the RTC during the
resolution of the banking and thrift problems that occurred in the late 1980s
and early 1990s. Operationally, the Company focused on traditional single family
mortgage lending and on deposit gathering. As a complement to these activities,
the Company entered the retail and wholesale mortgage banking businesses,
leveraging management's substantial experience in the origination, purchase,
sale, structuring, and securitization of mortgage loans and the purchase and
sale of MSRs.

The Company's financial priorities initially were focused towards
minimizing interest rate and credit risk while maximizing the net value of the
Company's assets and liabilities. To this end, the Company maintained a highly
liquid pool of securitizable assets as its core portfolio holdings. Given the
liquid nature of its portfolio, the Company was very active in the buying and
selling of loans, MBS and MSRs when economically attractive.

Over the past few years, the Company's management has pursued a strategy
designed to reduce the Bank's reliance on its traditional thrift and mortgage
banking lines of business by developing higher margin consumer and commercial
lines of business. During this time, the Company has increased its portfolio of
multi-family, residential construction, consumer, and commercial loans and has
also increased the level of lower cost transaction and commercial deposit
accounts. To support this strategy, the Company has hired experienced commercial
banking professionals and engaged in more aggressive marketing campaigns. In
addition to its efforts to increase originations of commercial and consumer
loans, the Company plans to increase the retention of higher yielding single
family and multi-family mortgage loans that, in the past, may have been sold or
securitized.

MANAGEMENT

Day-to-day operations of the Bank are directed by Barry C. Burkholder,
President and CEO of the Bank, who brings over 20 years of commercial banking
experience to the Bank, with specific experience in consumer banking, mortgage
banking and related areas. In connection with the Common Stock Offering, Mr.
Burkholder will also become Chairman of the Board of the Bank and President and
CEO of the Company. The executive management group of the Bank is composed of
seven individuals who have worked together for the past six years, giving them a
thorough understanding of the businesses they have developed together. They
average more than 20 years of related industry experience, the majority of which
comes from commercial banks. As a team, they have brought the disciplines and
sophistication of commercial banking to the Bank. The next level of senior
management is composed of 42 executives, a third of whom were hired directly
from commercial banks. The balance of the senior management team has experience
working with various financial services companies, including mortgage banks,
thrifts and accounting firms. See "Management".

Lewis A. Ranieri, who has over 20 years of investment experience with
particular expertise in the field of MBS, has previously served as Chairman of
the Board of the Bank and of the Company, as well as President and CEO of the
Company, and will continue, after the Common Stock Offering, to serve as
Chairman of the Board of the Company. The Company is contemplating entering into
a consulting arrangement with Mr. Ranieri pursuant to which he would serve as a
consultant to the Company for a period of three years.

COMMUNITY BANKING GROUP

The Community Banking Group, which has marketed itself under the name "Bank
United" since 1993, operates a 67 branch community banking network, a 24-hour
telephone banking center, and a 62-unit ATM network, which together serve as the
platform for the Company's consumer and small business banking activities. The
Company's branch network includes 34 branches in the greater Houston area, 29
branches in the Dallas / Ft. Worth metropolitan area, and two branches each in
Austin and San Antonio. In addition, the Company plans to open at least three
supermarket-based banking branches in 1996. Through its branch network, the
Company maintains more than 400,000 accounts with an estimated 182,000
households and businesses. The Community Banking Group's principal activities
include deposit gathering, consumer lending, small-business banking, and
investment product sales.

DEPOSIT GATHERING

The Community Banking Group offers a variety of traditional deposit
products and services, including checking and savings accounts, money market
accounts, and CDs. In addition, the Company offers deposit products and services
tailored specifically to small business needs. The Community Banking Group's
strategy is to become its customers' primary financial services provider by
emphasizing high levels of customer service and innovative products. The Company
has a history of introducing innovative products that have helped it increase
its competitive position within its primary banking markets. At March 31, 1996,
the Community Banking Group maintained over 310,000 deposit accounts with $3.9
billion in deposits.

CONSUMER LENDING

Since 1992, the Community Banking Group has engaged in consumer lending for
its own portfolio. At March 31, 1996, consumer loans outstanding totaled $130.4
million. Through the Community Banking Group, the Company offers a variety of
consumer loan products, including home improvement loans, unsecured lines of
credit, and automobile loans. In addition, while the Company has offered its
customers credit cards since 1990, the Company intends to begin credit card
lending for its own portfolio in the fourth quarter of 1996. The consumer
lending division of the Community Banking Group also offers home equity lines of
credit ("HELOCs") outside of Texas. (Current laws prohibit HELOC lending in the
state of Texas; however, the Company has put in place the systems and controls
needed to manage a Texas-based HELOC operation in anticipation of Texas
legislative and constitutional changes that would authorize such lending.) The
Community Banking Group has developed the technology required for efficient loan
processing and underwriting, including credit scoring and such services as
taking loan applications by telephone.

SMALL BUSINESS BANKING

The Community Banking Group provides a broad range of credit services to
its small business customers, including lines of credit, working capital loans,
equipment loans, owner-occupied real estate loans, and Small Business
Administration loans. At March 31, 1996, the Community Banking Group had
approximately 280 business credit loans outstanding, representing approximately
$26.1 million in loan commitments. At March 31, 1996, the Community Banking
Group also had approximately $7.5 million in approved, unclosed business credit
loans and another $5.6 million in pending applications for business credit
loans. The Community Banking Group's small business strategy is focused on
offering loan products and services tailored specifically to most small business
needs, with highly responsive credit decision-making. The Company is
aggressively seeking to increase its small business lending volume.

INVESTMENT PRODUCT SALES

Since 1993, a subsidiary of the Bank has been marketing investment products
to the Bank's consumer customer base. At March 31, 1996, the investment product
sales force was comprised of 23 commissioned Series 7 and Group I licensed
registered representatives. A broad range of investment products, including
stocks, bonds, mutual funds, annuities, and securities are offered by these
registered representatives.

COMMERCIAL BANKING GROUP

The Commercial Banking Group provides credit and a variety of cash
management and other services to certain real estate and real estate related
businesses. The Commercial Banking Group conducts its activities through four
units: MBF, a financial service provider to small- and medium-sized mortgage
companies; Multi-Family Lending; Residential Construction Lending; and
Commercial Real Estate Lending. Business is solicited in Texas and in targeted
regional markets throughout the United States. The Commercial Banking Group
earns fees on committed lines and fees and interest on loans outstanding. The
Commercial Banking Group is expanding its products and industry specialties to
include health care lending, asset-based lending, and other industrial and
commercial loan products.

MORTGAGE BANKER FINANCE

The Commercial Banking Group's MBF unit provides third-party mortgage
companies with credit facilities, including warehouse lines of credit, gestation
repurchase agreements, term loans secured by MSRs and working capital credit
lines, as well as cash management services. At March 31, 1996, the MBF unit had
$100.8 million in unfunded commitments and $141.8 million of loans outstanding.
Since 1994, the MBF unit has also offered commercial banking services (I.E.,
cash management, document custody and deposit services) to its mortgage banking
customers. Deposits related to MBF activities totaled $797.3 million at March
31, 1996.

MULTI-FAMILY LENDING

Since 1990, the Commercial Banking Group has been providing multi-family
financing for established, operating multi-family properties, real estate
investment trusts and selected construction, acquisition, and rehabilitation
projects. At March 31, 1996, the Multi-Family Lending unit had $243.0 million in
multi-family commitments and $341.1 million in multi-family loans outstanding,
including $297.7 million in permanent loans and $43.4 million in construction
loans. Loans are solicited directly in Texas and in targeted regional markets
throughout the United States, through regional offices and selected preapproved
multi-family mortgage banking correspondents. From time to time, the Commercial
Banking Group also purchases servicing rights related to multi-family loans. At
March 31, 1996, the multi-family servicing portfolio totaled $669.2 million, of
which $373.5 million represented loans in the Company's portfolio.

RESIDENTIAL CONSTRUCTION LENDING

Since 1989, the Commercial Banking Group has been active in making loans to
builders for the construction of single family residential properties and, on a
more limited basis, loans for acquisition and development of improved
residential lots. During fiscal 1994 and 1995, the Company expanded into several
other major markets outside of Texas, including Atlanta, Chicago, Denver,
Orlando, Phoenix, and Philadelphia. Current markets in Texas include Houston,
Dallas, Austin, and San Antonio. At March 31, 1996, the Company had $401.7
million in commitments and $179.5 million of residential construction loans
outstanding.

COMMERCIAL REAL ESTATE LENDING

The Commercial Banking Group is engaged in commercial real estate lending
in targeted sectors, emphasizing permanent mortgages on income producing
properties, such as assisted living facilities. At March 31, 1996, the Company
had $45.1 million in permanent commercial real estate loans outstanding.

FINANCIAL MARKETS GROUP

The Financial Markets Group manages the Company's asset portfolio
activities, including loan acquisition and management and the securitization of
whole loans. Additionally, under the supervision of the ALCO, the

Financial Markets Group is responsible for the Company's investment portfolio,
for interest rate risk hedging strategies, and for securing funding sources
other than consumer and commercial deposits.

LOAN ACQUISITION AND MANAGEMENT

The Financial Markets Group acquires residential loans, primarily single
family loans, through traditional secondary market sources (mortgage companies,
financial institutions, and investment banks), as well as from the Mortgage
Banking Group. Since September, 1992, the Company has closed more than 50 loan
acquisition transactions representing more than $5.3 billion in loans. At March
31, 1996, the majority of the $7.5 billion of loans held to maturity by the
Company, which are primarily (88%) adjustable-rate loans, were managed by the
Financial Markets Group.

WHOLESALE FUNDINGS

The Financial Markets Group arranges funding sources other than consumer
and commercial deposits for the Company. Wholesale funding sources include
advances from the FHLB Dallas, reverse repurchase agreements, commercial
borrowings, and brokered CDs. At March 31, 1996, wholesale activities provided
$5.3 billion in funding. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Capital Resources and Liquidity" and
Notes 8, 9 and 10 to the Consolidated Financial Statements.

INVESTMENT PORTFOLIO MANAGEMENT

The Financial Markets Group manages the Company's investment portfolio,
which totaled nearly $2.7 billion at March 31, 1996. The Financial Markets Group
seeks to maintain a portfolio of assets that provides for liquidity needs and
maintains an interest rate spread over matched funded liabilities, including
assets that may be pledged as collateral for secured borrowings, and that
maximize utilization of the Bank's risk-based capital. See "Business --
Investment Portfolio" and Notes 2, 3 and 4 to the Consolidated Financial
Statements.

SECURITIZATION OF WHOLE MORTGAGE LOANS

The Financial Markets Group evaluates the Company's loan portfolio for
securitization opportunities and, when appropriate, creates MBS and retains the
master servicing. During the past three years, the Financial Markets Group has
structured seven securitization transactions, creating $1.8 billion in MBS. The
Company has sold substantially all of the non-investment grade securities
created, thus enhancing the Bank's risk-based capital ratios and credit quality.
These securitization activities are separate from the secondary marketing
activities of the Mortgage Banking Group.

MORTGAGE BANKING GROUP

The Mortgage Banking Group operates under the names "Bank United Mortgage"
in Texas and Virginia and "Commonwealth United Mortgage" elsewhere in the United
States. The Mortgage Banking Group originates and services first mortgage loans
for single family residences for both the Company's portfolio and for sale to
investors. At December 31, 1995, with originations of $3.4 billion in fiscal
year 1995, the Company was ranked by the AMERICAN BANKER as among the 30 largest
originators of single family loans in the nation. In addition, the Company was
ranked by the AMERICAN BANKER as one of the 40 largest single family loan
servicers in the nation at December 31, 1995. The Company's servicing portfolio
at March 31, 1996 was $11.6 billion. To manage the risk on mortgage pipeline
loans, the Company estimates the portion of the loans that will close and then
enters into forward sales of such loans in the secondary market. Consistent with
the increasing emphasis on its community and commercial banking business, the
Company is in the process of evaluating its strategic alternatives with respect
to its mortgage banking business, including a sale or restructuring of all or
parts of its mortgage origination business. No assurances can be made regarding
the timing or impact of any such sale or restructuring on the Company's
residential mortgage lending business.

The Mortgage Banking Group principally engages in three activities: Retail
Mortgage Operations, Wholesale Mortgage Operations, and Mortgage Servicing
Operations.

RETAIL MORTGAGE OPERATIONS

The Mortgage Banking Group offers a variety of fixed-rate and
adjustable-rate mortgage products for consumers through a nationwide network of
retail mortgage origination offices. For the 12 months ended March 31, 1996, the
Mortgage Banking Group originated $2.2 billion in retail mortgage loans. Loans
are originated through direct contact with individual borrowers by the Group's
commissioned retail loan officers.

WHOLESALE MORTGAGE OPERATIONS

The Mortgage Banking Group provides qualified mortgage brokers nationwide
with a variety of fixed-rate and adjustable-rate mortgage products through its
network of wholesale mortgage origination offices. For the 12 months ended March
31, 1996, the Mortgage Banking Group originated $1.7 billion in mortgage loans
through its wholesale operations. Loans are originated through contact with one
of the Company's 3,255 mortgage brokers, serviced by the Group's wholesale
account executives. All loans originated through wholesale mortgage operations
are underwritten by the Company's staff according to secondary market
requirements and internal guidelines. The loans are originated and closed in
either the name of the Bank or, under certain circumstances, the mortgage
broker's name with immediate assignment to the Bank.

MORTGAGE SERVICING OPERATIONS

The Mortgage Banking Group services residential mortgage loans owned by the
Bank and by others, including the GNMA, the FNMA, the FHLMC and private mortgage
investors. Mortgage loan servicing consists of collecting and accounting for
principal and interest payments from borrowers, remitting principal and interest
payments to investors, making cash advances when required, collecting funds for
and paying mortgage-related expenses such as taxes and insurance, inspecting
mortgaged properties when required, collecting delinquent mortgages, conducting
foreclosures and property dispositions in the event of unremedied defaults, and
generally administering the loans. At March 31, 1996, the Mortgage Banking Group
serviced over $11.6 billion in mortgage loans, including $4.0 billion for the
Company's portfolio and $7.6 billion for others. Mortgage servicing operations
are technology and process management intensive. The Company views itself as
being competitively positioned to service loans in an efficient and cost
effective manner relative to its peers. The Company has been ranked by ICM
Consultants, Inc. as one of the nation's top 10 servicing organizations in terms
of efficiency and productivity for the past five years.

LOAN PORTFOLIO

The Company has focused in recent years on originating and servicing
commercial banking assets. However, the Company's loan portfolio still reflects
the Company's origins as a thrift institution, with single family mortgage
originations constituting a majority of loans made by the Company. The following
tables set out the Company's loan origination levels, as well as the product and
geographic distribution of its loan portfolio.

LOAN ORIGINATIONS

(1) Includes $493.2 million, $659.2 million, $1.0 billion, $1.3 billion, and
$529 million of loans originated for the Company's portfolio during the six
months ended March 31, 1996 and 1995, and during fiscal 1995, 1994, and
1993.

LOAN PORTFOLIO
<TABLE>
<CAPTION>

AT SEPTEMBER 30,
AT MARCH 31, ----------------------------------------
1996 1995 1994 1993
------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Single family........................ $6,651,723 $ 7,061,088 $ 4,203,614 $ 3,376,181
Single family residential
construction....................... 179,505 115,436 57,786 35,904
Consumer............................. 130,356 123,096 108,179 57,902
Multi-family......................... 393,604 479,798 289,334 112,055
Commercial real estate and business
credit............................. 64,113 38,326 61,919 49,510
Mortgage banker finance line of
credit............................. 141,781 109,339 147,754 385,548
Single family mortgage warehouse..... 379,720 411,287 252,153 899,602
------------ ------------ ------------ ------------
7,940,802 8,338,370 5,120,739 4,916,702
Allowance for credit losses.......... (36,489) (36,801) (23,454) (29,864)
Accretable unearned discount......... (24,452) (38,460) (50,650) (27,923)
Net deferred loan origination fees... (1,525) (1,727) (461) 3,464
Unrealized losses.................... (256) (1,142) -- --
------------ ------------ ------------ ------------
Total...................... $7,878,080 $ 8,260,240 $ 5,046,174 $ 4,862,379
============ ============ ============ ============
</TABLE>

GEOGRAPHIC DISTRIBUTION OF REAL ESTATE LOAN PORTFOLIO

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, ----------------------------------------
STATE 1996 1995 1994 1993
- ---------------------------------------- ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
California.............................. $3,793,094 $ 3,958,293 $ 1,764,531 $ 1,375,506
Texas................................... 1,238,727 1,259,306 1,131,225 891,459
Florida................................. 450,849 479,379 456,812 485,977
Illinois................................ 168,905 190,801 138,072 72,749
Arizona................................. 130,703 115,260 30,142 20,932
Pennsylvania............................ 120,853 128,693 68,728 33,489
New Jersey.............................. 107,080 118,825 80,727 53,452
Virginia................................ 100,700 107,420 92,704 92,846
Washington.............................. 85,425 81,005 32,899 7,682
Georgia................................. 83,871 94,413 56,442 63,098
Other states............................ 1,039,559 1,202,943 827,480 532,740
Other -- single family mortgage
warehouse............................. 379,720 411,287 252,153 899,602
------------ ------------ ------------ ------------
Total real estate.................. 7,699,486 8,147,625 4,931,915 4,529,532
Mortgage Banker Finance lines of
credit................................ 141,781 109,339 147,754 385,548
Business credit......................... 19,015 7,320 -- --
Non real estate consumer................ 91,730 89,509 72,987 44,597
------------ ------------ ------------ ------------
Subtotal........................... 7,952,012 8,353,793 5,152,656 4,959,677
Non-accretable unearned discounts....... (11,210) (15,423) (31,917) (42,975)
------------ ------------ ------------ ------------
Total.............................. $7,940,802 $ 8,338,370 $ 5,120,739 $ 4,916,702
============ ============ ============ ============
</TABLE>

GEOGRAPHIC AND PRODUCT DISTRIBUTION OF LOAN PORTFOLIO
AT MARCH 31, 1996

<TABLE>
<CAPTION>
SINGLE SINGLE
FAMILY COMMERCIAL FAMILY NON REAL
SINGLE RESIDENTIAL MULTI- REAL MORTGAGE TOTAL ESTATE
STATE FAMILY CONSTRUCTION FAMILY ESTATE WAREHOUSE REAL ESTATE LOANS
- ---------------------------------------- --------- ------------ -------- ---------- --------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
California.............................. $3,771,710 $ -- $ 21,384 $ -- $ -- $3,793,094 $ --
Texas................................... 881,324 107,412 220,878 29,113 -- 1,238,727 --
Florida................................. 421,850 27,013 -- 1,986 -- 450,849 --
Illinois................................ 157,986 10,919 -- -- -- 168,905 --
Arizona................................. 97,372 14,323 19,008 -- -- 130,703 --
Pennsylvania............................ 111,273 7,083 2,497 -- -- 120,853 --
New Jersey.............................. 107,080 -- -- -- -- 107,080 --
Virginia................................ 100,700 -- -- -- -- 100,700 --
Washington.............................. 65,974 -- 19,451 -- -- 85,425 --
Georgia................................. 56,331 6,957 20,583 -- -- 83,871 --
Other states............................ 926,785 5,798 91,211 15,765 -- 1,039,559 --
Other(1)................................ -- -- -- -- 379,720 379,720 252,526
--------- ------------ -------- ---------- --------- ----------- --------
Total............................... $6,698,385 $179,505 $395,012 $ 46,864 $379,720 $7,699,486 $252,526
========= ============ ======== ========== ========= =========== ========
% of Total.............................. 84.23% 2.26% 4.97% 0.59% 4.77 % 96.82% 3.18%
========= ============ ======== ========== ========= =========== ========
</TABLE>

% OF
STATE TOTAL TOTAL
- ---------------------------------------- --------- ------

California.............................. $3,793,094 47.70%
Texas................................... 1,238,727 15.58
Florida................................. 450,849 5.67
Illinois................................ 168,905 2.12
Arizona................................. 130,703 1.64
Pennsylvania............................ 120,853 1.52
New Jersey.............................. 107,080 1.35
Virginia................................ 100,700 1.27
Washington.............................. 85,425 1.07
Georgia................................. 83,871 1.06
Other states............................ 1,039,559 13.07
Other(1)................................ 632,246 7.95
--------- ------
Total............................... $7,952,012 100.00%
========= ======
% of Total.............................. 100.00%
=========

- ------------

(1) Loans that cannot be classified by state.

LOAN SERVICING PORTFOLIO

At March 31, 1996, the Mortgage Banking Group was servicing $4.0 billion in
residential mortgage loans owned by the Company and $7.6 billion in mortgages
owned by others. Mortgage loan servicing consists of collecting and accounting
for principal and interest payments from borrowers, remitting principal and
interest payments to investors, making cash advances when required, collecting
funds for and paying mortgage-related expenses such as taxes and insurance,
inspecting mortgaged properties when required, collecting delinquent mortgages,
conducting foreclosures and property dispositions in the event of unremedied
defaults, and generally administering the loans.

In return for performing the servicing functions listed above, the Mortgage
Banking Group receives servicing fees under loan administration contracts. These
fees are withheld from the monthly payments made to investors, are usually based
on the principal balance of the loan being serviced, generally range from 0.25%
to 0.50% annually of the outstanding principal amount of the loan, and are
collected only as payments are received. Minimum servicing fees for
substantially all loans serviced under MBS are set from time to time by the
sponsoring agencies. As a servicer of loans securitized by the GNMA, the FNMA
and the FHLMC, the Bank may be obligated to make timely payment of principal and
interest to security holders, whether or not such payments have been made by
borrowers on the underlying mortgage loans. With respect to mortgage loans
securitized under GNMA programs, the Company is insured by the FHA against
foreclosure loss on FHA loans, and by the VA through guarantees on VA loans.
Although the GNMA, the FNMA and the FHLMC are obligated to reimburse the Company
for principal and interest payments advanced by the Company as a servicer, the
funding of delinquent payments or the exercise of foreclosure rights involves
costs to the Company that may not be fully reimbursed or recovered.

The following table sets forth information on the Mortgage Banking Group's
Single Family Servicing Portfolio.

SINGLE FAMILY SERVICING PORTFOLIO

<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED MARCH 31, SEPTEMBER 30,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------

(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Beginning servicing portfolio........ $ 12,532 $ 8,921 $ 8,921 $ 8,073 $ 7,187
--------- --------- --------- --------- ---------
Add: Servicing acquisitions(1)....... 78 3,406 3,730 567 --
Servicing on loans purchased by
the Bank...................... 1 440 440 98 1,098
Servicing originated............ 1,980 1,497 3,339 5,407 6,690
Subservicing acquired........... 23 135 255 -- --
--------- --------- --------- --------- ---------
Total additions............ 2,082 5,478 7,764 6,072 7,788
--------- --------- --------- --------- ---------
Less: Prepayments.................... 823 329 938 1,051 1,169
Foreclosures.................... 52 37 80 41 39
Servicing
released/transferred(1)....... 1,986 1,861 2,840 3,913 5,492
Amortization.................... 159 140 295 219 202
--------- --------- --------- --------- ---------
Total reductions........... 3,020 2,367 4,153 5,224 6,902
--------- --------- --------- --------- ---------
Ending servicing portfolio........... $ 11,594 $ 12,032 $ 12,532 $ 8,921 $ 8,073
========= ========= ========= ========= =========
COMPOSITION OF ENDING SERVICING
PORTFOLIO BY TYPE
Government...................... $ 2,391 $ 3,008 $ 3,090 $ 2,777 $ 1,874
Conventional.................... 9,203 9,024 9,442 6,144 6,199
--------- --------- --------- --------- ---------
Total servicing portfolio............ $ 11,594 $ 12,032 $ 12,532 $ 8,921 $ 8,073
========= ========= ========= ========= =========
COMPOSITION OF ENDING SERVICING
PORTFOLIO BY OWNER
Company......................... $ 3,956 $ 3,657 $ 4,010 $ 2,714 $ 3,634
Others(2)....................... 7,638 8,375 8,522 6,207 4,439
--------- --------- --------- --------- ---------
Total servicing portfolio............ $ 11,594 $ 12,032 $ 12,532 $ 8,921 $ 8,073
========= ========= ========= ========= =========
</TABLE>
- ------------

(1) The actual release or transfer of servicing does not necessarily take place
during the same period as the related sale or purchase of MSRs.

(2) Includes servicing related to loans securitized by the Financial Markets
Group into MBS, a portion of which have been retained by the Company.

During the six months ended March 31, 1996 and 1995 and in fiscal 1995 and
1994, the Mortgage Banking Group purchased MSRs associated with loan principal
amounts of $78.2 million, $526.0 million, $594.7 million and $3.9 billion at
premiums of $949,000, $8.9 million, $10.3 million and $50.9 million,
respectively. In addition to the MSRs acquired during fiscal 1994 associated
with $567 million of single family loans included above, MSRs associated with
$3.4 billion of single family loans were purchased in fiscal 1994. Because this
transaction was consummated at or near year-end, these loans were subserviced by
the seller until they were transferred to the Company in fiscal 1995.
Accordingly, this $3.4 billion purchase is not reflected in the table above
until fiscal 1995. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Discussion of Results of Operations --
Non-Interest Income" and Note 6 to the Consolidated Financial Statements.

Gains on the sale of MSRs are affected by changes in interest rates as well
as the amount of MSRs capitalized at the time of loan origination or MSR
acquisition. Purchasers of MSRs analyze a variety of factors, including
prepayment sensitivity, to assess the purchase price they are willing to pay.
Lower market interest rates prompt an increase in prepayments as consumers
refinance their mortgages at lower rates of interest. As prepayments increase,
the life of the servicing portfolio is reduced, decreasing the servicing fee
revenue that will be earned over the life of that portfolio and the price
third-party purchasers are willing to pay. The fair value of

servicing is also influenced by the supply and demand of servicing available for
purchase at any point in time. Conversely, as interest rates rise, prepayments
generally decrease, resulting in an increase in the value of the servicing
portfolio as well as the gains on sales of MSRs.

Historically, the Company has sold substantially all of the originated MSRs
related to non-portfolio loans. The Company may retain servicing in order to
maintain the servicing portfolio at an acceptable level, particularly during
periods of unusually high levels of prepayments or low levels of new
originations.

The following table presents the percentage of loans in the single family
servicing portfolio in each interest rate category.

<TABLE>
<CAPTION>
AT MARCH 31, 1996
-----------------------------------------------------------------------
LESS
THAN 7.00- 8.01- 9.01- 10.01- 11.01- 12.01%
7.00% 8.00% 9.00% 10.00% 11.00% 12.00% & ABOVE
--------- --------- --------- ------ ------ ------ -------

<S> <C> <C> <C> <C> <C> <C> <C>
Government........................... 5.1% 7.5% 5.3% 2.1% 0.4% 0.2% 0.1%
Conventional......................... 9.1 29.6 28.9 8.4 2.0 0.7 0.6
--------- --------- --------- ------ ------ ------ -------
Total........................... 14.2% 37.1% 34.2% 10.5% 2.4% 0.9% 0.7%
========= ========= ========= ====== ====== ====== =======
</TABLE>

The weighted average interest rate in the single family servicing portfolio
has decreased from 9.57% at September 30, 1991 to 8.14% at March 31, 1996,
principally as a result of the origination of mortgage loans with increasingly
lower rates during fiscal 1991 to 1995, the prepayment and refinance of higher
rate mortgages, and purchases of MSRs on loans originated by others at lower
rates. At March 31, 1996, the weighted average contractual maturity (remaining
years to maturity) of the loans in the residential mortgage loan servicing
portfolio was 23 years.

The following table sets forth as of March 31, 1996 the percentage of
loans, by principal amount, in the Company's single family servicing portfolio
secured on properties located in each state listed:

STATE PERCENT
- ------------------------------------- -------

California........................... 30.8%
Texas................................ 18.3
Florida.............................. 6.2
Illinois............................. 5.1
New Jersey........................... 4.8
Georgia.............................. 3.0
Other(1)............................. 31.8
-------
Total........................... 100.0%
=======

- ------------

(1) No other state constitutes more than 3%.

Of the approximately 159,000 loans serviced by the Mortgage Banking Group,
at March 31, 1996, 3.84% were delinquent and an additional 0.60% were in
foreclosure. The following table presents certain information regarding the
number of the delinquent single family loans serviced by the Mortgage Banking
Group as of the dates indicated. Completed foreclosures and loans less than 30
days delinquent have been excluded from the table below.

AT SEPTEMBER 30,
AT MARCH 31, ----------------------
1996 1995 1994 1993
------------- ---- ---- ----

30-59 Days Past Due................ 2.3% 2.7 % 2.3 % 2.4 %
60-89 Days Past Due................ 0.5 0.6 0.5 0.6
90+ Days Past Due.................. 1.0 0.9 0.8 0.8
Loans in foreclosure............... 0.6 0.6 0.7 0.6
--- ---- ---- ----
Total......................... 4.4% 4.8 % 4.3 % 4.4 %
=== ==== ==== ====

Loan administration contracts with the FNMA, and typically with private
investors, provide for continuation of servicing over the term of the loan, but
permit termination for cause or termination without cause upon payment of a
cancellation fee. Loan administration contracts with the GNMA and the FHLMC are
terminable only for cause. Management believes that the Mortgage Banking Group
is currently in substantial compliance with all material rules, regulations, and
contractual obligations related to mortgage loan servicing.

INVESTMENT PORTFOLIO

The Company maintains an investment portfolio for investment and liquidity
purposes.

INVESTMENT PORTFOLIO

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, ----------------------------------------
1996 1995 1994 1993
------------- ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Securities purchased under agreements
to resell and federal funds sold... $ 659,279 $ 471,052 $ 358,710 $ 547,988
Trading account assets............... 1,267 1,081 1,011 1,006
Securities........................... 58,351 116,013 114,115 43,430
MBS.................................. 1,954,070 2,398,263 2,828,903 2,175,925
------------- ------------ ------------ ------------
Total........................... $2,672,967 $ 2,986,409 $ 3,302,739 $ 2,768,349
============= ============ ============ ============
</TABLE>

The investment portfolio consists primarily of MBS. MBS were acquired as a
means of investing in housing-related mortgage instruments while incurring less
credit risk than that which arises in holding a portfolio of non-securitized
loans. Additionally, MBS include securities created through the securitization
of the Company's single family loans.

The MBS in the investment portfolio include FNMA, FHLMC, and GNMA
certificates, privately issued and credit enhanced MBS ("non-agency
securities"), and certain types of collateralized mortgage obligations ("CMOs").

MORTGAGE-BACKED SECURITIES

<TABLE>
<CAPTION>
AT MARCH 31, 1996
--------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED CARRYING
COST GAINS LOSSES FAIR VALUE VALUE
------------ ---------- ---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Held to maturity
Agency CMOs -- fixed-rate.......... $ 3,061 $ 61 $ -- $ 3,122
Non-agency
Fixed-rate...................... 7,529 1,837 93 9,273
Adjustable-rate................. 559,365 635 12,526 547,474
CMOs -- fixed-rate.............. 104,286 7 6,893 97,400
Other.............................. 303 -- -- 303
------------ ---------- ---------- ------------
674,544 $2,540 $ 19,512 657,572
========== ==========
Allowance for losses............... (56) --
------------ ------------
Held to maturity........... 674,488 657,572 $ 674,488
============
------------ ------------
Available for sale
Agency
Adjustable-rate................. 386,876 $3,335 $ 5 390,206
CMOs -- fixed-rate.............. 4,032 6 -- 4,038
CMOs -- adjustable-rate......... 245,565 1,219 121 246,663
Non-agency
Fixed-rate...................... 72,760 2,390 1 75,149
Adjustable-rate................. 440,638 687 2,723 438,602
CMOs -- fixed-rate.............. 79,944 -- 1,460 78,484
CMOs -- adjustable-rate......... 37,851 12 1,017 36,846
Other.............................. 8,360 1,234 -- 9,594
------------ ---------- ---------- ------------
Available for sale......... 1,276,026 $8,883 $ 5,327 1,279,582 $ 1,279,582
========== ========== ============
------------ ------------
Total mortgage-backed
securities............... $ 1,950,514 $ 1,937,154
============ ============
</TABLE>

The FNMA, FHLMC and GNMA certificates are modified pass-through MBS that
represent undivided interests in underlying pools of fixed-rate or certain types
of adjustable-rate, single family loans issued by the GNMA, a governmental
agency, and by the FNMA and the FHLMC, government-sponsored enterprises. The
non-agency securities acquired by the Company have been pooled and sold by
private issuers and were generally underwritten by large investment banking
firms. These securities provide for the timely payments of principal and
interest either through insurance issued by a reputable insurer, or by
subordinating certain payments under other securities secured by the same
mortgage pool in a manner that is sufficient to have the senior MBS earn one of
the two highest credit ratings from one or more of the nationally recognized
statistical rating agencies. As of March 31, 1996, 99% of the non-agency MBS had
a credit rating of AA/Aa or higher as defined by the Standard & Poor's
Corporation or Moody's Investor Services, Inc., respectively.

The repurchase agreements outstanding at March 31, 1996 and September 30,
1995 were collateralized by single family, multi-family, and commercial real
estate loans and MBS. The loans and MBS underlying the repurchase agreements are
held by the counterparty in safekeeping for the account of the Company or by a
third-party custodian for the benefit of the Company. All of the investments in
repurchase agreements and federal funds sold at March 31, 1996 matured on or
before April 24, 1996 and those outstanding at September 30, 1995

matured on or before October 5, 1995. The repurchase agreements provide for the
same loans and MBS to be resold at maturity.

See Notes 1 through 4 to the Consolidated Financial Statements for
additional information related to the assets in the investment portfolio.

DEPOSITS AND BORROWINGS

DEPOSITS

The Company attracts deposits through the Bank's 67 community banking
branches located primarily in the Houston and Dallas/Ft. Worth areas. Currently,
the principal methods used by the Company to attract and retain deposit accounts
include offering generally competitive interest rates, having branch locations
in these major Texas markets, and offering a variety of services for the
Company's customers. The Company uses traditional marketing methods to attract
new customers and savings deposits, including newspaper, radio, and television
advertising. The Company offers a traditional line of deposit products that
currently includes checking, commercial checking, money market and savings
accounts and certificates of deposit. These deposit products are specifically
tailored to meet the needs of the Company's retail and small business banking
customers.

The following table illustrates the levels of deposits gathered by the
Company's branch network at March 31, 1996.

COMMUNITY BANKING NETWORK

AT MARCH 31, 1996
------------------------------------
AVERAGE
DEPOSITS
NUMBER OF DEPOSITS PER
LOCATION BRANCHES OUTSTANDING BRANCH
- ------------------------------------- --------- ------------ ---------

(DOLLARS IN THOUSANDS)
Houston Area......................... 34 $ 2,392,261 $ 70,361
Dallas/Ft. Worth Area................ 29 1,322,686 45,610
Other................................ 4 212,889 53,222
--
------------
Total deposits.................. 67 $ 3,927,836 58,624
== ============

The Company also offers cash management services to its MBF customers.
These services are commercial deposit accounts comprised of operating accounts
of MBF customers, escrow deposits, and principal and interest payments on the
loans serviced by MBF customers. At March 31, 1996, these deposits totaled
$797.3 million. While the Company does not generally solicit brokered deposits,
the Company from time to time accepts brokered deposits when permitted by
regulation and available at favorable rates. Wholesale deposits are raised from
time to time through the Company's money desk from institutional investors.

The following table sets forth by account types the aggregate amount and
weighted average rate of the Company's deposits.

DEPOSITS

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
------------------------------------------------------------------
AT MARCH 31,
1996 1995 1994 1993
-------------------- -------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE
--------- -------- --------- -------- --------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest bearing deposits........ $ 242,560 -- % $ 181,196 -- % $ 76,498 -- % $ 44,149 -- %
Interest-bearing deposits
Transaction accounts............... 222,148 1.00 219,307 1.50 233,666 1.49 229,972 2.07
Insured money fund accounts
Consumer......................... 493,000 4.11 397,473 3.73 407,029 3.12 397,511 2.69
Commercial....................... 717,308 5.32 857,669 5.82 416,571 4.84 51,938 2.60
--------- --- --------- --- --------- --- --------- ---
Subtotal....................... 1,210,308 4.83 1,255,142 5.16 823,600 3.99 449,449 2.68
--------- --- --------- --- --------- --- --------- ---
Savings accounts................... 139,343 2.50 144,301 2.73 222,769 2.60 312,778 2.68
Certificates of deposit
Consumer......................... 2,912,263 5.72 3,063,631 5.84 2,949,715 4.88 3,251,391 4.77
Commercial....................... 3,348 5.02 2,273 5.36 -- -- -- --
Wholesale........................ 233,351 9.70 316,370 9.06 457,956 7.92 551,649 7.13
--------- --- --------- --- --------- --- --------- ---
Subtotal....................... 3,148,962 6.01 3,382,274 6.14 3,407,671 5.29 3,803,040 5.11
--------- --- --------- --- --------- --- --------- ---
Total interest-bearing
deposits..................... 4,720,761 5.37 5,001,024 5.59 4,687,706 4.74 4,795,239 4.58
--------- --- --------- --- --------- --- --------- ---
Total deposits................. $4,963,321 5.11% $5,182,220 5.40% $4,764,204 4.67% $4,839,388 4.53%
========= === ========= === ========= === ========= ===
Consumer............................. $3,843,134 $3,868,498 $3,834,238 $4,207,739
Commercial........................... 886,836 997,352 472,009 80,000
Wholesale............................ 233,351 316,370 457,957 551,649
--------- --------- --------- ---------
Total deposits................. $4,963,321 $5,182,220 $4,764,204 $4,839,388
========= ========= ========= =========
</TABLE>

The following table sets forth, by various interest rate categories, the
dollar amounts and the periods to maturity of the Company's time deposits at
March 31, 1996.

DEPOSIT MATURITIES

<TABLE>
<CAPTION>
CERTIFICATES MATURING IN THE YEAR ENDING MARCH 31,
------------------------------------------------------------------
STATED RATE 1997 1998 1999 2000 2001 THEREAFTER TOTAL
--------------- --------- --------- --------- --------- --------- ---------- ---------
(IN THOUSANDS)
<C> <C> <C> <C> <C> <C> <C> <C> <C>
2.99% & below........................ $ 1,824 $ -- $ -- $ -- $ -- $ -- $ 1,824
3.00% to 3.99%....................... 21,033 3,827 649 8 -- 3 25,520
4.00% to 4.99%....................... 291,351 237,112 16,495 32,615 1,051 3,099 581,723
5.00% to 5.99%....................... 524,650 564,293 144,050 47,412 5,496 15,581 1,301,482
6.00% to 6.99%....................... 131,259 436,705 82,683 57,147 60,189 19,592 787,575
7.00% to 7.99%....................... 127,964 80,121 7,690 5,723 21,599 12,888 255,985
8.00% to 8.99%....................... 11,580 1,273 2,581 3,010 1,700 379 20,523
9.00% to 9.99%....................... 265 741 6,249 2,925 12 446 10,638
10.00% to 10.99%..................... 31,200 7,444 23,974 728 591 325 64,262
Over 10.99%.......................... 69,648 29,517 -- 265 -- -- 99,430
--------- --------- --------- --------- --------- ---------- ---------
$1,210,774 $1,361,033 $ 284,371 $ 149,833 $ 90,638 $ 52,313 $3,148,962
========= ========= ========= ========= ========= ========== =========
</TABLE>

The following table sets forth the amount of the Company's certificates of
deposit that are $100,000 or greater by time remaining until maturity.

TIME DEPOSITS GREATER THAN $100,000

AT MARCH 31, 1996
------------------------------------
NUMBER OF ACCOUNTS DEPOSIT AMOUNT
------------------ --------------

(DOLLARS IN THOUSANDS)
Three months or less.................... 648 $ 68,289
Over three through six months........... 895 94,458
Over six through twelve months.......... 1,455 151,881
Over twelve months...................... 1,352 143,660
------ --------------
4,350 $458,288
====== ==============

BORROWINGS

The Company relies upon borrowings, primarily collateralized borrowings
such as advances from the FHLB and reverse repurchase agreements, to fund its
assets. These sources of funds were the primary source of funds for the recent
asset growth and accounted for 46% of the funding of average assets for the six
months ended March 31, 1996, 43% for fiscal 1995, 31% for fiscal 1994 and 23%
for fiscal 1993. Fixed and variable rate advances are obtained from the FHLB
Dallas under a security and pledge agreement that restricts the amount of
borrowings to the greater of (i) a percentage of fully disbursed single family
loans, unless assets are physically pledged to the FHLB Dallas, and (ii) a
percentage of total assets. At March 31, 1996, these limitations were 65% of the
outstanding principal of single family loans and 45% of total assets. See Notes
9 and 10 to the Consolidated Financial Statements.

The following table sets forth certain information regarding the borrowings
of the Company as of or for the period indicated.

BORROWINGS

<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE YEAR ENDED SEPTEMBER 30,
SIX MONTHS ENDED ----------------------------------------
MARCH 31, 1996 1995 1994 1993
---------------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Reverse Repurchase Agreements
Balance outstanding at period-end..... $ 949,936 $ 1,172,533 $ 553,000 $ 300,000
Fair value of collateral at
period-end......................... 987,478 1,239,527 673,000 321,200
Maximum outstanding at any
month-end.......................... 1,096,508 1,355,540 553,000 659,000
Daily average balance................. 982,115 887,932 273,899 345,269
Average interest rate................. 5.82% 5.99% 3.85% 3.23%
Federal Funds Purchased
Balance outstanding at period-end..... $ -- $ -- $ -- $ 10,000
Maximum outstanding at any
month-end.......................... -- -- 15,000 10,000
Daily average balance................. 54 521 767 740
Average interest rate................. 5.94% 5.95% 3.73% 2.84%
FHLB Advances
Balance outstanding period-end........ $4,139,023 $ 4,383,895 $ 2,620,329 $ 2,185,445
Maximum outstanding at any
month-end.......................... 4,384,798 4,386,605 2,697,829 2,217,745
Daily average balance................. 4,346,960 3,560,844 2,285,630 1,344,129
Average interest rate................. 6.18% 6.31% 3.98% 3.62%
</TABLE>

See Note 8 to the Consolidated Financial Statements for additional
information.

ASSET AND LIABILITY MANAGEMENT

The Company's asset and liability management process is utilized to manage
the Company's interest rate risk through structuring the balance sheet and
off-balance sheet portfolios to maximize net interest income while maintaining
acceptable levels of risk to changes in market interest rates. The achievement
of this goal requires a balance between profitability, liquidity and interest
rate risk.

Interest rate risk is managed by the ALCO, which is composed of senior
officers of the Bank, in accordance with policies approved by the Board of
Directors of the Bank. The ALCO formulates strategies based on appropriate
levels of interest rate risk. In determining the appropriate level of interest
rate risk, the ALCO considers the impact on earnings and capital of the current
outlook on interest rates, potential changes in interest rates, regional
economies, liquidity, business strategies and other factors. The ALCO meets
regularly to review, among other things, the sensitivity of assets and
liabilities to interest rate changes, the book and market values of assets and
liabilities, unrealized gains and losses, purchase and sale activity, the
mortgage pipeline, and the maturities of investments and borrowings.
Additionally, the ALCO reviews liquidity, cash flow flexibility, maturities of
deposits, consumer and commercial deposit activity, current market conditions,
and interest rates on both a local and national level.

The "interest rate sensitivity gap" is defined as the difference between
interest-earning assets and interest-bearing liabilities maturing or repricing
within a given time period. A gap is considered positive when the amount of
interest rate sensitive assets exceeds the amount of interest rate sensitive
liabilities. A gap is considered negative when the amount of interest rate
sensitive liabilities exceeds interest rate sensitive assets. During a period of
rising interest rates, a negative gap would tend to affect net interest income
adversely, while a positive gap would tend to result in an increase in net
interest income. During a period of falling interest rates, a negative gap would
tend to result in an increase in net interest income, while a positive gap would
tend to affect net interest income adversely. Different types of assets and
liabilities with the same or similar maturities may react differently to changes
in overall market rates or conditions, thus changes in interest rates may affect
net interest income positively or negatively even if an institution were
perfectly matched in each maturity category. While the interest rate sensitivity
gap is a useful measurement and contributes toward effective asset and liability
management, it is difficult to predict the effect of changing interest rates
solely on that measure, without accounting for alterations in the maturity or
repricing characteristics of the balance sheet that occur during changes in
market interest rates.

To effectively measure and manage interest rate risk, the Company uses
simulation analysis to determine the impact on net interest income under various
interest rate scenarios, balance sheet trends and strategies. From these
simulations, interest rate risk is quantified and appropriate strategies are
developed and implemented. Additionally, duration and market value sensitivity
measures are utilized when they provide added value to the overall interest rate
risk management process. The overall interest rate risk position and strategies
are reviewed by executive management and the Bank's Board of Directors on an
ongoing basis.

The following table sets forth the expected repricing characteristics of
the Company's consolidated assets and liabilities at March 31, 1996, utilizing
assumptions noted below:

ASSET/LIABILITY REPRICING

<TABLE>
<CAPTION>
AMOUNTS MATURING OR REPRICING IN
------------------------------------------------------------------
AFTER
THREE AFTER AFTER
MONTHS SIX MONTHS ONE YEAR
LESS THAN BUT WITHIN BUT WITHIN BUT WITHIN AFTER NON-
THREE MONTHS SIX MONTHS ONE YEAR FIVE YEARS FIVE YEARS REPRICING
------------ ----------- ----------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS(1)(2)
Residential construction and
commercial real estate loans..... $ 599,923 $ 6,275 $ 12,837 $ 154,403 $ 6,254 $ --
Single family mortgage warehouse... 379,719 -- -- -- -- --
Adjustable-rate loans and mortgage-
backed securities................ 3,025,481 2,101,348 1,487,350 1,007,120 26,395 --
Fixed-rate loans and mortgage-
backed securities................ 47,260 46,311 89,921 555,531 248,791 --
Cash and investment securities..... 994,980 -- 52,600 -- 40,009 --
Other assets....................... 76,470 -- -- -- -- 307,658
------------ ----------- ----------- ---------- ---------- ---------
Total assets................... $ 5,123,833 $2,153,934 $1,642,708 $1,717,054 $ 321,449 $ 307,658
============ =========== =========== ========== ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Certificates of deposit............ $ 465,343 $ 644,399 $1,107,134 $ 902,043 $ 30,043 $ --
Checking and savings(3)............ 1,108,572 91,606 183,213 430,968 -- --
------------ ----------- ----------- ---------- ---------- ---------
Total deposits................. 1,573,915 736,005 1,290,347 1,333,011 30,043 --
Senior Notes....................... -- -- -- 115,000 -- --
FHLB advances and other
borrowings....................... 3,516,307 653,564 843,202 71,200 5,045 --
Other liabilities.................. 287,056 -- -- -- -- 100,000
Minority interest.................. -- -- -- -- -- 185,500
Stockholders' equity............... -- -- -- -- -- 526,441
------------ ----------- ----------- ---------- ---------- ---------
Total liabilities, minority
interest, and stockholders'
equity....................... $ 5,377,278 $1,389,569 $2,133,549 $1,519,211 $ 35,088 $ 811,941
============ =========== =========== ========== ========== =========
Gap before off-balance-sheet
financial instruments.............. $ (253,445) $ 764,365 $ (490,841) $ 197,843 $ 286,361 $(504,283)
OFF-BALANCE-SHEET(5)
Interest rate swap
agreements -- pay floating....... (50,000) -- 50,000 -- -- --
Interest rate swap
agreements -- pay fixed -- -- -- -- -- --
------------ ----------- ----------- ---------- ---------- ---------
Gap.................................. $ (303,445) $ 764,365 $ (440,841) $ 197,843 $ 286,361 $(504,283)
============ =========== =========== ========== ========== =========
Cumulative gap....................... $ (303,445) $ 460,920 $ 20,079
===========
Weighted average gap(4).............. $ (54,367)
===========
Cumulative gap as a percentage of
total assets....................... (2.69%) 4.09% 0.18%
</TABLE>

TOTAL
-------------

ASSETS(1)(2)
Residential construction and
commercial real estate loans..... $ 779,692
Single family mortgage warehouse... 379,719
Adjustable-rate loans and mortgage-
backed securities................ 7,647,694
Fixed-rate loans and mortgage-
backed securities................ 987,814
Cash and investment securities..... 1,087,589
Other assets....................... 384,128
-------------
Total assets................... $ 11,266,636
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Certificates of deposit............ $ 3,148,962
Checking and savings(3)............ 1,814,359
-------------
Total deposits................. 4,963,321
Senior Notes....................... 115,000
FHLB advances and other
borrowings....................... 5,089,318
Other liabilities.................. 387,056
Minority interest.................. 185,500
Stockholders' equity............... 526,441
-------------
Total liabilities, minority
interest, and stockholders'
equity....................... $ 11,266,636
=============
Gap before off-balance-sheet
financial instruments..............
OFF-BALANCE-SHEET(5)
Interest rate swap agreements -- pay floating.......
Interest rate swap
agreements -- pay fixed
Gap..................................
Cumulative gap.......................
Weighted average gap(4)..............
Cumulative gap as a percentage of
total assets.......................

- ------------

(1) Fixed-rate loans and MBS are distributed based on their contractual maturity
adjusted for prepayments, and adjustable-rate loans and MBS are distributed
based on the interest rate reset date and contractual maturity adjusted for
prepayments. Loans and MBS runoff and repricing assumes a constant
prepayment rate based on coupon rate and maturity. The weighted average
annual projected prepayment rate was 20%.

(2) Assets repricing to lagging rate indices are adjusted to reflect the delay
in the repricing of the index to market interest rates. The lagging indices
are based on a blended cost of funds, primarily the FHLB 11th District Cost
of Funds Index. These indices are assumed to take 18 months to reprice fully
to a change in the general level of interest rates.

(3) Checking and savings deposits are distributed based on their assumed pricing
relationship to general market interest rates. Savings accounts are assumed
to reprice over a twelve month period, and checking accounts are assumed to
reprice to interest rate changes after one year but before five years.

(4) The weighted average gap weighs each maturity or repricing amount by the
number of months remaining in the year at the time of occurrence. It
provides a measure of net interest income sensitivity over the next twelve
months given a change in the general level of market interest rates without
altering the maturity or repricing characteristics of the balance sheet.

(5) The above table includes only those off-balance-sheet financial instruments
which impact the gap in all interest rate environments. The Company also has
certain off-balance-sheet financial instruments which hedge specific
interest rate risks.

COMPETITION

The Company competes with numerous other providers of financial products
and services in all aspects of its operations. Competitors for deposits include
thrift institutions, commercial banks, credit unions, full service and discount
broker dealers, and other investment alternatives, such as mutual funds, money
market funds, and savings bonds or other government securities. Primary
competitive factors include convenience of locations, variety of deposit or
investment options, quality of customer service and rates and/or terms offered.

The Company competes for mortgage originations with thrift institutions,
banks, insurance companies, and mortgage companies, many of which operate
nationwide mortgage origination networks similar to that of the Company. Primary
competitive factors include service quality, relationships with builders and
real estate brokers, and rates and fees. Many of the Company's competitors are,
or are affiliated with, organizations with substantially larger asset and
capital bases (including regional and multi-national banks and bank holding
companies) and with lower funding costs.

SUBSIDIARIES

The Company has no direct subsidiaries other than the Bank. The Bank is
permitted to invest in the capital stock, obligations, and other securities of
its service corporations in an aggregate amount not to exceed 2% of the Bank's
assets, plus an additional 1% of assets if such investment is used for community
development or inner-city development purposes. In addition, if the Bank meets
minimum regulatory capital requirements, it may make certain conforming loans in
an amount not exceeding 50% of the Bank's regulatory capital to service
corporations of which the Bank owns more than 10% of the stock. At March 31,
1996, the Bank was authorized to have a maximum investment of approximately
$338.1 million in its subsidiaries.

COMMONWEALTH UNITED MORTGAGE COMPANY

The Bank is the sole shareholder of Commonwealth United Mortgage Company, a
Texas corporation formed in 1992 to function as a licensed mortgage banker in
the state of Vermont.

UNITED AGENCY CORPORATION

United Agency Corporation is a wholly-owned subsidiary of the Bank whose
primary purpose is holding the stock of Commonwealth General Services Agency,
Inc., an Arkansas corporation incorporated in 1951 ("CGSA"). CGSA is a managing
general insurance agency that contracts with insurance companies and agencies
that offer insurance products to the Bank's mortgage loan customers. CGSA earns
a commission on each insurance policy sold by the insurance companies or
agencies with which CGSA contracts.

UNITED CAPITAL MANAGEMENT CORPORATION

The Bank is the sole shareholder of United Capital Management Corporation,
a Texas corporation formed in 1985 to function in the deposit referral business
and is currently inactive.

UNITED FINANCIAL MARKETS, INC.

The Bank is the sole shareholder of United Financial Markets, Inc. ("UFM"),
a Texas corporation, which acts as a full-service broker-dealer. UFM, through
its institutional division, sells various securities products and whole loans
and engages in the deposit referral business with institutional and
sophisticated retail customers. Through its retail division, UFM markets
annuities and securities, including mutual funds, stocks and bonds, to the
Bank's retail customers. UFM is a broker-dealer registered with the Commission
and a member of the NASD. This subsidiary commenced operations in late 1992, and
its activities have been expressly approved by the OTS.

UNITED GREENWAY SECURITIES SERVICES, INC.

The Bank is the sole shareholder of United Greenway Securities Services,
Inc., a Texas corporation formed in 1989 to make mutual funds and other
non-deposit products available to retail customers through referrals to a
registered broker-dealer. This subsidiary is currently inactive.

UNITED MORTGAGE SECURITIES CORPORATION

The Bank is the sole shareholder of United Mortgage Securities Corporation,
a Delaware corporation formed in 1993 to issue MBS securitized with mortgage
loans purchased from the Bank.

USAT MORTGAGE SECURITIES, INC.

The Bank is the sole shareholder of USAT Mortgage Securities, Inc., a Texas
corporation formed in 1985 to function as an issuer of three series of CMOs.
This subsidiary is currently inactive.

PERSONNEL

As of March 31, 1996, the Company employed 2,568 full-time employees and
129 part-time employees. The employees are not represented by a collective
bargaining agreement, and the Company believes that it has good relations with
its employees. See Note 14 to the Consolidated Financial Statements for
information relating to certain benefits generally available to all employees.

THE ASSISTANCE AGREEMENT

In connection with the Acquisition, the Bank, the Company and certain of
their direct and indirect parent entities entered into an overall agreement with
certain agencies of the federal government that was evidenced by several written
agreements. The principal contract relating to the Acquisition was the
Assistance Agreement, dated December 30, 1988, among the FSLIC, the Company, the
Bank, and certain of the Bank's other direct and indirect parent entities. The
Assistance Agreement set forth certain mutual, interdependent commitments of the
parties with respect to the Acquisition. Among other provisions, the FSLIC
agreed to provide the Bank with certain forms of financial assistance.

The Company also succeeded to substantial NOLs as a result of the
Acquisition and has recorded substantial additional NOLs for tax purposes due to
the exclusion of assistance payments received from the FRF under the Assistance
Agreement from taxable income and the deduction of losses and writedowns on
certain assets (the "Covered Assets") for which tax-free assistance payments
were received. See "Regulation -- Taxation -- FSLIC Assistance".

In connection with the Acquisition, the Bank issued the Warrants, which
enable the FDIC, as administrator of the FRF, to acquire a specified number of
shares of Bank Common Stock for a nominal price, and agreed to make payments in
lieu of dividends on the Warrants upon the payment of dividends on the Bank
Common Stock. See " -- Warrant Agreement".

The Assistance Agreement was terminated on December 23, 1993, when the
Company, the Bank, certain of their direct and indirect parent entities, and the
FDIC entered an agreement settling certain disputes with respect to various
matters relating to the Acquisition and the Assistance Agreement (the
"Settlement Agreement"). Pursuant to the Settlement Agreement, the Assistance
Agreement was terminated, the Bank no longer managed or owned the Covered Assets
(except for certain of the Covered Assets that were "uncovered" and retained),
and, as of December 28, 1993, the Bank no longer received any significant
financial assistance from the FRF. The Settlement Agreement also provided for
the continuation of certain of the Company's and the Bank's claims against the
United States in the United States Court of Federal Claims. See " --
Forbearance".

IMPACT OF ASSISTANCE PAYMENTS

The Bank received substantial payments from the FRF pursuant to the
Assistance Agreement prior to its termination. Payments received during fiscal
1994 and 1993 are summarized below.

FOR THE YEAR ENDED
SEPTEMBER 30,
---------------------
1994 1993
---------- ---------

(IN THOUSANDS)
Payments affecting the results of
operations............................ $ 23,143 $ 9,289
Other Payments
Settlement payment................. 195,300 --
Other.............................. 468 61,578
---------- ---------
Total FRF payments............ $ 218,911 $ 70,867
========== =========

WARRANT AGREEMENT

Concurrent with the execution of the Assistance Agreement, the Bank and the
FSLIC entered into a warrant agreement (the "Warrant Agreement"), pursuant to
which the FSLIC was granted the Warrants to purchase up to 158,823 shares of the
Bank Common Stock (5.56% of the Bank Common Stock as of December 28, 1993,
assuming exercise in full of the Warrants) at an exercise price of $0.01 per
share. Pursuant to the Settlement Agreement, the Bank and the FDIC (as
administrator of the FRF, the successor to FSLIC) entered into the First
Amendment to the Warrant Agreement on December 28, 1993 (the "First Amendment to
Warrant Agreement"). References to the Warrant Agreement below are to the
Warrant Agreement as amended by the First Amendment to Warrant Agreement.

The Warrant Agreement provides that the holder may exercise the Warrants,
in whole or in part, at any time, and from time to time until December 29, 2004.
The Warrant Agreement provides that the holder may sell, transfer, assign, or
otherwise dispose of the Warrant and its rights and obligations under the
Warrant Agreement at any time, subject to a right of first refusal by the Bank.

The Warrant Agreement provides that the holder of the Warrants shall have
the right to, among other things, have an offering circular filed with the OTS
in connection with the sale of the Bank Common Stock to be received upon
exercise thereof. The Warrant Agreement also provides for an adjustment of the
number of shares of the Bank Common Stock that are purchasable upon exercise of
the Warrants upon the occurrence of certain events, including a stock split and
the issuance of Bank Common Stock, at a price below the market price determined
at and immediately prior to the time of issuance. No adjustments had been made
to such number of shares of the Bank Common Stock at September 30, 1995 or March
31, 1996. Within 60 days following the submission by the holders of more than
50% interest of the Warrants or of the Bank Common Stock that has been issued
upon the exercise of the Warrants of a demand for filing of an offering circular
with the OTS, the Bank, the Company or their affiliates have the right to
repurchase all or a portion of both the Warrants and any shares of the Bank
Common Stock that have been issued upon the exercise of the Warrants, for cash,
in an amount equal to their market value (as defined in the Warrant Agreement).

Pursuant to the Settlement Agreement, all disputes with respect to the
Warrants, including the dispute concerning credit to the FRF for dividends paid
prior to December 28, 1993, were resolved, and the parties agreed that the Bank
will make payments to the holder of the Warrants in lieu of dividends upon any
payment of dividends on the Bank Common Stock (other than dividends for which
anti-dilution adjustments are made) beginning December 28, 1993 until December
30, 1998 or such earlier date as the Warrants are no longer outstanding. In May
1996, the Bank made a payment to the FDIC of $5.9 million in lieu of such
dividends in connection with the declaration of a $100 million dividend on the
Bank Common Stock.

The Warrant Agreement also provides that the Warrants shall be redeemed
upon a merger or liquidation of the Bank or certain events constituting a change
in control of the Bank's direct or indirect parent entities, at a price
equivalent to the value of the number of shares of the Bank Common Stock for
which the Warrants are exercisable, such value to be derived from the
consideration paid in connection with such merger, liquidation, or change in
control.

FORBEARANCE

In connection with the Acquisition, the FHLB also approved the Forbearance
Agreement. Under the terms of the Forbearance Agreement, the FSLIC agreed to
waive or forbear from the enforcement of certain regulatory provisions with
respect to regulatory capital requirements, liquidity requirements, accounting
requirements and other matters. On January 9, 1990, OTS took the position that
the capital standards set forth in the FIRREA apply to all savings institutions,
including those institutions that had been operating under previously granted
capital and accounting forbearances, and that FIRREA eliminated these
forbearances. While the Bank has not had to rely on such forbearances or waivers
in order to remain in compliance with existing capital requirements as
interpreted by the OTS, the position of the OTS has adversely affected the Bank
by curtailing the growth and reducing the leverage contemplated by the terms of
the Forbearance Agreement. The Bank also has been and continues to be in
compliance with all of the other referenced regulatory capital provisions and,
accordingly, has not had to rely on the waivers or forbearances provided in the
Acquisition. Pursuant to the Settlement Agreement, the Company, the Bank and
certain of their then-direct and indirect parent entities have retained all
causes of action and claims relating to the forbearances against the United
States in the United States Court of Federal Claims, and the FDIC and the other
governmental parties to the lawsuit have reserved any and all defenses to such
causes of actions and claims. On July 25, 1995, the Bank, the Company, and
certain of their then-direct and indirect parent entities filed suit against the
United States in the Court of Federal Claims for alleged failures of the United
States to honor certain contractual obligations, including obligations related
to the Forbearance Agreement. The lawsuit is in a preliminary stage. Discovery
has been stayed pending the United States Supreme Court's review of UNITED
STATES V. WINSTAR CORP., an action by another thrift raising similar issues. See
"Legal Proceedings".

REGULATION

REGULATION OF SAVINGS AND LOAN HOLDING COMPANIES

The Company is a savings and loan holding company that is regulated and
subject to examination by the OTS. The activities of savings and loan holding
companies are governed by the provisions of the Home Owners' Loan Act, as
amended (the "HOLA"). Pursuant to the HOLA, a savings and loan holding company
may not (i) acquire control of a savings association or savings and loan holding
company without prior OTS approval; (ii) acquire, except with prior OTS
approval, by process of merger, consolidation, or purchase of assets of another
savings association or savings and loan holding company, all or substantially
all of the assets of any such association or holding company; or (iii) acquire,
by purchase or otherwise, more than 5% of the voting shares of a savings
association that is not a subsidiary, or of a savings and loan holding company
that is not a subsidiary. Other restrictions on activities of a savings and loan
holding company do not apply to the Company because its savings association
subsidiary is a qualified thrift lender, and further because its savings
association subsidiary was initially acquired in connection with assisted
transactions. See " -- Safety and Soundness Regulations -- Capital Requirements
- -- Qualified Thrift Lender ("QTL") Test". Every subsidiary savings association
of a savings and loan holding company must give the OTS not less than 30 days of
advance notice of proposed dividend declarations.

SAFETY AND SOUNDNESS REGULATIONS

CHARTER, SUPERVISION AND EXAMINATION

CHARTER. The Bank is chartered under the HOLA, which imposes certain
obligations and restrictions upon, and grants certain powers to, federally
chartered savings banks such as the Bank. The provisions of the HOLA are
implemented by regulations adopted and administered by the OTS.

OTS. Federally chartered savings banks, such as the Bank, are subject to
extensive regulation by the OTS and must regularly file financial and other
reports with that agency. The supervision and regulation to which the Bank is
subject is intended primarily for the protection of its depositors. The OTS
performs periodic examinations of the Bank to test compliance by the Bank with
various regulatory requirements. The OTS may revalue assets of an insured
institution based upon appraisals and require establishment of specific reserves
in amounts

equal to the difference between such revaluation and the book value of the
assets, as well as require specific charge-offs relating to such assets.

The OTS prescribes regulations for the collection of fees in order to
recover the expenses of the agency, the cost of supervision of savings
associations, the examination of savings associations and their subsidiaries,
and the processing of applications, filings, notices, and certain other requests
of savings associations filed with the OTS. The OTS adopted a two-pronged
sliding scale approach in 1990 by which all institutions pay a general
assessment and troubled institutions pay an additional premium assessment. The
Bank has never been subject to a premium assessment. The Bank's assessments
amounted to approximately $719,600, $1.2 million, and $1.1 million in the
aggregate during the six months ended March 31, 1996 and fiscal 1995 and 1994,
respectively.

FDIC. The FDIC administers the SAIF, which insures the deposits of savings
associations such as the Bank. The Bank's deposits are insured by the SAIF to a
maximum of $100,000 for each insured depositor. In addition, the FDIC has
certain regulatory and full examination authority over OTS regulated savings
associations. The FDIC may also recommend enforcement actions against savings
associations to the OTS and, if the OTS fails to act on the FDIC's
recommendation, the FDIC may, under certain circumstances, compel the OTS to
take the requested enforcement action.

INSURANCE ASSESSMENTS. The FDIC establishes premium assessment rates for
SAIF deposit insurance. There is no statutory limit on the maximum assessment
and the percent of increase in the assessment that the FDIC may impose in any
one year. Effective January 1, 1993, the FDIC adopted risk-based assessment
regulations.

To arrive at a risk-based assessment for each bank and thrift, the FDIC
places it in one of nine risk categories using a two-step process based first on
capital ratios and then on relevant supervisory information. Each institution is
assigned to one of three groups (well capitalized, adequately capitalized, or
undercapitalized) based on its capital ratios. A "well-capitalized" institution
is one that has at least a 10% "total risk-based capital" ratio (the ratio of
total capital to risk-weighted assets), a 6% "Tier 1 risk-based capital" ratio
(the ratio of Tier 1 (core) capital to risk-weighted assets) and a 5% "leverage
capital" ratio (the ratio of core capital to adjusted total assets). An
"adequately capitalized" institution has at least an 8% total risk-based capital
ratio, a 4% Tier 1 (core) risk-based capital ratio and a 4% leverage capital
ratio. An "undercapitalized" institution is one that does not meet either the
definition of well capitalized or adequately capitalized.

The FDIC also assigns each institution to one of three supervisory
subgroups based on an evaluation of the risk posed by the institution. These
supervisory evaluations modify premium rates within each of the three capital
groups. The nine risk categories and the corresponding SAIF assessment rates are
as follows:

SUPERVISORY SUBGROUP
-------------------------------
A B C
-- -- --

Meets numerical standards for:
Well capitalized................ 23 26 29
Adequately capitalized.......... 26 29 30
Undercapitalized................ 29 30 31

For purposes of assessments of FDIC insurance premiums, the Bank is a
"well-capitalized" institution. FDIC regulations prohibit disclosure of the
supervisory subgroup to which an insured institution is assigned. The Bank's
insurance assessments for the six months ended March 31, 1996, fiscal 1995 and
1994 were $6.1 million, $11.4 million, and $11.3 million, respectively.

Both the SAIF and the BIF, the deposit insurance fund that covers most
commercial bank deposits, are statutorily required to achieve and maintain a
reserve ratio equal to 1.25% of estimated insured deposits. As a result of the
BIF reaching the 1.25% level, on August 16, 1995, the FDIC lowered the deposit
insurance premium assessment rate for BIF members to between .04% and .31% of
insured deposits, while retaining the existing assessment rate of .23% to .31%
of insured deposits for members of SAIF. On November 14, 1995, the FDIC further
reduced insurance premiums on BIF deposits by $.04 per $100 of insured deposits,
creating an assessment range of 0% to .27% of insured deposits, subject to a
statutory requirement that all institutions pay at least $2,000

annually. Approximately 92% of BIF members qualify for the lowest assessment
rate. As a result of the significant disparity in the deposit insurance premiums
paid by well-capitalized SAIF members, such as the Bank, and well-capitalized
BIF members, SAIF members are at a competitive disadvantage to BIF members with
respect to the pricing of loans and deposits and the ability to achieve lower
operating costs.

Measures to mitigate the effect of the BIF/SAIF premium disparity are being
considered by the Congress. Many of these proposals feature a one-time
assessment (which reports estimate from 0.75% of deposits to 0.90% of deposits)
on SAIF-insured institutions with the aim of fully recapitalizing the SAIF. Such
an assessment could result in an amount payable by the Bank, net of tax, of as
much as $23.7 million to $28.5 million. At this time, no assurance can be given
as to whether any BIF/SAIF legislative alternatives will become law.

Partly in response to the BIF/SAIF premium disparity, the Bank has applied
to the appropriate regulatory authorities to establish a BIF-insured national
bank as a subsidiary of the Bank. As a long-term strategy, if the BIF/SAIF
premium disparity continues, the national bank could attract BIF deposits by
offering interest rates that compare more favorably to that of the Bank.
However, legislation has been introduced in Congress that could make it more
difficult to carry out such a deposit-shifting strategy. At this time, no
assurance can be given when, or if, the Company will be able to carry out its
plan to establish and operate a national bank.

TERMINATION OF INSURANCE. The FDIC may terminate the deposit insurance of
any insured depository institution, if it determines after a hearing that the
institution has engaged or is engaging in unsafe or unsound practices, is in an
unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, or order, or any condition imposed by an agreement
with the FDIC. It also may suspend deposit insurance temporarily during the
hearing process for the permanent termination of insurance if the institution
has no tangible capital. If insurance of an institution's accounts is
terminated, the accounts at the institution at the time of such termination,
less subsequent withdrawals, would continue to be insured for a period of six
months to two years, as determined by the FDIC.

AUDIT REQUIREMENTS. In May 1993, the FDIC adopted rules establishing annual
independent audits and financial reporting requirements for all depository
institutions with assets of more than $500 million, and for their management,
and their independent auditors. The rules also establish requirements for the
composition, duties, and authority of such institutions' audit committees and
boards of directors. Among other things, all depository institutions with assets
in excess of $500 million are required to prepare and make available to the
public annual reports on their financial condition and management, including
statements of management's responsibility for preparing the institution's
financial statements, for establishing and maintaining an internal control
structure and procedures for financial reporting, and for complying with
specified laws and regulations relating to safety and soundness, and an
assessment of the effectiveness of such internal controls and procedures and the
institution's compliance with laws and regulations designated by the FDIC. The
institution's independent auditors are required to attest to these management
assessments. Each such institution also is required to have an audit committee
composed of directors who are independent of management of the institution.
Audit committees of large institutions (institutions with assets exceeding $3.0
billion) must: (i) include members with banking or related financial management
expertise; (ii) have the ability to engage their own independent legal counsel;
and (iii) must not include any entities designated as "large customers" of the
institution. In some cases, the institution's responsibilities under these rules
may be fulfilled by its holding company.

FEDERAL RESERVE BOARD. The Federal Reserve Board requires all depository
institutions (including savings associations) to maintain reserves against their
transaction accounts (primarily NOW and Super NOW checking accounts) and
non-personal time deposits. Reserves of 3% must be maintained against total
transaction accounts of $52.0 million or less (subject to adjustment by the
Federal Reserve Board) and an initial reserve of $1,560,000 plus 10% (subject to
adjustment by the Federal Reserve Board to a level between 8% and 14%) must be
maintained when total transaction accounts exceed such amount. The balances
maintained to meet the reserve requirements imposed by the Federal Reserve Board
may be used to satisfy liquidity requirements imposed by the OTS. See " --
Investment Authority -- Liquidity".

Savings associations are authorized to borrow from the Federal Reserve Bank
"discount window," but Federal Reserve Board regulations require savings
associations to exhaust other reasonable alternative sources of funds, including
FHLB advances, before borrowing from the Federal Reserve Bank.

FEDERAL HOME LOAN BANKS. The Bank is a member of the FHLB Dallas, which is
one of 12 regional FHLBs, each subject to supervision and regulation by the
Federal Housing Finance Board. The FHLBs provide a central credit facility
primarily for member thrift institutions, as well as for qualified commercial
banks and other entities involved in home mortgage finance. The Bank, as a
member of the FHLB Dallas, is required to purchase and hold shares of the
capital stock in that FHLB in an amount at least equal to the greater of: (i) 1%
of the aggregate principal amount of its unpaid mortgage loans, home purchase
contracts and similar obligations at the beginning of each year; (ii) 0.3% of
its assets; or (iii) 5% (or such greater fraction as established by the FHLB) of
its advances (I.E., borrowings) from the FHLB.

CAPITAL REQUIREMENTS

REQUIREMENTS AND STANDARDS. The OTS capital regulations have three
components: a leverage limit, a tangible capital requirement, and a risk-based
capital requirement. See Note 15 to the Consolidated Financial Statements for
compliance with the regulatory capital requirements.

LEVERAGE LIMIT. The leverage limit requires that a savings association
maintain "core capital" of at least 3% of its adjusted total assets. For
purposes of this requirement, total assets are adjusted to exclude intangible
assets and investments in certain subsidiaries, and to include the assets of
certain other subsidiaries, certain intangibles arising from prior period
supervisory transactions, and permissible MSRs. "Core capital" includes common
shareholders' equity and retained earnings, noncumulative perpetual preferred
stock and related surplus and minority interests in consolidated subsidiaries,
minus intangibles, plus certain MSRs and certain goodwill arising from prior
regulatory accounting practices.

Although accounted for under Generally Accepted Accounting Principles
("GAAP") as an intangible asset, certain MSRs need not be deducted in computing
core and tangible capital. Generally, the lower of 90% of the fair market value
of readily marketable MSRs, or the current unamortized book value as determined
under GAAP may be included in core and tangible capital up to a maximum of 50%
of core capital computed before the deduction of any disallowed qualifying
intangible assets. At March 31, 1996, the Bank's core capital included $82.7
million of MSRs.

In determining core capital, all investments in and loans to subsidiaries
engaged in activities not permissible for national banks, which are generally
more limited than activities permissible for savings associations and their
subsidiaries ("nonconforming subsidiaries"), must be deducted. Certain
exceptions are provided, including exceptions for mortgage banking subsidiaries
and subsidiaries engaged in agency activities for customers (unless determined
otherwise by the FDIC on safety and soundness grounds). Generally, all
subsidiaries engaged in activities permissible for national banks are required
to be consolidated for purposes of calculating capital compliance by the parent
savings association.

TANGIBLE CAPITAL REQUIREMENT. The tangible capital requirement mandates
that a savings association maintain tangible capital of at least 1.5% of
adjusted total assets. For purposes of this requirement, adjusted total assets
are calculated on the same basis as for the leverage limit. "Tangible capital"
is defined in the same manner as core capital, except that all intangible assets
except qualifying MSRs must be deducted. At March 31, 1996, the Bank's tangible
capital ratio was 6.88%.

RISK-BASED CAPITAL REQUIREMENT. The risk-based requirement promulgated by
the OTS is required by the HOLA to track the standard applicable to national
banks, except that the OTS may determine to reflect interest rate and other
risks not specifically included in the national bank standard. However, such
deviations from the national bank standard may not result in a materially lower
risk-based requirement for savings associations than for national banks. The
risk-based standard adopted by the OTS is similar to the OCC standard for
national banks.

The risk-based standards of the OTS require maintenance of core capital
equal to at least 4% of risk-weighted assets and total capital equal to at least
8% of risk-weighted assets. "Total capital" includes core capital plus
supplementary capital (except that includable supplementary capital may not
exceed core capital). Supplementary capital includes: cumulative perpetual
preferred stock; mutual capital certificates, income capital certificates and
net worth certificates; nonwithdrawable accounts and pledged deposits to the
extent not included in core capital; perpetual and mandatory convertible
subordinated debt and maturing capital instruments meeting

specified requirements; and general loan and lease loss allowances, up to a
maximum of 1.25% of risk-weighted assets. At March 31, 1996, the Bank's core
capital and total capital ratios were 6.96% and 14.20%, respectively.

In determining the amount of risk-weighted assets, all assets, including
certain off-balance sheet assets, are multiplied by a risk factor ranging from
0% to 100%, as assigned by the OTS based on the risks it believes inherent in
the type of asset. Comparable weights are assigned to off-balance sheet
activities.

INTEREST RATE RISK ("IRR") COMPONENT. OTS regulations add an IRR component
to the 8% risk-based capital requirement discussed above. Only savings
associations with more than a "normal" level of IRR are subject to IRR
requirements. The IRR component is calculated as one-half of the difference
between the institution's measured IRR and 2%, multiplied by the market value of
the institution's assets.

On October 13, 1994, the OTS waived the IRR capital deduction until
guidelines under which institutions may appeal such a deduction were published.
The OTS extended the waiver on March 20, 1995 until further notice. On August
21, 1995, the OTS adopted and approved an appeal process, but again delayed the
IRR capital deduction indefinitely.

FAILURE TO MEET REQUIREMENTS. Any savings association that fails to meet
its regulatory capital requirements is subject to enforcement actions by the OTS
or the FDIC. The OTS must limit the asset growth of any undercapitalized
association and issue a capital directive against the association. See " --
Enforcement -- Prompt Corrective Action".

CAPITAL DISTRIBUTIONS. Limitations are imposed upon all "capital
distributions" by savings associations, including cash dividends, payments by an
institution in a cash-out merger and other distributions charged against
capital. The capital distribution regulation establishes a three-tiered system,
with the greatest flexibility afforded to well-capitalized institutions.

Under the capital distribution regulation, an association that immediately
prior to a proposed capital distribution, and on a pro forma basis after giving
effect to a proposed capital distribution, has capital that is equal to or
greater than the amount of its fully phased-in capital requirement is a "Tier 1
association". To qualify, an association must maintain the following capital
ratios: (i) tangible capital to adjusted total assets ratio of 1.50%, (ii) core
capital to adjusted total assets ratio of 3.00%, and (iii) total risk-based
capital to risk-weighted assets ratio of 8.00%, of which at least 4.00% must be
core capital. An association that immediately prior to a proposed capital
distribution, and on a pro forma basis after giving effect to a proposed capital
distribution, has capital that is equal to or in excess of its minimum capital
requirements is a "Tier 2 association". An association that immediately prior to
a proposed capital distribution, and on a pro forma basis after giving effect to
a proposed capital distribution, has capital that is less than its minimum
regulatory capital requirement is a "Tier 3 association". The Bank currently
qualifies as a Tier 1 association. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Capital Resources and Liquidity
- -- Capital".

Upon 30 days' notice to the OTS, a Tier 1 association may make capital
distributions during a calendar year up to the higher of 100% of its net income
to date during the calendar year, plus the amount that would reduce by one-half
its surplus capital ratio at the beginning of the calendar year or 75% of its
net income over the most recent four quarter period. A Tier 1 association may
not make capital distributions in excess of the foregoing limitations except
upon notice to the OTS and an opportunity for the OTS to object to such capital
distribution. The OTS may prohibit an otherwise permissible capital distribution
upon a determination that making such a distribution would be an unsafe or
unsound practice. The OTS may notify an institution that qualifies as a Tier 1
association that it is subject to more than normal supervision and thereafter,
treat it as a Tier 2 or Tier 3 association.

Under the prompt corrective action provisions discussed below, no insured
depository institution may make a capital distribution if after such
distribution it would be undercapitalized. See " -- Enforcement -- Prompt
Corrective Action". The OTS has proposed to amend its capital distribution
regulation to conform to the prompt corrective action system and to provide
additional flexibility. Under the proposal, savings associations that were
adequately or well capitalized under prompt corrective action and that would
remain at least adequately capitalized after a capital distribution would be
permitted to make a distribution after providing notice to the OTS. "Troubled"
and undercapitalized institutions could make capital distributions only by
filing an application

and receiving OTS approval, which would be granted only under certain limited
conditions. The proposal defines "troubled condition" as a function of an
institution's examination rating, its capital condition, or on the basis of
supervisory directives issued or designation made by the OTS.

INVESTMENT AUTHORITY

Permissible Loans and Investments. Federally chartered savings banks, such
as the Bank, are authorized to originate, invest in, sell, purchase, service,
participate, and otherwise deal in: (i) loans made on the security of
residential and nonresidential real estate, (ii) commercial loans, and (iii)
consumer loans, including credit card loans. The lending authority of federally
chartered associations is subject to numerous OTS requirements, including, as
applicable, requirements governing amortization, term, loan-to-value ratio,
percentage-of-assets limits, and loans-to-one-borrower limits. In January of
1996, the OTS proposed substantial revisions to its investment and lending
regulations intended to simplify the regulations and to eliminate many of their
specific requirements in favor of a more general standard of "safety and
soundness".

A federally chartered savings association may invest, without limitation,
in the following assets: (i) obligations of the United States government or
certain agencies or instrumentalities thereof; (ii) stock issued or loans made
by the FHLBs or the FNMA; (iii) obligations issued or guaranteed by the FNMA,
the Student Loan Marketing Association, the GNMA or any agency of the United
States government; (iv) certain mortgages, obligations, or other securities that
have been sold by the FHLMC, (v) stock issued by a national housing partnership
corporation; (vi) demand, time or savings deposits, shares, or accounts of any
insured depository institution; (vii) certain "liquidity" investments approved
by the OTS to meet liquidity requirements; (viii) shares of registered
investment companies the portfolios of which are limited to investments that a
federal association is otherwise authorized to make; (ix) certain MBS; (x)
general obligations of any state of the United States or any political
subdivision or municipality thereof, PROVIDED that not more than 10% of a
savings association's capital may be invested in the general obligations of any
one issuer; and (xi) loans on the security of liens upon residential real
property. Federally chartered savings associations are authorized by the HOLA to
make investments in business development credit corporations, certain commercial
paper and corporate debt securities, service corporations, and small business
investment companies, all of which investments are subject to
percentage-of-assets and various other limitations.

LENDING LIMITS. Generally, savings associations, such as the Bank, are
subject to the same loans to one borrower limits that apply to national banks.
Generally, a savings association may lend to a single or related group of
borrowers, on an unsecured basis, in an amount not greater than 15% of its
unimpaired capital and unimpaired surplus (as defined). An additional amount,
not greater than 10% of the savings association's unimpaired capital and
unimpaired surplus (as defined), may be loaned if the loan is secured by readily
marketable collateral, which is defined to include certain securities and
bullion, but generally does not include real estate. Notwithstanding the general
lending limits, a savings association may make loans to one borrower of up to
$500,000, or to develop domestic residential housing units, up to the lesser of
$30 million or 30% of the savings association's unimpaired capital and
unimpaired surplus, if certain conditions are satisfied.

In addition to limits on loans to one borrower, the HOLA also limits a
federal savings association's aggregate nonresidential real property loans to
400% of the savings association's capital as determined pursuant to the OTS's
capital requirements. See "-- Capital Requirements". The OTS may allow a savings
association to exceed the aggregate limitation if the OTS determines that
exceeding the limitation would pose no significant risk to the safe and sound
operations of the association and would be consistent with prudent operating
practices.

SUBSIDIARIES -- SERVICE CORPORATIONS. The HOLA authorizes federally
chartered savings associations, such as the Bank, to invest in the capital
stock, obligations or other securities of service corporations. The HOLA
authorizes a savings association to invest up to a total of 3% of its assets in
service corporations. The last 1% of the 3% statutory investment limit
applicable to service corporations must be primarily invested in community
development investments drawn from a broad list of permissible investments that
include, among others: government guaranteed loans; loans for investment in
small businesses; investments in revitalization and rehabilitation projects; and
investments in low- and moderate-income housing developments.

Service corporations are authorized to engage in a variety of preapproved
activities, some of which (E.G., securities brokerage and real estate
development) are ineligible activities for the parent savings association. The
OTS regulations implementing the service corporation authority contained in the
HOLA also provide that activities reasonably related to the activities of a
federally chartered savings association may be approved on a case-by-case basis
by the Director of the OTS.

OPERATING SUBSIDIARIES. All federal savings associations are authorized to
establish or acquire one or more operating subsidiaries. Operating subsidiaries
are subject to examination and supervision by the OTS to the same extent as the
parent thrift. An "operating subsidiary" is a corporation that meets all of the
following requirements: (i) it engages only in activities that a federal savings
association is permitted to engage in directly; (ii) the parent savings
association owns, directly or indirectly, more than 50% of the subsidiary's
voting stock; and (iii) no person or entity other than the parent thrift may
exercise "effective operating control" over the subsidiary. While a savings
association's investment in its service corporations is generally limited to an
amount that does not exceed 3% of the parent savings association's total assets,
OTS regulations do not limit the amount that a parent savings association may
invest in its operating subsidiaries. Operating subsidiaries may be incorporated
and operated in any geographical location where its parent may operate. An
operating subsidiary that is a depository institution may accept deposits in any
location, provided that the subsidiary has federal deposit insurance.

FINANCE SUBSIDIARIES. In accordance with OTS regulations, federal savings
associations may establish one or more finance subsidiaries. The sole purpose of
a finance subsidiary is to issue securities that a federal savings association
may issue directly and to remit the net proceeds of the issuance to the parent
savings association.

QTL TEST. All savings associations are required to meet a QTL test for,
among other things, future eligibility for FHLB advances. An association must
have invested at least 65% of its portfolio assets in qualified thrift
investments and must maintain this level of qualified thrift investments on a
monthly average basis in nine of every 12 months.

"Portfolio assets" is defined as total assets less intangibles, properties
used to conduct business and liquid assets (up to 20% of total assets). The
following assets may be included as qualified thrift investments without limit:
domestic residential housing or manufactured housing loans; home equity loans
and MBS backed by residential housing or manufactured housing loans; FHLB stock
as well as certain obligations of the FDIC and certain other related entities.
Other qualifying assets, which may be included up to an aggregate of 20% of
portfolio assets, are: (i) 50% of originated residential mortgage loans sold
within 90 days of origination; (ii) investments in debt or equity of service
corporations that derive 80% of their gross revenues from housing-related
activities; (iii) 200% of certain loans to, and investment in, low cost one- to
four-family housing; (iv) 200% of loans for residential real property, churches,
nursing homes, schools and small businesses in areas where the credit needs of
low- and moderate-income families are not met; (v) other loans for churches,
schools, nursing homes and hospitals; and (vi) personal, family, household, or
education loans (up to 10% of total portfolio assets).

Any savings association that fails to meet the QTL test must convert to a
national bank charter, unless it requalifies. A savings association may
requalify the next time it meets the requirement in nine of the preceding 12
months, but it may requalify only one time. If a savings association converts to
a bank charter, it must remain SAIF-insured until the expiration of the
moratorium (the moratorium, enacted in 1989, effectively prohibits most
conversions from the SAIF to the BIF insurance fund), which will not occur until
the date on which the SAIF fund meets its designated reserve ratio. If an
institution that fails the QTL test has not yet requalified and has not
converted to a national bank, its new investments and activities are limited to
those permissible for a national bank, it is immediately ineligible to receive
any new FHLB advances, is subject to national bank limits for payment of
dividends, and may not establish a branch office at any location at which a
national bank located in the savings association's home state could not
establish a branch.

LIQUIDITY. The Bank is required to maintain an average daily balance of
"liquid assets" (cash, certain time deposits, bankers' acceptances, highly rated
corporate debt securities, and commercial paper, securities of certain mutual
funds, reserves maintained pursuant to Federal Reserve Board requirements, and
specified government, state or federal agency obligations) equal to a certain
percentage of net withdrawable deposit accounts and

borrowings payable in one year or less. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings associations. Currently, OTS regulations require a savings
association, such as the Bank, to maintain liquid assets equal to not less than
5% of its net withdrawable deposit accounts and borrowings payable in one year
or less and short-term liquid assets of not less than 1%. Penalties may be
imposed for failure to meet the liquidity requirements.

MERGERS AND ACQUISITIONS

RESTRICTIONS ON ACQUISITIONS. As previously described, the Bank is
controlled by the Company. The Company must obtain approval from the OTS before
acquiring control of any other savings association. Such acquisitions are
generally prohibited if they result in a savings and loan holding company
controlling savings associations in more than one state. However, such
interstate acquisitions are permitted based on specific state authorization or
in supervisory acquisitions of failing savings associations. The Company may
acquire up to 5%, in the aggregate, of the voting stock of any non-subsidiary
savings association or savings and loan holding company without being deemed to
acquire control of the association or holding company. In addition, a savings
and loan holding company may hold shares of a savings association or a savings
and loan holding company for certain purposes, including as a bona fide
fiduciary, as an underwriter or in an account solely for trading purposes. Under
certain conditions, a savings and loan holding company may acquire up to 15% of
the shares of a savings association or savings and loan holding company in a
"qualified stock issuance".

The Change in Bank Control Act and the savings and loan holding company
provisions of the HOLA, together with the regulations of the OTS under such
Acts, require that the consent of the OTS be obtained prior to any person or
company acquiring control of a savings association or a savings and loan holding
company. Under OTS regulations, "control" is conclusively presumed to exist if
an individual or company acquires more than 25% of any class of voting stock of
a savings association or holding company. Control is rebuttably presumed to
exist if a person acquires more than 10% of any class of voting stock (or more
than 25% of any class of non-voting stock) and is subject to any of several
"control factors". The control factors relate, among other matters, to the
relative ownership position of a person, the percentage of debt and/or equity of
the association or holding company controlled by the person, agreements giving
the person influence over a material aspect of the operations of the association
or holding company, and the number of seats on the board of directors thereof
held by the person or his designees. The regulations provide a procedure for
challenge of the rebuttable control presumption. Certain restrictions applicable
to the operations of savings and loan holding companies and certain conditions
imposed by the OTS in connection with its approval of companies to become
savings and loan holding companies may deter companies from seeking to obtain
control of the Bank.

Insured depository institutions are authorized to merge or engage in
purchase and assumption transactions with other insured depository institutions
with the prior approval of the federal banking regulator of the resulting
entity.

BRANCHING. Subject to certain statutory restrictions in the HOLA and the
Federal Deposit Insurance Act (the "FDIA"), the Bank is authorized to branch on
a nationwide basis. Branching by savings associations is also subject to other
regulatory requirements, including compliance with the Community Reinvestment
Act (the "CRA") and its implementing regulations.

OFFICERS, DIRECTORS, AND CONTROLLING SHAREHOLDERS

INSIDER LOANS. Loans to an executive officer, director, or to any person
who directly or indirectly, or acting through or in concert with one or more
persons, owns, controls, or has the power to vote more than 10% of any class of
voting securities of such institution ("Principal Shareholder") and their
related interests (I.E., any company controlled by such executive officer,
director, or Principal Shareholder), or to any political or campaign committee,
the funds or services of which will benefit such executive officer, director or
Principal Shareholder, or which is controlled by such executive officer,
director or Principal Shareholder, are subject to Sections 22(g) and 22(h) of
the Federal Reserve Act (the "FRA") and the regulations promulgated thereunder.
Among other things, such loans must be made on terms substantially the same as
those prevailing on transactions made to unaffiliated individuals, and certain
extensions of credit to such persons must first be approved in advance by a
disinterested majority of a savings association's entire board of directors.
Section 22(h) of the FRA prohibits

loans to any such individuals where the aggregate amount exceeds an amount equal
to 15% of an insured institution's unimpaired capital and surplus, plus an
additional 10% of unimpaired capital and surplus (as defined) in the case of
loans that are fully secured by readily marketable collateral, or when the
aggregate amount on all such extensions of credit outstanding to all such
persons would exceed the Bank's unimpaired capital and unimpaired surplus.
Section 22(g) identifies limited circumstances in which the Bank is permitted to
extend credit to executive officers.

CHANGES IN DIRECTORS AND SENIOR EXECUTIVE OFFICERS. Section 32 of the FDIA
requires a depository institution or holding company thereof to give 30 days'
prior written notice to its primary federal regulator of any proposed
appointment of a director or senior executive officer if the institution: (i)
has been chartered less than two years; (ii) has undergone a change in control
within the preceding two years; or (iii) is not in compliance with the minimum
capital requirements or otherwise is in a troubled condition. The regulator then
has the opportunity to disapprove any such appointment.

TRANSACTIONS WITH AFFILIATES

Pursuant to Section 11 of the HOLA, savings associations are subject to
restrictions regarding transactions with affiliates ("Covered Transactions")
substantially similar to those imposed upon member banks under Sections 23A and
23B of the FRA. Savings associations are also prohibited from extending credit
to any affiliate engaged in an activity not permissible for a bank holding
company.

The term "affiliate" includes any company that controls or is controlled by
a company that controls the Bank, or a bank or savings association subsidiary of
the Bank. The term "affiliate" also includes any company controlled by
controlling stockholders of the Bank or the Company and any company sponsored
and advised on a contractual basis by the Bank or any subsidiary or affiliate of
the Bank. The Company is an affiliate of the Bank.

Section 23A of the FRA limits Covered Transactions with any one affiliate
to 10% of an association's capital stock and surplus (as defined therein) and
limits aggregate affiliate transactions to 20% of the Bank's capital stock and
surplus. A Covered Transaction is defined generally as a loan to an affiliate,
the purchase of securities issued by an affiliate, the purchase of assets from
an affiliate, the acceptance of securities issued by an affiliate as collateral
for a loan, or the issuance of a guarantee, acceptance or letter of credit on
behalf of an affiliate. In addition, the Bank generally may not purchase
securities issued or underwritten by an affiliate. Sections 23A and 23B of the
FRA provide that a loan transaction with an affiliate generally must be
collateralized (but may not be collateralized by a low quality asset or
securities issued by an affiliate) and that all Covered Transactions, as well as
the sale of assets, the payment of money or the provision of services by the
Bank to an affiliate, must be on terms and conditions that are substantially the
same, or at least as favorable to the Bank, as those prevailing for comparable
nonaffiliate transactions.

The OTS generally requires savings associations, such as the Bank, to
attribute to an affiliate the amounts of all transactions conducted with
subsidiaries of that affiliate and grants the Director of the OTS the authority
to deem certain non-bank or non-thrift subsidiaries of a savings association as
affiliates.

ENFORCEMENT

PROMPT CORRECTIVE ACTION. The OTS is required by statute to take certain
actions against savings associations that fail to meet certain capital-based
requirements. Each of the federal banking agencies, including the OTS, is
required to establish five levels of insured depository institutions based on
leverage limit and risk-based capital requirements established for institutions
subject to their jurisdiction plus, in each agency's discretion, individual
additional capital requirements for such institutions.

Under the final rules that have been adopted by each of the federal banking
agencies, an institution will be designated well capitalized if the institution
has a total risk-based capital ratio of 10% or greater, a core risk-based
capital ratio of 6% or greater, and a leverage ratio of 5% or greater, and the
institution is not subject to an order, written agreement, capital directive, or
prompt corrective action directive to meet and maintain a specific capital level
for any capital measure.

An institution will be designated adequately capitalized if the institution
has a total risk-based capital ratio of 8% or greater, a core risk-based capital
ratio of 4% or greater, and a leverage ratio of 4% or greater (or a

leverage ratio of 3% or greater if the institution is rated a composite 1 in its
most recent report of examination). An institution will be designated
undercapitalized if the institution has a total risk-based capital ratio of less
than 8%, a core risk-based capital ratio of less than 4%, or a leverage ratio of
less than 4% (or a leverage ratio of less than 3% if the institution is rated
composite 1 in its most recent report of examination). An institution will be
designated significantly undercapitalized if the institution has a total
risk-based capital ratio of less than 6%, a core risk-based capital ratio of
less than 3%, or a leverage ratio of less than 3%. An institution will be
designated critically undercapitalized if the institution has a ratio of
tangible equity to total assets equal to or less than 2%.

Undercapitalized institutions are required to submit capital restoration
plans to the appropriate federal banking agency and are subject to certain
operational restrictions. Moreover, companies controlling an undercapitalized
institution are required to guarantee the subsidiary institution's compliance
with the capital restoration plan subject to an aggregate limitation of the
lesser of 5% of the institution's assets, or the amount of the capital
deficiency when the institution first failed to meet the plan.

Significantly or critically undercapitalized institutions and
undercapitalized institutions that have not submitted or complied with
acceptable capital restoration plans are subject to regulatory sanctions. A
forced sale of shares or merger, restrictions on affiliate transactions, and
restrictions on rates paid on deposits are required to be imposed unless the
supervisory agency has determined that such restrictions would not further
capital improvement. The agency may impose other specified regulatory sanctions
at its option. Generally, the appropriate federal banking agency is required to
authorize the appointment of a conservator or receiver within 90 days after an
institution becomes critically undercapitalized.

The federal banking agencies have adopted uniform procedures for the
issuance of directives by the appropriate federal banking agency. Under these
procedures, an institution will generally be provided advance notice when the
appropriate federal banking agency proposes to impose one or more of the
sanctions set forth above. These procedures provide an opportunity for the
institution to respond to the proposed agency action or, where circumstances
warrant immediate agency action, an opportunity for administrative review of the
agency's action.

ADMINISTRATIVE ENFORCEMENT AUTHORITY. The OTS exercises extensive
enforcement authority over all savings associations and their
"institution-affiliated parties" (I.E., officers, directors, controlling
shareholders, employees, as well as attorneys, appraisers or accountants) who
knowingly or recklessly participate in a wrongful action likely to have adverse
effect on an insured institution. This enforcement authority includes, among
other things, the ability to assess civil money penalties, to issue
cease-and-desist or removal and prohibition orders, and to initiate injunctive
actions. In general, these enforcement actions may be initiated for violations
of laws and regulations and unsafe or unsound practices. The OTS may use written
agreements to correct compliance deficiencies with respect to applicable laws
and regulations and to ensure safe and sound practices. Except under certain
narrow circumstances, public disclosure of final enforcement actions by the
federal banking agencies, including the OTS, is required.

The OTS has the authority, when statutorily prescribed grounds exist, to
appoint a conservator or receiver for a savings association. Grounds for such
appointment include: insolvency; substantial dissipation of assets or earnings;
existence of an unsafe or unsound condition to transact business; likelihood
that the association will be unable to pay its obligations in the normal course
of business; undercapitalization where the association (i) has no reasonable
prospect of becoming adequately capitalized, (ii) fails to become adequately
capitalized when required to do so, (iii) fails timely to submit an acceptable
capital restoration plan, or (iv) materially fails to implement a capital
restoration plan; or where the association is "critically undercapitalized" or
"otherwise has substantially insufficient capital".

CONSUMER PROTECTION REGULATIONS

The Bank is subject to many federal consumer protection statutes and
regulations including, but not limited to, the following:

MORTGAGE AND CONSUMER LENDING

THE TRUTH IN LENDING ACT. The TILA, enacted into law in 1968, is designed
to ensure that credit terms are disclosed in a meaningful way so that consumers
may compare credit terms more readily and knowledgeably. As a result of the
TILA, all creditors must use the same credit terminology and expressions of
rates, the annual percentage rate, the finance charge, the amount financed, the
total of payments, and the payment schedule.

The TILA is implemented by the FRB's Regulation Z. Regulation Z contains
disclosure and advertising rules, rules related to the calculation of annual
percentage rates, document retention rules, and error resolution procedures. The
appendices to the regulation set forth model forms and clauses that creditors
may use when providing open-end and closed-end disclosures. The appendices also
contain detailed rules for calculating the annual percentage rate. Official
staff interpretations of the regulation are published in the FRB's Commentary.
Good faith compliance with the Commentary protects creditors from civil
liability under the TILA.

Under certain circumstances involving extensions of credit secured by the
borrower's principal dwelling, the TILA and Regulation Z thereunder provide a
right of rescission. The period within which the consumer may exercise the right
to rescind runs for three business days from the last of three events: (i) the
occurrence that gives rise to the right of rescission; (ii) delivery of all
required material disclosures, I.E., the annual percentage rate, the finance
charge, the amount financed, the total of payments, and the payment schedule; or
(iii) delivery to the consumer of the required rescission notice. When a
creditor has failed to take the action necessary to start the three-day
rescission period running, the right to rescind automatically lapses on the
occurrence of the earliest of the following three events: (i) the expiration of
three years after the occurrence giving rise to the right of rescission; (ii)
transfer of all the consumer's interest in the property; or (iii) sale of the
consumer's interest in the property. After that time, depending on state law, a
consumer may assert a right of rescission as a defense in a foreclosure action
under certain circumstances. Under the TILA, the consumer cannot be required to
pay any amount in the form of money or property either to the creditor or to a
third party as a part of the transaction in which a consumer exercises the right
of rescission. Any amounts of this nature already paid by the consumer must be
refunded. "Any amount" includes finance charges already accrued, as well as
other charges such as application and commitment fees or fees for a title search
or appraisal. Once the creditor has fulfilled its rescission obligation under
the TILA, the consumer must tender to the creditor any property or money the
creditor has already delivered to the consumer.

The regulatory agencies are authorized to order creditors to make monetary
and other adjustments to the accounts of consumers in cases where an annual
percentage rate or finance charge is inaccurately disclosed. Generally, the
agencies order restitution when such disclosure errors resulted from a clear and
consistent pattern or practice of violation or gross negligence or a willful
violation that was intended to mislead the person to whom the credit was
extended. However, the agencies are not precluded from ordering restitution for
isolated disclosure errors. The TILA also provides for statutory damages of
twice the finance charge, with a minimum of $200 and a maximum of $2,000 for
closed end loans secured by real property or a dwelling. If successful, the
borrower is entitled to reasonable attorneys' fees and the costs of bringing the
action. The TILA also provides for class actions for actual damages and for
statutory damages of the lesser of $500,000 or 1% of the creditor's net worth,
plus court costs and attorneys' fees.

On September 30, 1995, President Clinton signed into law the Truth In
Lending Amendments of 1995 (the "1995 Amendments"). The 1995 Amendments increase
finance charge tolerances, limit the liability of assignees and loan servicers,
and provide protection from civil liability for claims based on certain
disclosure rules covered by the 1995 Amendments, including prohibiting the
maintenance of certain class action cases not certified as class actions prior
to January 1, 1995. The 1995 Amendments also clarify that third party fees not
required or retained by a lender, taxes levied on a security interest, and fees
to prepare all loan-related documents for real estate loans, as well as pest and
flood inspections, are excluded from the finance charge.

The Bank attempts in good faith to comply with the TILA and Regulation Z
thereunder. The requirements are complex, however, and even inadvertent
non-compliance could result in civil liability or the extension of the
rescission period for a mortgage loan for up to three years from the date the
loan was made. During the past several years, numerous individual claims and
purported consumer class action claims were commenced against a number of
financial institutions, their subsidiaries, and other mortgage lending
institutions, seeking civil statutory and actual damages and rescission under
the TILA, as well as remedies for alleged violations of various state unfair
trade practices acts and restitution or unjust enrichment in connection with
certain mortgage loan transactions.

THE FAIR HOUSING ACT. The FH Act, enacted into law in 1968, regulates many
practices, including making it unlawful for any lender to discriminate in its
housing-related lending activities against any person because of race, color,
religion, national origin, sex, handicap, or familial status.

Section 805 of the FH Act, which applies to the financing of housing, makes
it unlawful for a bank to deny a loan or any other financial assistance for the
purpose of purchasing, constructing, improving, repairing, or maintaining a
dwelling because of the race, color, religion, national origin, sex, handicap,
or familial status of the loan applicant, any person associated with the loan
applicant, any present or prospective owner of the dwelling, any lessees, or any
tenants or occupants. It is also unlawful to discriminate in fixing the amount,
interest rates, duration, or other terms of the credit.

Section 813 of the FH Act provides that aggrieved persons may sue anyone
who they believe has discriminated against them. Section 814 of the FH Act
provides that the Attorney General of the United States may sue for an
injunction against any pattern or practice that denies civil rights granted by
the FH Act. Section 810 of the FH Act allows a person to file a discrimination
complaint with the Department of Housing and Urban Development ("HUD"). HUD will
investigate the complaint and may attempt to resolve the grievance through
conciliation or persuasion. Penalties for violation of the FH Act include actual
damages suffered by the aggrieved person and injunctive or other equitable
relief. The court's order may also assess civil penalties.

THE EQUAL CREDIT OPPORTUNITY ACT. The ECOA, enacted into law in 1974,
prohibits discrimination in any credit transaction, whether for consumer or
business purposes, on the basis of race, color, religion, national origin, sex,
marital status, age (except in limited circumstances), receipt of income from
public assistance programs, or good faith exercise of any rights under the
Consumer Credit Protection Act. Regulation B, which implements the ECOA, covers
all individuals and institutions that regularly participate in decisions to
extend credit. In addition to prohibiting outright discrimination on any of the
impermissible bases listed above, an effects test has been applied to the
analysis of discrimination under Regulation B. This means that if a creditor's
actions have had the effect of discriminating, the creditor may be held liable
- -- even when there is no intent to discriminate.

In addition to actual damages, the ECOA provides for punitive damages of up
to $10,000 in individual lawsuits and up to the lesser of $500,000 or 1% of the
creditor's net worth in class action suits. Successful complainants may also be
entitled to an award of court costs and attorneys' fees.

THE REAL ESTATE SETTLEMENT PROCEDURES ACT. The RESPA, enacted into law in
1974, requires lenders to provide borrowers with disclosures regarding the
nature and cost of real estate settlements. Also, the RESPA prohibits certain
abusive practices, such as kickbacks, and places limitations on the amount of
money that a lender may require a borrower to place in an escrow account.
Regulation X, which implements RESPA, also establishes escrow accounting
procedures and mandates the use of aggregate accounting for determining the
maximum dollar amount that may be collected in connection with escrow accounts.

RESPA is applicable to all federally related mortgage loans. A "federally
related mortgage loan" includes any loan secured by a first or subordinate lien
on residential real property designed for occupancy by one to four families,
including a refinancing of an existing loan secured by the same property, if:
(i) the loan is made by any lender, the deposits of which are federally insured
or any lender that is regulated by a federal agency; or (ii) the loan is
insured, guaranteed or supplemented by a federal agency; or (iii) the loan is
intended to be sold to the FNMA, the GNMA, or the FHLMC; or (iv) the loan is
made by any creditor who makes or invests in residential real estate loans
aggregating more than $1 million per year.

Section 8 of the RESPA prohibits any person from giving or receiving a fee
or a thing of value (payments, commissions, fees, gifts or special privileges)
for a referral of settlement business. Such "kickbacks" include payments in
excess of the reasonable value of goods provided or services rendered.
Violations of Section 8 of the RESPA may result in imposition of the following
penalties: (i) civil liability equal to three times the amount of any charge
paid for the settlement services; (ii) the possibility that court costs and
attorneys' fees can be recovered; and (iii) a fine of not more than $10,000 or
imprisonment for not more than one year, or both.

The Bank attempts in good faith to comply with the requirements of the
RESPA and its implementing regulations. The requirements are complex, however,
and even inadvertent non-compliance could result in civil or criminal liability.
During the past several years, numerous individual claims and purported consumer
class action claims were commenced against a number of financial institutions,
their subsidiaries, and other mortgage lending institutions alleging violations
of the RESPA's escrow account rules and seeking civil damages, court costs, and
attorneys' fees.

THE HOME MORTGAGE DISCLOSURE ACT (THE "HMDA"). The HMDA, enacted into law
in 1975, is intended to provide public information that can be used to help
determine whether financial institutions are serving the housing credit needs of
the neighborhoods and communities in which they are located and to assist in
identifying possible discriminatory lending patterns.

The HMDA requires institutions to report data regarding applications for
one- to four-family loans, home improvement loans, and multi-family loans, as
well as information concerning originations and purchases of such types of
loans. The HMDA also requires most lenders to report the race, sex, and income
of mortgage applicants and borrowers. Generally, insured institutions, like the
Bank, are also required to indicate the reasons for decisions not to grant
credit.

Compliance with the HMDA implementing regulations is enforced by the
appropriate federal banking agency, or, in some cases, by HUD. Administrative
sanctions, including civil money penalties, may be imposed by supervisory
agencies for violations.

THE COMMUNITY REINVESTMENT ACT. The CRA, enacted into law in 1977, is
intended to encourage insured depository institutions, while operating safely
and soundly, to help meet the credit needs of their communities. The CRA
specifically directs the federal regulatory agencies, in examining insured
depository institutions, to assess their record of helping to meet the credit
needs of their entire community, including low-and moderate-income
neighborhoods, consistent with safe and sound banking practices. The CRA further
requires the agencies to take a financial institution's record of meeting its
community credit needs into account when evaluating applications for, among
other things, domestic branches, consummating mergers or acquisitions, or
holding company formations. Under the CRA, which is implemented by uniform
regulations adopted by each of the bank regulatory agencies, including the OTS,
financial institutions are required to describe their local community by
outlining the community on a map. If the financial institution has more than one
local community, it must describe each one. A financial institution's local
community consists of the areas surrounding each deposit-taking office or
cluster of offices, including any low- or moderate-income neighborhoods within
that area.

The regulations require the banking agencies to assess each financial
institution's record of performance in helping to meet the credit needs of its
community by reviewing 12 assessment factors. These assessment factors include:
(i) activities conducted by a financial institution to ascertain the credit
needs of its community; (ii) the extent of marketing and special credit related
programs to make members of the community aware of credit services; (iii) the
extent of participation of the financial institution's board of directors in
formulating policy and reviewing performance; (iv) the presence or absence of
practices intended to discourage applications for types of credit set forth in
the institution's CRA statement; (v) the geographic distribution for the
financial institution's credit extensions, credit applications, and denials;
(vi) the presence or absence of evidence of prohibited discriminatory or other
illegal credit practices; (vii) the financial institution's record of opening
and closing offices and providing services at offices; (viii) the financial
institution's participation, including investments, in local community
development projects; (ix) the financial institution's origination or purchase
of residential mortgage loans, housing rehabilitation loans, home improvement
loans, and small business and farm loans within its community; (x) the financial
institution's participation in governmentally insured, guaranteed, or subsidized
loan programs for housing and small farms and businesses; (xi) the financial
institution's ability to meet various

community credit needs based on its financial condition, size, and other
factors; and (xii) any other factors, that in the agencies' judgment, reasonably
bear on the extent to which a financial institution has helped to meet the
credit needs of its community.

The agencies use the CRA assessment factors in order to provide a rating to
the financial institution. The ratings range from a high of "outstanding" to a
low of "substantial noncompliance".

On April 19, 1995, the agencies jointly adopted revised CRA regulations.
Under the new system, the 12 assessment factors used to evaluate the CRA
performance of most large retail institutions, such as the Bank, will be
replaced with three tests, the lending, investment, and service tests, with the
lending test carrying the primary importance. To receive a satisfactory or
better rating, an institution must achieve at least a satisfactory lending
performance.

The lending test evaluates an institution's record of helping to meet the
credit needs of its assessment area(s) through its lending activities by
considering, among other things, the number, amount, geographic distribution,
and certain borrower characteristics of the institution's home mortgage, small
business, small farm, and community development lending. The investment test
evaluates an institution's record of helping to meet the credit needs of its
assessment area or areas through "qualified investments" (lawful investments,
deposits, membership shares, or grants that have community development as their
primary purpose). The service test evaluates an institution's record of helping
to meet the credit needs of its assessment area or areas by analyzing the
availability and effectiveness of an institution's systems for delivering retail
banking services and an institution's community development services. An
institution may elect to be evaluated on the basis of a strategic plan approved
by its primary regulator rather than the three tests.

Although the regulations became effective on July 1, 1995, the primary
provisions are subject to a two-year phase-in period. Most large retail
institutions will become subject to the new examination criteria beginning July
1, 1997, although institutions may elect to be examined with the new tests
beginning January 1, 1996. Finally, new data collection requirements that became
effective on January 1, 1996 are included in the new regulations.

While the Bank is strongly committed to serving all of its CRA communities,
including its low- and moderate-income neighborhoods, the OTS might determine
the Bank's CRA-related programs to be insufficient. The Bank was last examined
for CRA compliance by its primary regulator, the OTS, on October 14, 1995 and
received a CRA assessment rating of "outstanding". The Bank's previous CRA
assessment rating, as of March 8, 1993, was also "outstanding".

SAVINGS AND CHECKING ACCOUNTS AND PUBLIC ACCOMMODATIONS

THE BANK SECRECY ACT ("BSA") AND MONEY LAUNDERING LAWS. The BSA, enacted
into law in 1970, requires every financial institution within the United States
to file a Currency Transaction Report with the IRS for each transaction in
currency of more than $10,000 not exempted by the Treasury Department. The
reports must be filed within 15 days of the transaction. A "transaction in
currency" is defined by the regulations to include any transaction "involving
the physical transfer of currency from one person to another". The Treasury
Department deems multiple transactions by the same person on the same day
exceeding $10,000 in the aggregate to be reportable. Financial institutions are
also required to file a Suspicious Activity Report with respect to any known or
suspected criminal conduct or suspicious activities, including transactions
valued at more than $5,000 that the institution knows or suspects involve funds
derived from illegal activities, are designed to evade the requirements of the
BSA, have no business or apparent lawful purpose, or are not the sort in which
the particular customer would normally be expected to engage.

In 1988, Congress enacted the Money Laundering Prosecution Improvements Act
(the "1988 Act"). The 1988 Act expanded the BSA's definition of "financial
institution" and broadened the BSA's reporting requirements to require financial
institutions, typically banks, to verify and record the identity of the
purchaser upon the issuance or sale of bank checks or drafts, cashier's checks,
traveler's checks, or money orders involving $3,000 or more in cash.
Institutions must also verify and record the identity of the originator and
beneficiary of certain funds transfers.

Under the FDIA, a receiver or conservator may be appointed for an insured
depository institution on the receipt of written notice from the Attorney
General that an insured depository institution has been found guilty of a
criminal money laundering offense or criminal offense under the BSA. The FDIC
may also take action to terminate the deposit insurance of an institution
convicted of criminal violations of the BSA and money laundering offenses. Any
person who willfully causes a violation of the BSA's record-keeping requirements
for insured institutions is subject to the imposition of up to a $50,000 civil
money penalty, in addition to any other applicable penalties.

The Bank has instituted a policy against money laundering that is
communicated by top management to the Bank's employees. The policy includes
safeguards to prevent money laundering, including, but not limited to, regular
education programs to teach employees the requirements of the federal money
laundering laws and to make them aware of the innovative and ever-changing
techniques employed by money launderers.

ELECTRONIC FUND TRANSFER ACT (THE "EFTA"). The EFTA, enacted into law in
1978, provides a basic framework establishing the rights, liabilities, and
responsibilities of participants in "electronic fund transfer systems", defined
to include automated teller machine transfers, telephone bill-payment services,
point-of-sale terminal transfers, and preauthorized transfers from or to a
consumer's account (E.G., direct deposit of Social Security payments). Its
primary objective is to protect the rights of individuals using these systems.
The EFTA limits a consumer's liability for certain unauthorized electronic fund
transfers and requires certain error resolution procedures.

Unless an error is resolved in accordance with the error-resolution
procedures specified in the EFTA, the institution may be liable for civil
damages. The statutory damages the institution would have to pay in a successful
individual action are actual damages and statutory damages between $100 and
$1,000, as determined by the court, plus court costs and attorneys' fees. In a
successful class action, the institution would have to pay actual damages and
statutory damages up to the lesser of $500,000 or 1% of the institution's net
worth, plus court costs and reasonable attorneys' fees. The EFTA also sets forth
provisions for criminal liability for certain EFTA violations. Penalties under
these provisions run from a $5,000 fine and one year's imprisonment for
knowingly and willfully failing to comply with the EFTA, to a $10,000 fine and
10 years' imprisonment for fraudulent use of a debit card.

THE EXPEDITED FUNDS AVAILABILITY ACT ("EXPEDITED FUNDS ACT"). The Expedited
Funds Act, enacted into law in 1987, seeks to insure prompt availability of
funds deposited into a customer's account and to expedite the return of checks.
The Expedited Funds Act is implemented by the Federal Reserve Board's Regulation
CC. The Act and Regulation CC include specific detailed provisions requiring a
financial institution to: (i) make funds available to its customers within
specified time frames; (ii) ensure that interest accrues on funds in
interest-bearing transaction accounts not later than the day the financial
institution receives credit; and (iii) disclose the financial institution's
funds-availability policies to its customers.

In addition to administrative enforcement, there is civil liability for
violations of the Expedited Funds Act. Any depository institution that fails to
comply with any requirement of the Expedited Funds Act or regulation with
respect to any person other than another depository institution is liable to
such person in an amount equal to the sum of actual damages, such additional
amount as the court may allow (with a minimum of $100 and a maximum of $1,000 in
an individual action and, in a class action, a maximum of the lesser of $500,000
or 1% of the net worth of the depository institution), plus court costs and
attorneys' fees in the case of any successful action.

THE TRUTH IN SAVINGS ACT (THE "TISA"). The TISA, enacted into law in 1991,
is principally a disclosure law, the purpose of which is to encourage
comparative shopping for deposit products. The common denominator used by the
TISA to facilitate comparison shopping of interest payable on deposit accounts
is the Annual Percentage Yield (the "APY"). TISA is implemented by Regulation
DD. The TISA and Regulation DD thereunder require depository institutions to pay
interest on the full amount of the principal in the account for each day, under
either the "daily balance method" or the "average daily balance method". No
other balance calculation methods are permitted by the TISA.

In addition to administrative enforcement, TISA violations carry civil
liability. Any depository institution that fails to comply with any requirement
of the TISA with respect to any person who is an account holder is liable to
such person in an amount equal to the sum of actual damages, such additional
amount as the court may allow (with a minimum of $100 and a maximum of $1,000 in
an individual action and, in a class action, a maximum of the lesser of $500,000
or 1% of the net worth of the depository institution), plus court costs and
attorneys' fees in the case of any successful action.

THE AMERICANS WITH DISABILITIES ACT (THE "ADA"). The ADA, enacted into law
in 1990, prohibits private employers, state and local governments, employment
agencies, and labor unions from discriminating against qualified individuals
with disabilities in connection with job application procedures, hiring, firing,
advancement, compensation, job training, and other terms, conditions, and
privileges of employment. An individual with a disability is a person who: (i)
has a physical or mental impairment that substantially limits one or more major
life activities; (ii) has a record of such an impairment; or (iii) is regarded
as having such an impairment.

Title 3 of the ADA covers banks, thrifts, credit unions, and finance
companies -- all of which are considered to be "public accommodations". Section
302(a) of the ADA provides that "no individual shall be discriminated against on
the basis of disability in the full and equal enjoyment of the goods, services,
or facilities, privileges, advantages, or accommodations of any place of public
accommodation". Section 302(b) of the ADA sets forth specific requirements and
prohibitions for public accommodations; for example, a place of public
accommodation, such as the Bank's retail branch offices, may not impose
eligibility criteria that screen out persons with disabilities. Discrimination
also includes the failure to provide the auxiliary aids and services necessary
to enable individuals with disabilities to take advantage of a financial
institution's services, unless the financial institution can demonstrate that
providing the aids and services would "fundamentally" alter the nature of the
service or would result in an "undue burden". Another significant provision of
Section 302 of the ADA is the requirement to remove from public accommodations
all architectural barriers and communication barriers that are structural in
nature if the removal is "readily achievable". "Readily achievable" is defined
as "easily accomplishable and able to be carried out without much difficulty or
expense". In deciding whether a particular action is readily achievable, the
size of the institution and the nature and the cost of the action will be
considered. The last substantive provision of Title 3 of the ADA that applies to
financial institutions is Section 303, dealing with new construction. It
provides that any building opening to the public after January 26, 1993 must be
"readily accessible to and useable by individuals with disabilities" unless
doing so is structurally impracticable.

Anyone who has been discriminated against on the basis of a disability in
relation to employment may file an action with the United States Equal
Employment Opportunity Commission and may be entitled to remedies that include
rehiring, promotion, reinstatement, back pay or remuneration, or reasonable
accommodation including reassignment. Such individuals may also be entitled to
damages intended to compensate for future pecuniary losses, mental anguish, and
inconvenience. The ADA authorizes the Attorney General to sue institutions that
are engaged in a pattern or practice of discrimination. At the Attorney
General's request, the court may impose civil penalties of $50,000 for a first
violation and $100,000 for any subsequent violation or certain other remedies.

The Bank attempts in good faith to assure compliance with the requirements
of the consumer protection statutes to which it is subject, as well as the
regulations that implement the statutory provisions. The requirements are
complex, however, and even inadvertent non-compliance could result in civil and,
in some cases, criminal liability. Based on the Bank's history of claims under
the consumer protection statutes and regulations to which it is subject,
management does not believe that claims are likely to be asserted that will have
a material adverse effect on the Bank's or the Company's financial condition,
results of operations, or liquidity.

LEGISLATION

Federal legislation and regulation have significantly affected the
operations of federally insured savings associations, such as the Bank, and
other federally regulated financial institutions in the past several years and
have increased competition among savings associations, commercial banks, and
other financial institutions. The operations of regulated depository
institutions will continue to be subject to changes in applicable statutes and
regulations from time to time, which changes could adversely affect the Bank and
its affiliates. See "Risk

Factors -- Recapitalization of the SAIF and Its Impact on SAIF Premiums; Other
Legislative Proposals" and " -- Taxation -- Proposed Legislation".

TAXATION

FEDERAL TAXATION

The Company is a savings and loan holding company and the Bank is a federal
savings bank. Both are subject to provisions of the Code, in the same manner,
with certain exceptions, as other corporations. The Company and the Bank
participate in the filing of a consolidated federal income tax return with their
"affiliated group", as defined by the Code. For financial reporting purposes,
however, the Company and the Bank compute their tax on a separate company basis.
The accompanying Consolidated Financial Statements include provisions for income
taxes as a result of the Company's and the Bank's taxable income for the six
months ended March 31, 1996 and 1995, and fiscal 1995. For fiscal 1994 and 1993,
the provision for income taxes includes a deferred tax benefit as a result of
the Bank's expected utilization of its NOLs against future taxable income in
accordance with SFAS 109, "Accounting for Income Taxes". No tax benefit for
income taxes was recognized as a result of the Company's stand alone losses. See
" -- Residual Interest", " --Alternative Minimum Tax", and " -- Accounting for
Income Taxes". The Company and the Bank have generated losses creating NOLs. See
" -- Net Operating Losses". In addition to federal income taxes, the Bank is
required to make payments in lieu of federal income taxes pursuant to the
Assistance Agreement with the FSLIC. The tax benefit sharing provisions
contained in the Assistance Agreement were replaced by similar provisions
contained in the tax benefits agreement ("Tax Benefits Agreement") entered into
in connection with the Settlement Agreement; these provisions, relating to the
obligation to share tax benefit utilization, will continue through the taxable
year ending nearest to September 30, 2003. See " -- FSLIC Assistance", and Note
13 to the Consolidated Financial Statements. See " -- Proposed Legislation" for
changes which would affect the bad debt deduction and the bad debt reserve.

RESIDUAL INTEREST

The Bank is a holder of residual interests in Real Estate Mortgage
Investment Conduits ("REMICs") as defined by the Code. The Code limits the
amount of NOLs that may be used to offset the taxable income derived by holders
of residual interests in a REMIC. However, the Code states that this limitation
does not apply to certain financial institutions that are holders of residual
interests that meet a significant value test prescribed by applicable Treasury
regulations. The Bank incurs taxable income from residual interests that meet
such test and, therefore, may be offset by NOLs without respect to this
limitation. Also, the Bank incurs taxable income from residual interests that
does not meet such test and, therefore, may not be offset by NOLs. This income
caused the Bank to incur a regular tax liability for the six months ended March
31, 1995, and fiscal 1994.

DOMESTIC BUILDING AND LOAN ("DBL") TEST

Savings institutions such as the Bank that meet the definitional DBL test
prescribed by the Code may benefit from certain favorable provisions regarding
their deductions from taxable income for annual additions to their bad debt
reserve. The DBL test consists of a supervisory test, a business operations
test, and an asset test. If the Bank fails to meet these tests, the transition
from the reserve method to the direct charge-off method of tax accounting for
bad debts would result in a recapture of this reserve into taxable income. At
September 30, 1995, the Bank was in excess of the minimum thresholds. There can
be no assurance that the Bank will meet these tests for subsequent tax years.

BAD DEBT DEDUCTION

For purposes of the bad debt reserve deduction, loans are separated into
"qualifying real property loans", which generally are loans secured by certain
interests in real property, and "non-qualifying loans", which are all other
loans. The deduction with respect to non-qualifying loans must be computed under
the experience method, which generally allows a deduction based on a savings
association's actual bad debt loss experience, consisting of the current year
and the prior five years. The bad debt reserve deduction with respect to
qualifying real property loans, however, may be the larger of the amounts
computed under (i) the experience method, or (ii) the

percentage of taxable income method. The percentage of taxable income method
generally permits a qualifying savings association to deduct 8% of its taxable
income prior to such deduction, as adjusted for certain items.

Savings associations, such as the Bank, that file federal income tax
returns as part of a consolidated group are required by applicable Treasury
regulations to reduce their taxable income, for purposes of computing the
percentage of taxable income deduction, for losses attributable to activities of
the non-savings association members of the consolidated group that are
functionally related to the activities of the savings association member.
Currently, the Bank is computing its bad debt deduction pursuant to the
experience method. All or a portion of the Bank's tax reserve for bad debts may
be required to be includible in taxable income in a subsequent taxable year
under certain circumstances, including the Bank's failure to meet the definition
of a savings institution for federal income tax purposes, dividend distributions
in excess of the Bank's then current or accumulated earnings and profits, or as
a result of distributions in liquidation or redemption of the Bank Common Stock
or the Bank Preferred Stock.

PROPOSED LEGISLATION

For a discussion of proposed legislation which could, if enacted, have a
material effect on the financial condition and results of operations of the
Company and the Bank, see "Risk Factors -- Recapitalization of the SAIF and Its
Impact on SAIF Premiums; Other Legislative Proposals".

ALTERNATIVE MINIMUM TAX ("AMT")

In addition to regular income taxes, corporations including saving and loan
holding companies and savings associations are subject to an AMT, which is
generally equal to 20% of alternative minimum taxable income ("AMTI") (taxable
income increased by tax preference items and adjusted for other items). The
preference item principally affecting the Bank relates to the adjusted current
earnings ("ACE") adjustment, which includes FRF assistance. See "Business -- The
Assistance Agreement". Although the amounts received by the Bank pursuant to the
Assistance Agreement are not taxable for federal income tax purposes, a portion
of such amounts are considered to be an ACE adjustment. For the six months ended
March 31, 1996, and for fiscal 1995 and 1993, the Bank incurred AMTI that was
offset by the utilization of AMT NOLs. However, corporations may offset only 90%
of their AMTI with the related NOLs. For the six months ended March 31, 1995,
and for fiscal 1994, 1992, and 1991, the Bank did not incur an AMT liability.

ENVIRONMENTAL TAX

The Code imposes an additional tax at the rate of .12% on the modified AMTI
of a corporation. Because the tax was enacted to provide funds for various
environmental programs, it is denominated as an environmental tax. Modified AMTI
is essentially AMTI without regard to any utilization of available AMT NOLs less
$2 million.

FSLIC ASSISTANCE

Pursuant to the Assistance Agreement, the FRF, as successor to the FSLIC,
was obligated to provide the Bank with financial assistance in connection with
various matters that arose under the Assistance Agreement. See "Business -- The
Assistance Agreement". The tax treatment of the assistance payments to savings
associations that acquire assets from institutions in receivership (such as the
predecessor to the Company) has been amended several times in recent years.
Payments to the Bank pursuant to the Assistance Agreement were subject to the
applicable provisions of the Code that were in effect in 1988, the year of the
Acquisition. Payments from the FRF to the Bank pursuant to the Assistance
Agreement were not included in the Bank's taxable income, and the Bank was not
required to reduce its basis in the Covered Assets by the amount of such
financial assistance; however, certain writedowns and losses are limited as
discussed below. Accordingly, there was no requirement to pay federal income
taxes with respect to any amount of the assistance payments received pursuant to
the Assistance Agreement. The Bank also succeeded to substantial NOLs as a
result of the Acquisition.

The Assistance Agreement did, however, require the Bank, in effect, to pay
to the FRF an amount equal to one-third of the sum of federal and state net tax
benefits ("Net Tax Benefits") (as defined by the Assistance Agreement). The Net
Tax Benefits shall be equal to the excess of any of the federal income tax
liability which would have been incurred if the tax benefit item had not been
deducted or excluded from income over the federal income tax liability actually
incurred. The Net Tax Benefits items are the tax savings resulting from (i) the

utilization of the deduction by the Bank of any amount of NOLs, capital loss
carryforwards, and certain other carryforwards on the books and records of Old
USAT, (ii) the exclusion from gross income of the amount of certain interest or
assistance payments made to the Bank by the FRF, and (iii) the deduction of
certain costs, expenses, or losses incurred by the Bank for which the FRF has
made tax-free assistance payments. These provisions were replaced by similar
provisions in the Tax Benefits Agreement entered into in connection with the
termination of the Assistance Agreement. Pursuant to the Tax Benefits Agreement,
these provisions relating to the obligation to share tax benefit utilization
will continue through the taxable year ending nearest to September 30, 2003.

Under the Assistance Agreement, the Bank received assistance payments from
the FRF for writedowns and losses from the sales of Covered Assets. For federal
income tax purposes, the Bank included the writedowns and losses from the sale
of Covered Assets in its calculation of the bad debt deduction, using the
experience method. However, the Revenue Reconciliation Act of 1993 denied the
inclusion of writedowns and losses from the sale of Covered Assets in the
calculation of bad debt deductions for assistance payments credited on or after
March 4, 1991. Amendment of federal tax returns for fiscal 1991 and 1992 did not
cause any additional federal tax liabilities to be incurred. However, the new
tax law reduced the Bank's federal NOLs in the amount of approximately $259
million.

The aforementioned tax relief provided savings (costs) on the amount of
taxes required to be paid. The estimated tax savings (costs), by year, were as
follows (in millions):

FOR THE YEAR ENDED
SEPTEMBER 30, SAVINGS (COSTS)
- ------------------------------------- ---------------

1991............................ $(1.7)
1992............................ (2.8)
1993............................ 10.5
1994............................ 3.6
1995............................ 31.8

FOR THE SIX MONTHS
ENDED MARCH 31,
- -------------------------------------

1996............................ 17.2

The remaining NOLs associated with this tax relief aggregated approximately
$745 million at March 31, 1996.

NET OPERATING LOSSES

There are federal income tax NOLs of approximately $808 million as of March
31, 1996. Included in the $808 million is $24 million of Old USAT's NOLs that
will expire in fiscal 2003 if not utilized. Because Old USAT's NOLs are
"separate return limitation year" losses within the meaning of the consolidated
return Treasury regulations, their utilization is limited to future taxable
income of the Bank. The remaining $784 million of NOLs are attributable to
operations for fiscal 1989 to 1994, and will begin expiring in fiscal 2004 if
not utilized. See Note 13 to the Consolidated Financial Statements. These NOLs
may be utilized against the taxable income of the other companies within the
consolidated group of which the Company and the Bank are members.

NET OPERATING LOSS LIMITATIONS

In the event of an Ownership Change, Section 382 of the Code imposes an
annual limitation on the amount of taxable income a corporation may offset with
NOLs and certain recognized built-in losses. The limitation imposed by Section
382 of the Code for any post-change year would be determined by multiplying the
value of the Company's stock (including both Common Stock and Preferred Stock)
at the time of the Ownership Change by the applicable long-term tax exempt rate
(which was 5.78% for June 1996). Any unused annual limitation may be carried
over to later years, and the limitation may under certain circumstances be
increased by the built-in gains in assets held by the Company at the time of the
change that are recognized in the five-year period after the change. Under
current conditions, if an Ownership Change were to occur, the Company's annual
NOL utilization would be limited to a minimum of approximately $31.8 million.

The Company would undergo an Ownership Change if, among other things, 5%
Stockholders increase their aggregate percentage ownership of such stock by more
than 50 percentage points over the lowest percentage of such stock owned by such
stockholders at any time during the Testing Period (generally the preceding
three years). In applying Section 382 of the Code, at least a portion of the
stock sold pursuant to the Offering would be considered to be acquired by a new
5% stockholder even if no person acquiring the stock in fact owns as much as 5%
of the issuer's stock. While the application of Section 382 of the Code is
highly complex and uncertain in some respects, the sale of shares of Class A
Common Stock as contemplated by this Prospectus is not expected to cause an
Ownership Change. In addition, events could occur prior to or after the Offering
that are beyond the control of the Company which could result in an Ownership
Change.

In an effort to protect against a future Ownership Change that is not
initiated by the Company, the Certificate and By-Laws limit Transfers, subject
to certain exceptions, at any time during the three years following the Common
Stock Offering, of shares of Common Stock that would either cause a person or
entity to become a 5% Stockholder or increase a 5% Stockholder's percentage
ownership interest. While such Transfers are deemed prohibited by the
Certificate and the Company is authorized not to recognize any transferee of
such a Transfer as a stockholder to the extent of such Transfer, these
restrictions are incomplete since the Company cannot, consistent with NASDAQ
requirements, prevent the settlement of transactions through NASDAQ, and because
the prohibition on Transfers by 5% Stockholders does not limit transactions in
the securities of such 5% Stockholders that could give rise to ownership shifts
within the meaning of the applicable Section 382 rules. Moreover, the Company
Board retains the discretion to waive these limitations or to take certain other
actions that could trigger an Ownership Change, including through the issuance
of additional shares of Common Stock in subsequent public or private offerings
or through subsequent merger or acquisition transactions.

See "Risk Factors -- Limitations on Use of Tax Losses, Restrictions on
Transfer of Stock", "Common Stock Offering: Selling Stockholders -- Selling
Stockholder Letter Agreements".

Preferred stock that meets the requirements of section 1504(a)(4) of the
Code is not considered stock when calculating an Ownership Change. Preferred
stock meets the definition under section 1504(a)(4) of the Code if such stock:
(i) is not entitled to vote; (ii) is limited and preferred as to dividends and
does not participate in corporate growth to any significant extent; (iii) has
redemption and liquidation rights which do not exceed the issue price of such
stock (except for a reasonable redemption or liquidation premium); and (iv) is
not convertible into another class of stock.

In fiscal 1995, the Bank publicly issued 4,000,000 shares, $25 liquidation
preference per share, of 9.60% Preferred Stock, Series B (par value $0.01). In
fiscal 1993, the Bank publicly issued 3,420,000 shares, $25 liquidation
preference per share, of 10.12% noncumulative Preferred Stock, Series A (par
value $0.01). Management believes that the Bank's issuance of the Bank Preferred
Stock met the requirements of Section 1504(a)(4) of the Code and, therefore, did
not result in an Ownership Change.

The tax laws in effect in 1988 that applied to the Acquisition provided
that generally applicable limitations on the ability of an acquiring corporation
to utilize the NOLs, and built-in losses, of acquired savings associations did
not apply in the case of the acquisition of assets from insolvent savings and
loan associations. Pursuant to this exception to the generally applicable law,
which existed in 1988, the Bank is allowed to use the NOLs and built-in losses
of Old USAT without limitation.

If an Ownership Change should occur, the Company's ability to utilize its
NOLs will be limited as described above, and the Company's ability to deduct its
built-in losses, if any, as they are realized will be subject to the same
limitation. Limitation of the utilization of these tax benefits could have a
material impact on the Company's financial condition.

CONSOLIDATED GROUP

The Company and the Bank were and are members of an "affiliated group" of
corporations, as defined in the Code and, accordingly, participate in the filing
of a consolidated tax return. One of the requirements of being a member of an
affiliated group is that 80% of the total voting power and 80% of the total
value of stock be owned, directly or indirectly, by other members of the
affiliated group. Stock for this purpose does not include preferred stock that
meets certain definitional requirements prescribed by the Code. Therefore, the
Bank did not cease to be a member of an affiliated group as a result of the
prior issuance of the Bank Preferred Stock. However, if subsequent events occur
that cause the Bank Preferred Stock to no longer meet these requirements (as
could occur if a default in dividends permitted the holders of such stock to
vote in the election of Bank directors), the Bank may cease to be a member of
the affiliated group. If the Bank ceases to be a member of the affiliated group,
other members of the affiliated group will lose their ability to utilize the
Bank's nonseparate return year limitation NOLs in the amount of $736 million.
See " -- Net Operating Losses".

ACCOUNTING FOR INCOME TAXES

Effective October 1, 1992, the Company and the Bank adopted SFAS No. 109,
"Accounting for Income Taxes". SFAS No. 109 changes the method of computing
income taxes for financial statement purposes by adopting the liability method
under which the net deferred tax asset or liability is determined based on the
tax effects of tax benefits attributable to tax carryforwards such as NOLs,
investment tax credits and capital losses, and the differences between the book
and tax bases of the various assets and liabilities. The deferred tax asset must
be reduced by a valuation allowance if, based on available evidence, it is more
likely than not that some portion of the tax benefit will not be realized.
Accounting guidance under Accounting Principles Board No. 11, "Accounting for
Income Taxes", did not require these amounts to be recognized previously. During
the fourth quarter of fiscal 1993, the Bank recognized $59 million as a tax
benefit for the expected utilization of $252 million in NOLs against future
taxable income. SFAS No. 109 requires that tax benefits arising from an
acquisition should be used first to reduce to zero any goodwill related to that
acquisition, second to decrease other non-current intangible assets resulting
from that acquisition, and finally to reduce income tax expense. As a result of
the recognition of $59 million in tax benefits, income tax expense was reduced
$44 million, and goodwill associated with the Acquisition was reduced $15
million during the fourth quarter of fiscal 1993. During fiscal 1994, the
Company recognized an additional $58 million as a tax benefit for the expected
utilization of $249 million in NOLs against future taxable income. For fiscal
1994 and 1993, the Company recognized no tax benefit for income taxes for its
NOLs because the criteria to recognize a tax benefit under SFAS No. 109 was not
met. For the six months ended March 31, 1996 and 1995 and fiscal 1995, there
have been no tax benefits recognized by the Company or the Bank for the expected
utilization of NOLs against future taxable income. See " -- Net Operating Loss
Limitations". During the third quarter of 1996, the Company recognized a tax
benefit of $101.7 million for the expected utilization of NOLs against future
taxable income. See Note 21 to the Consolidated Financial Statements.

STATE TAXATION

The Company and the Bank file unitary and combined state returns with
certain subsidiaries and also file separate state returns. The location of
mortgage bank branches, loan solicitations, or real property securing loans
creates jurisdiction for taxation in certain states, which results in the filing
of state income tax returns. Amounts for state tax liabilities are included in
the statements of operations for the six months ended March 31, 1996 and 1995,
and fiscal 1995, 1994, and 1993. See Note 13 to the Consolidated Financial
Statements.

DESCRIPTION OF PROPERTIES

The Company's offices are located at 50 Charles Lindbergh Boulevard, Suite
500, Uniondale, New York 11553, in space provided by an affiliate of the
Company. The headquarters of the Bank is located in leased premises in Houston,
Texas. The leases for the Bank's headquarters have terms expiring from one to
five years, with annual rental expenses of $4.3 million, subject to increases
under certain circumstances. The following table sets forth the number and
location of the community banking, commercial banking, and mortgage banking
offices of the Company as of March 31, 1996:

<TABLE>
<CAPTION>
NUMBER OF OFFICES
--------------------------------------------------------------
COMMUNITY
BANKING
BRANCHES COMMERCIAL
--------------- BANKING MORTGAGE BANKING
LOCATION OWNED LEASED OFFICES LEASED OFFICES LEASED TOTAL
- ------------------------------------- ----- ------ -------------- ---------------- -----
<S> <C> <C> <C> <C> <C>
Houston Area......................... 14 20 1 5 40
Dallas/Ft. Worth Area................ 12 17 1 3 33
Other Texas.......................... -- 4 -- 3 7
California........................... -- -- 1 25 26
Florida.............................. -- -- 1 6 7
Other U.S............................ -- -- 5 70 75
--
----- ------ --- -----
Total............................ 26 41 9 112 188
===== ====== == === =====
</TABLE>

A majority of leases outstanding at March 31, 1996 expire within five years
or less. See Note 17 to the Consolidated Financial Statements.

Net investment in premises and equipment totaled $36.2 million at March 31,
1996.

LEGAL PROCEEDINGS

On December 7, 1995, Maxxam filed a Petition for Review in the United
States Court of Appeals for the Fifth Circuit seeking to modify, terminate, and
set aside the order, dated December 30, 1988 (the "Order"), of the FSLIC
approving the Acquisition, which was consummated on December 31, 1988 and
involved substantially all the Bank's initial assets and liabilities. See "The
Company -- History". On December 8, 1995, Maxxam filed a Motion to Intervene and
a Complaint in Intervention in an action pending in the U.S. District Court for
the Southern District of Texas, entitled FEDERAL DEPOSIT INSURANCE CORPORATION
V. CHARLES E. HURWITZ, also seeking to set aside the Order. Maxxam contends, in
both cases, that it submitted the most favorable bid to acquire the assets and
liabilities of Old USAT and that it should have been selected as the winning
bidder.

The Company is not a party to either of these proceedings. The Bank has
intervened in the Fifth Circuit case and may file a Motion to Intervene in the
District Court case at a later date. Management believes, after consultation
with legal counsel, that the claims of Maxxam are barred by applicable time
limits, have no basis for assertion under existing law, and will not have a
material adverse effect on the Bank's or the Company's financial condition,
results of operations, or liquidity.

The Bank's operations are subject to various consumer protection statutes
and regulations, including, for example, the TILA, the FH Act, the CRA, the
ECOA, the HMDA, the RESPA, the EFTA, the Expedited Funds Act, the TISA, and the
ADA. See "Regulation -- Consumer Protection Regulations". During the past
several years, numerous individual claims and purported consumer class action
claims were commenced against a number of financial institutions, their
subsidiaries, and other mortgage lending institutions seeking civil statutory
and actual damages and rescission under the TILA, as well as remedies for
alleged violations of various state unfair trade practices laws and restitution
or unjust enrichment in connection with certain mortgage loan transactions.
Also, there have been numerous individual claims and purported consumer class
action claims commenced against a number of financial institutions, their
subsidiaries, and other mortgage lending institutions seeking declaratory relief
that certain of the lenders' escrow account servicing practices violate the
RESPA and breach the lenders' contracts with borrowers. Such claims also
generally seek actual damages and attorneys' fees.

100

origination, pricing, closing, servicing, and collection of mortgage loans and
that allege inadequate disclosure, breach of contract, breach of fiduciary duty,
or violation of federal or state laws. Claims have involved, among other things,
interest rates and fees charged in connection with loans, interest rate
adjustments on adjustable-rate mortgage loans, timely release of liens upon loan
payoffs, the disclosure and imposition of various fees and charges, and the
placing of collateral protection insurance. While the Bank has had various
claims asserted against it similar to those discussed above, management does not
expect these claims to have a material adverse effect on the Bank's or the
Company's financial condition, results of operations or liquidity.

On July 25, 1995, the Bank, the Company and Hyperion Partners filed suit in
the United States Court of Federal Claims against the United States of America
for breach of contract and taking of property without compensation in
contravention of the Fifth Amendment of the United States Constitution. The
action arose because the passage of FIRREA and the regulations adopted by the
OTS pursuant to FIRREA deprived the Company of its contractual rights.

In December 1988, the United States, through its agencies, entered into
certain agreements with the Company that resulted in contractual obligations
owed to the Company. The Company contends that the obligations were undertaken
to induce, and did induce, the Company's acquisition of substantially all of the
assets and the secured, deposit, and certain tax liabilities of Old USAT, an
insolvent savings and loan association, thereby relieving the FSLIC of the
immense costs and burdens of taking over and managing or liquidating the
institution. The FSLIC, an agency of the United States government, actively
solicited buyers for Old USAT, and in the weeks preceding the acquisition the
Company and the FSLIC negotiated the terms of a complex transaction involving
some six contractual documents. To accomplish this transaction, the FSLIC and
its regulating agency, the Federal Home Loan Bank Board (the "FHLBB"), which was
also an agency of the United States government, were required to undertake to
pay certain other amounts of money over time and to count for regulatory
purposes certain monies and book entries of the Bank in ways that allowed the
Company greater leverage to increase the size of the Bank prudently and
profitably. The United States obtained the right to share in this leveraged
growth through warrants for stock and through so-called "tax benefit payments"
to the United States from the Company.

The lawsuit involves the United States' contractual obligations (i) to
abide by a capital forbearance, which allowed the Bank to operate for ten years
under negotiated capital levels lower than the levels required by the then
existing regulations or successor regulations, (ii) to abide by its commitment
to allow the Bank to count subordinated debt as regulatory capital for all
purposes and (iii) to abide by an accounting forbearance, which allowed the Bank
to count as capital for regulatory purposes, and to amortize over a period of
twenty-five years, the difference between certain FSLIC payment obligations to
the Bank, denominated "Reimbursable Goodwill," and the discounted present value
of those future FSLIC payments. The lawsuit seeks monetary relief for the
breaches by the United States of its contractual obligations to plaintiffs and,
in the alternative, seeks just compensation for a taking of property and for a
denial of due process under the Fifth Amendment to the United States
Constitution.

There are over 100 similar cases pending in the United States Court of
Federal Claims, which has entered summary judgment for the plaintiffs as to
liability, but not damages, in three of the cases. These three cases (the
"Winstar cases") were appealed to the United States Court of Appeals for the
Federal Circuit, which affirmed the judgment for the plaintiffs following a
hearing EN BANC after a three-judge panel had found for the United States. The
United States Supreme Court has agreed to review the decision in the Winstar
cases, oral argument occurred on April 24, 1996, and the Supreme Court is
expected to issue a decision during 1996. The Company's claim has been stayed,
pending the decisions of the Supreme Court in the Winstar cases. There have been
no decisions determining damages in any of the similar cases. The Company is
unable to predict the outcome of its claim against the United States and the
amount of any damages that may be awarded to the Bank or the Company, if any, in
the event that judgment is made in favor of the Bank or the Company.
Consequently, no assurances can be given as to the results of this claim or the
timing of any proceeding in relation thereto.

The Bank is involved in other legal proceedings occurring in the ordinary
course of business that management believes, after consultation with legal
counsel, are not, in the aggregate, material to the financial condition, results
of operations, or liquidity of the Bank or the Company.

101

MANAGEMENT

DIRECTORS

The Company Board consists of three members and is divided into three
classes. The members of each class are elected for a term of three years with
one class being elected annually. Each director of the Company is also a
director of the Bank. The following table sets forth certain information with
respect to the directors of the Company, including information regarding their
ages and when they became directors.

DIRECTOR OF DIRECTOR OF
THE COMPANY THE BANK TERM
NAME AGE SINCE SINCE EXPIRES
- ------------------------------ --- ----------- ----------- -------

Lewis S. Ranieri.............. 49 1988 1988
Salvatore A. Ranieri.......... 47 1988 1988
Scott A. Shay................. 38 1988 1988

The principal occupation and position with the Company and the Bank of each
director is set forth below.

LEWIS S. RANIERI. Mr. Ranieri is the Chairman of the Company. He was also
the President of the Company and Chairman of the Bank from 1988 until
1996. Mr. Ranieri is the Chairman and CEO of Ranieri & Co.,
positions he has held since founding Ranieri & Co. in 1988. Mr. Ranieri is a
founder of Hyperion Partners and of Hyperion Partners II. He is also Chairman of
Hyperion Capital Management, Inc., a registered investment advisor and an
affiliate of the Bank ("Hyperion Capital") and The Hyperion Total Return Fund,
Inc. He is director of the Hyperion 1999 Term Trust, Inc., the Hyperion 1997
Term Trust, Inc., the Hyperion 2002 Term Trust, Inc. and Hyperion 2005
Investment Grade Opportunity Trust, Inc. Mr. Ranieri is also Chairman and
President of various other indirect subsidiaries of Hyperion Partners. Along
with his brother, Salvatore A. Ranieri, and Scott A. Shay, Mr. Ranieri controls
the general partner of Hyperion Partners. Along with Mr. Shay, Mr. Ranieri
controls the general partner of Hyperion Partners II, a recently formed
investment partnership which plans to make investments primarily in the
financial and real estate sectors of the economy. He is also Chairman of the
Board and a director of American Marine Holdings, Inc. ("American Marine").
Mr. Ranieri is also a director of Delphi Financial Group, Inc.

Mr. Ranieri is a former Vice Chairman of Salomon Brothers Inc ("Salomon")
where he was employed from 1968 to 1987, and was one of the principal developers
of the secondary mortgage market. While at Salomon, Mr. Ranieri helped to
develop the capital markets as a source of funds for housing and commercial real
estate and to establish Salomon's then leading position in the MBS area. He is a
member of the National Association of Home Builders Mortgage Roundtable.

Mr. Ranieri is a Trustee for the Parish of Our Lady of the Rosary/Shrine of
St. Elizabeth Ann Seton and the Environmental Defense Fund. Mr. Ranieri is also
a director of the Peninsula Hospital Center in Queens, New York. Mr. Ranieri
received his Bachelor of Arts degree from St. John's University.

SALVATORE A. RANIERI. Mr. Ranieri is the General Counsel and a Managing
Director of Ranieri & Co. He was also the Vice President, Secretary and General
Counsel of the Company from 1988 until 1996. He is a director of
Hyperion Capital, as well as of various other direct and indirect subsidiaries
of Hyperion Partners. Along with his brother, Lewis S. Ranieri, and Scott A.
Shay, Mr. Ranieri controls the general partner of Hyperion Partners. He is also
a director of American Marine. Mr. Ranieri was one of the original founders of
Ranieri & Co. and of Hyperion Partners. Prior to joining Ranieri & Co., he had
been President of Livia Enterprises, Inc., a private venture capital and real
estate investment company that oversaw investments in the real estate,
construction, and manufacturing sectors. In addition to his business experience,
Mr. Ranieri is also a lawyer. During his career, his practice has included the
areas of corporate, litigation, real estate and regulatory matters. Until 1984,
he had been a member of a law firm in New York City. He is admitted to practice
law in New York and various federal courts. He received his Bachelor of Arts
degree from New York University and his Juris Doctor degree from Columbia
University School of Law.

SCOTT A. SHAY. Mr. Shay has been a Managing Director of Ranieri & Co.
since its formation in 1988. He was also a Vice President of the Company from
1988 until 1996. Mr. Shay is a founder of Hyperion Partners and
Hyperion Partners II. Mr. Shay is currently a director of Hyperion Capital and
Transworld

102

Home Healthcare, Inc., as well as an officer or director of other direct and
indirect subsidiaries of Hyperion Partners and Hyperion Partners II. Along with
Lewis S. Ranieri and Salvatore A. Ranieri, Mr. Shay controls the general partner
of Hyperion Partners. Along with Mr. Lewis S. Ranieri, Mr. Shay controls the
general partner of Hyperion Partners II. Prior to joining Ranieri & Co., Mr.
Shay was a director of Salomon where he was employed from 1980 to 1988. Mr. Shay
was involved with Salomon's thrift mergers and acquisitions practice and with
mortgage banking financing and mergers and acquisitions. Mr. Shay also worked on
acquisitions of real estate investment trusts while at Salomon. Mr. Shay
graduated Phi Beta Kappa from Northwestern University with a B.A. degree in
economics and received a Master of Management degree with distinction from
Northwestern's Kellogg Graduate School of Management. Mr. Shay has lectured at
the School of Mortgage Banking and has written articles on the strategic
environment for mortgage banking and on merger and acquisition theory. Mr. Shay
currently serves as a member of the board and was President of Hillel of New
York from 1990 until June 30, 1992. He is also on the board of UJA-Federation of
New York.

The principal occupation of each director of the Bank is set forth below.

BARRY C. BURKHOLDER. Mr. Burkholder has been the President and CEO of the
Company since 1996, and has held similar positions with the Bank
since joining it on April 10, 1991. Since , 1996, Mr. Burkholder has also been
Chairman of the Bank. In May 1994, Mr. Burkholder assumed the additional
responsibilities of managing the Bank's retail banking operations. Prior to
joining the Bank, Mr. Burkholder was employed at Citicorp/Citibank for 15 years.
Mr. Burkholder became associated with Citicorp through its then newly formed
Consumer Services Group in 1976, and then became a member of its International
Staff. Mr. Burkholder moved to Citibank Savings in London where he was named
Chairman and Managing Director in 1977. Mr. Burkholder returned to the United
States in 1981 to become President of Citicorp Person-to-Person, now part of
Citicorp Mortgage, Inc., a nationwide mortgage lending business with related
mortgage banking, servicing, and insurance activities. In 1984, he was named
Chairman and CEO of Citibank Illinois, and two years later became Central
Division Executive for the U.S. Consumer Bank. As Central Division Executive,
Mr. Burkholder was responsible for Citicorp's consumer banking activities in the
Midwest and Southeast. Mr. Burkholder began his career at Ford Motor Company in
the financial planning area and moved to Certain-teed Corporation where his last
position prior to joining Citicorp was as President of its real estate
development subsidiary. Mr. Burkholder received a B.S. and an M.B.A. from Drexel
University. Mr. Burkholder is President elect of the Houston Symphony, and
serves on the Board of Trustees of the Texas Gulf Coast United Way.

LAWRENCE CHIMERINE, PH.D. Dr. Chimerine has served as President of his own
economic consulting firm, Radnor Consulting Services, since 1990, and as a
Senior Economic Counselor for Data Resources Inc. since 1990. He is currently
also the Managing Director and Chief Economist of the Economic Strategy
Institute in Washington, D.C. Dr. Chimerine served as Chairman and Chief
Executive Officer of the WEFA Group from 1987 to 1990 and of Chase Econometrics
from 1979 to 1987, both of which provide economic consulting. Dr. Chimerine
received a B.S. from Brooklyn College and a Ph.D. from Brown University.

DAVID M. GOLUSH. Mr. Golush is a Managing Director of Ranieri & Co. with
which he has been associated since the firm's founding in 1988. He is an officer
of direct and indirect subsidiaries of Hyperion Partners and Hyperion Partners
II, and has an economic interest in Hyperion Partners and Hyperion Partners II.
Mr. Golush was at Salomon from 1972 to 1987 and was a Vice President from 1975.
From 1984 to 1987, he was Chief Administrative Officer of Salomon's Mortgage and
Real Estate Department at Salomon. From 1966 to 1972, he held positions in
public accounting and private industry. He has been a certified public
accountant in New York since 1972. Mr. Golush received a B.B.A. from the
University of Cincinnati. He is Treasurer of the New York Police & Fire Widows'
and Children's Fund, Inc. and a member of the board of the Jewish Federation of
Central New Jersey.

PAUL M. HORVITZ, PH.D. Dr. Horvitz has been on the faculty of the
University of Houston since 1977, and holds the University's Judge James Elkins
Chair of Banking and Finance. From 1967 to 1977, Dr. Horvitz held positions as
Assistant Director of Research, Director of Research and Deputy to the Chairman
at the FDIC. Prior to joining the FDIC he was an economist at the Federal
Reserve Bank of Boston and the Office of Comptroller of the Currency. From 1983
to 1990, Dr. Horvitz was a member of the Board of Directors of the FHLB Dallas,
and in 1986 and 1987 he was a member of the Federal Savings and Loan Advisory
Council. He is currently a director

103

of the Pulse EFT Association, and a member of the Shadow Financial Regulatory
Committee. Dr. Horvitz received a B.A. from the University of Chicago, an M.B.A.
from Boston University, and a Ph.D. from MIT.

ALAN E. MASTER. Mr. Master began his career with Chemical Bank in 1961 as
a commercial lending officer, became a Branch Office Head, and worked on
start-ups or clean-ups of banks in Miami, Florida. In 1973, he joined Barnett
Banks of Florida ("Barnett") and led a unit of Barnett formed from the
reorganization and merger of five subsidiaries of Barnett. In 1977, he became
President, CEO, and Chief Financial Officer, and in 1978 was elected Vice
Chairman of United Americas Bank of New York. Mr. Master joined The Merchants
Bank of New York in 1979 as Executive Vice President and was elected a director
in 1980. In 1983, Mr. Master joined Ensign Bank FSB in New York City as
President and CEO. In 1991, Mr. Master established a consulting practice
specializing in the financial services and banking sectors. Mr. Master has
served on the Board of Trustees of the Hyperion Government Mortgage Trust II,
has participated in meetings of the Advisory Board of Hyperion Partners, is a
member of the Advisory Board of the Johnson Graduate School of Management of
Cornell University and joined PaineWebber Incorporated in April 1996. Mr. Master
received a B.A. from Cornell University and has completed course work in finance
and accounting at the New York University Graduate School of Business
Administration.

ANTHONY J. NOCELLA. Mr. Nocella has been the Executive Vice President and
Chief Financial Officer of the Company since June 27, 1996, and has held those
same positions with the Bank since joining it in July 1990. He manages the
Financial Markets and Commercial Banking Groups of the Bank. From 1988 to 1990,
Mr. Nocella provided consulting services to the Bank as President of Nocella
Management Company, a firm that specialized in asset and liability management
consulting for financial institutions. From 1981 to 1987, Mr. Nocella served as
Executive Vice President and Chief Financial Officer of Meritor Financial Group,
as well as President of the Company's Commercial banking/financial markets arm,
Meritor Financial Markets ("Meritor"). During his 13 years at Meritor
(1974-1987), he also served as President of PSFS Management Company, Inc., the
holding company of The Philadelphia Saving Fund Society, the nation's largest
savings institution at the time. Other career positions include Controller and
Director of Financial Services for American Medicorp (now Humana), Managing
Auditor and Consultant for Peat Marwick and adjunct professor of finance at St.
Joseph's University and Drexel University. Mr. Nocella, a Certified Public
Accountant, received an undergraduate degree in accounting from LaSalle
University, and an M.B.A. in computer science and finance from Temple
University. He also completed the graduate Bank Financial Management Program of
the Wharton School at the University of Pennsylvania. Mr. Nocella is the
President and a director of the Community Bankers Association of Southeast
Texas, a delegate and member of the Mortgage Finance and Accounting Committees
of the America's Community Bankers, a director of the Texas Community Bankers
Association, and delegate and past President of the Financial Executives
Institute.

PATRICIA A. SLOAN. Ms. Sloan is a Managing Director of Ranieri & Co. and
has an economic interest in Hyperion Partners and Hyperion Partners II. She is
also a director of certain funds managed by Hyperion Capital Management,
including Hyperion 1999 Term Trust, Inc., Hyperion 1997 Term Trust, Inc.,
Hyperion 2002 Term Trust, Inc., Hyperion Investment Grade Opportunity Term
Trust., Inc., and the Hyperion Total Return Fund, Inc. Prior to joining Ranieri
& Co. in 1988, Ms. Sloan was employed at Salomon from 1972 to 1988, where she
served as Director of the Company's Financial Institutions Group. Prior to
joining Salomon, Ms. Sloan was employed at Bache & Co., Inc. from 1965 to 1972.
Ms. Sloan received a B.A. from Radcliffe College and an M.B.A. from Northwestern
University.

KENDRICK R. WILSON III. Mr. Wilson currently is a Managing Director and
head of investment banking of Lazard Freres & Co. LLC, a New York-based
investment banking firm. Prior to his joining Lazard Freres & Co. LLC in 1990,
Mr. Wilson served as President of Ranieri & Co. from March 1988 to December
1989, and Senior Executive Vice President for E.F. Hutton from April 1987 to
February 1988. Mr. Wilson was also employed at Salomon from June 1978 to April
1987 where he became a Managing Director. Mr. Wilson has an economic interest in
Hyperion Partners. He is a director of ITT Corporation, Black Rock Asset
Investors, American Marine Holdings, American Buildings Company, Inc., and
Meigher Communications, Inc. Mr. Wilson received a B.A. from Dartmouth College
and an M.B.A. from Harvard Business School.

104

Mr. Lewis Ranieri and Mr. Salvatore Ranieri are brothers. No other director
or executive officer is related to any other director or executive officer by
blood, marriage, or adoption. Mr. Lewis Ranieri, Mr. Salvatore Ranieri and Mr.
Shay served since 1990 as directors of the Company pursuant to an agreement
entered into in 1990 between the owners of certain non-voting stock of the
Company and Hyperion Partners, which was terminated in 1996.
There are no existing arrangements or understandings between a director and any
other person pursuant to which such person was elected a director.

ANNUAL MEETING

The By-Laws provide that annual meetings of stockholders will be held at
the Company's principal office or at such other place and on such date as may be
fixed from time to time by resolution of the Company Board. The first annual
meeting for which proxies will be solicited from stockholders will be held on
, 1996.

COMMITTEES OF THE BOARD OF DIRECTORS

The Company Board has established committees:

COMPENSATION OF DIRECTORS

Non-employee directors currently receive an annual retainer of $ . The
chair of each committee will receive an additional annual retainer of $ .
Directors will not receive separate meeting fees.

EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

The following table sets forth information concerning executive officers of
the Company and principal executive officers of the Bank who do not serve on the
Company Board. All executive officers of the Company and the Bank are elected by
the Company Board and the Board of Directors of the Bank, respectively, and
serve until their successors are elected and qualified. There are no
arrangements or understandings between any director and any other person
pursuant to which such individual was elected an executive officer.

105

PRINCIPAL OCCUPATION DURING LAST FIVE YEARS

NAME AGE POSITION AND OCCUPATION
- --------------------------- --- ------------------------------------------------------------------------------
<S> <C> <C>
George R. Bender........... 56 Executive Vice President -- Mortgage Banking of the Company since 1996 and of
the Bank since July 1990. Prior to joining the Bank, Mr. Bender was employed
by CenTrust Mortgage Corporation as President and CEO from June 1985 to
February 1990. As President and CEO, Mr. Bender was responsible for the
overall management of this mortgage banking subsidiary of CenTrust Savings.
Mr. Bender's career also includes positions as Chairman and CEO of WestAmerica
Mortgage Company in Denver, President and CEO of Unity Mortgage Corporation in
Chicago; Senior Vice President of United First Mortgage Corporation of San
Diego; and Senior Vice President of Production and Marketing at Advance
Mortgage Corporation. Mr. Bender attended the University of Michigan in Ann
Arbor.
Jonathon K. Heffron........ 43 Executive Vice President and General Counsel of the Company since
1996 and of the Bank since May 1990, and Chief Operating Officer of the Bank
since May 1994. Prior to joining the Bank, Mr. Heffron served for two years as
President and CEO of First Northern Bank, Keene, New Hampshire. Prior to
joining First Northern Bank, Mr. Heffron served for more than 10 years in
several capacities at the FHLB Board, Washington, D.C. and at the FHLB Dallas,
including Attorney Advisor, Trial Attorney, General Counsel, Chief
Administrative Officer, and Chief Operating Officer. Mr. Heffron received a
B.A. Magna Cum Laude from the University of Minnesota, a J.D. from
Southwestern University School of Law, and an LL.M. from the National Law
Center of George Washington University. Mr. Heffron serves on the Boards of
Directors of the FHLB Dallas, the Credit Coalition of Greater Houston and the
Texas Conference for Homeowners' Rights.
Leslie H. Green............ 57 Senior Vice President -- Operations and Technology of the Company since
1996 and of the Bank since June 1991. Prior to joining the Bank,
Mr. Green was employed by Equimark since 1988 as Executive Vice
President -- Systems and Operations. Prior to joining Equimark, Mr. Green
served in several capacities at Keystone Computer Association, Fidelity Bank,
National Information Systems and RCA Computer Systems. Mr. Green received a
degree in Business Management from Rutgers University.
Karen J. Hartnett.......... 48 Senior Vice President -- Human Resources of the Company since 1996
and of the Bank since January 1991. Prior to joining the Bank, Ms. Hartnett
was employed by Equimark as Senior Vice President Human Resources since 1989.
From 1988 to 1989, Ms. Hartnett was Senior Vice President and Chief Personnel
Officer for NCNB Texas. Ms. Hartnett served NCNB Texas, and predecessor
organizations, as Vice President and as Director of Human Resources. Ms.
Hartnett's human resources experiences include positions at Zale Corporation,
Mobil Oil Corporation and Sweet Briar College. Ms. Hartnett received an A.B.
from Sweet Briar College in 1970. Ms. Hartnett serves on the Board of
Directors of the Gulf Coast Chapter of the American Heart Association, on the
Board of Trustees for the Houston Ballet Foundation and is a lifetime member
of the Houston Livestock Show and Rodeo.
Sonny H. Lyles............. 50 Senior Vice President and Chief Credit Officer of the Company since
1996 and of the Bank since February 1991. Prior to joining the
Bank, Mr. Lyles was employed by First Union National Bank as Senior Credit
Officer beginning in 1983. Prior to joining First Union National Bank, Mr.
Lyles was employed at First Tulsa Bank, Florida National Bank and South
Carolina National Bank. Mr. Lyles received a B.A. from Wofford College. Mr.
Lyles is a member of the Board, First Vice President of the Texas Chapter, and
a national member, of the Credit and Risk Management Council of Robert Morris
Associates, a trade association of bank lending and credit officers. Mr. Lyles
is the Wofford College alumni representative from Houston.
</TABLE>

106

EXECUTIVE COMPENSATION

SUMMARY OF CASH AND CERTAIN COMPENSATION

The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years awarded to or earned by the CEO of the Company
and the other four most highly compensated executive officers of the Company and
the Bank:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS
-------------------------------------------- -------------------------
OTHER SECURITIES PAYOUTS
ANNUAL UNDERLYING -------
COMPEN- RESTRICTED OPTIONS/ LTIP
SALARY BONUS(1) SATION(2)(3) STOCK SAR PAYOUTS
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) (#) ($)
- -------------------------------------- ---- ------- -------- ------------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Barry C. Burkholder................... 1995 375,000 594,000 -- -- -- --
President and 1994 375,000 607,500 -- -- -- --
Chief Executive Officer 1993 375,000 500,000 1,328 -- -- --
Anthony J. Nocella.................... 1995 315,000 235,000 -- -- -- --
Executive Vice President and 1994 315,000 200,000 -- -- -- --
Chief Financial Officer 1993 315,000 210,000 1,323 -- -- --
Financial Markets/Treasury
Commercial Banking
Jonathon K. Heffron................... 1995 225,000 200,000 -- -- -- --
Executive Vice President, 1994 225,000 175,000 -- -- -- --
General Counsel, and 1993 225,000 185,000 118 -- -- --
Chief Operating Officer
George R. Bender...................... 1995 200,000 75,000 -- -- -- --
Executive Vice President 1994 200,000 408,900 -- -- -- --
Mortgage Banking 1993 200,000 703,601 1,341 -- -- --
Leslie H. Green....................... 1995 175,000 75,000 -- -- -- --
Senior Vice President 1994 175,000 70,000 -- -- -- --
Operations & Technology 1993 167,500 70,000 -- -- -- --
</TABLE>

ALL
OTHER
COMPEN-
SATION(4)
NAME AND PRINCIPAL POSITION ($)
- -------------------------------------- ----------

Barry C. Burkholder................... 9,240
President and 9,240
Chief Executive Officer 8,994
Anthony J. Nocella.................... 9,402
Executive Vice President and 8,878
Chief Financial Officer 9,069
Financial Markets/Treasury
Commercial Banking
Jonathon K. Heffron................... 9,402
Executive Vice President, 8,984
General Counsel, and 5,386
Chief Operating Officer
George R. Bender...................... 13,980
Executive Vice President 4,500
Mortgage Banking 8,994
Leslie H. Green....................... 4,620
Senior Vice President 4,615
Operations & Technology 6,320

- ------------

(1) Mr. Burkholder was hired on April 10, 1991, and was paid a bonus based on
the financial performance of the Bank, according to the provisions of his
employment contract, for each of the first five full years of his
employment. Amounts indicated represent the amount paid in the respective
fiscal year. For the 12-month period ended April 10, 1996, Mr. Burkholder
was paid a bonus of $550,000. See "-- Management Employment Arrangements".
All other management bonuses were paid as determined by the Compensation
Committee of the Bank's Board of Directors, based on the Bank's financial
and individual performance for 1995. The Bank's financial performance is
measured by net income, return on assets, and return on equity as compared
to the Bank's annual business plan and a specified peer group of other
thrifts of comparable size.

(2) "Other Annual Compensation" for 1993 includes a tax equalization amount paid
to Messrs. Burkholder, Bender, Nocella, and Heffron to offset a failed
401(k) discrimination test for calendar year 1992.

(3) Messrs. Burkholder, Bender, Nocella, and Heffron are each provided an auto
allowance and a country club and/or dining club membership. However, in no
case does the aggregated value of such auto allowance and memberships exceed
the lesser of $50,000 or 10% of such officer's annual cash compensation.
Therefore, the value of auto allowances and club memberships are excluded
from these numbers.

(4) "All Other Compensation" amounts represent contributions by the Bank to each
executive's account in the Bank's 401(k) Plan.

107

EXECUTIVE MANAGEMENT COMPENSATION PLAN

In June 1996, the Company Board approved an Executive Management
Compensation Plan (the "Compensation Plan") containing the following provisions:
(i) a cash bonus of $ million payable by June 30, 1996; (ii) the award of shares
of Company common stock with restrictions on its transferability for a period of
three years from its issuance; and (iii) the issuance of options for purchase of
an equivalent number of shares of common stock: such options vest ratably over
three years from the date of grant. The options' exercise price approximates the
fair market value at the date of the grant and will expire if not exercised by
June 2003.

THE 1996 INCENTIVE COMPENSATION PLAN

The Company has adopted the Bank United 1996 Incentive Compensation Plan
(the "1996 Incentive Compensation Plan"). The 1996 Incentive Compensation Plan
is designed to promote the success and enhance the value of the Company by
linking the interests of certain of the full-time employees of the Company
("Participants") to those of the Company's stockholders and by providing
Participants with an incentive for outstanding performance. The 1996 Incentive
Compensation Plan is further intended to provide flexibility to the Company in
its ability to motivate, attract and retain Participants upon whose judgment,
interest and special efforts the Company's successful operation largely is
dependent. As determined by the Compensation and Directors Committee of the
Company Board, or any other designated committee of the Company Board, the
Company employees, including employees who are members of the Company Board, are
eligible to participate in the 1996 Incentive Compensation Plan. Non-employee
directors are not eligible to participate in the 1996 Incentive Compensation
Plan. The Company Board has provided for the 1996 Incentive Compensation Plan to
remain in effect for 10 years, to 2006. The description below is intended as a
summary only and is qualified in its entirety by reference to the 1996 Incentive
Compensation Plan, a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.

GENERAL

The 1996 Incentive Compensation Plan will be administered by the
Compensation and Directors Committee of the Company Board or, at the discretion
of the Company Board, any other committee appointed by the Company for such
purpose (the "Committee"). Four types of awards may be granted to Participants
under the 1996 Incentive Compensation Plan: (i) stock options (both
non-qualified and incentive) ("Options"), (ii) stock appreciation rights
("SARs"), (iii) restricted Common Stock ("Restricted Stock") and (iv)
performance awards ("Performance Awards," and together with the Options, SARs
and Restricted Stock, the "Awards").

The 1996 Incentive Compensation Plan provides that the total number of
shares of Class A Common Stock available for grant under the 1996 Incentive
Compensation Plan may not exceed shares; PROVIDED that, if during the term of
the 1996 Incentive Compensation Plan, the Company repurchases shares of Class A
Common Stock additional shares equal to the number of such repurchased shares,
up to outstanding shares; PROVIDED that, if during the term of the 1996
Incentive Compensation Plan, the Company repurchases shares of Class A Common
Stock additional shares equal to the number of such repurchased shares, up to
shares, will be available for Options; and PROVIDED, FURTHER, that the total
number of shares of Class A Common Stock Available for Restricted Stock awards
is not to exceed . No Participant may be granted Awards covering in excess of
10% of the shares of Class A Common Stock available for issuance over the life
of the 1996 Incentive Compensation Plan. If any Award is cancelled or forfeited
or terminates, expires, or lapses (other than a termination of a Tandem SAR (as
defined below)), upon exercise of the related Option or the termination of a
related Option upon exercise of the corresponding Tandem SAR, shares subject to
such Award will be available for the grant of an Award under the 1996 Incentive
Compensation Plan.

In the event of any change in corporate capitalization, such as a stock
split, or a corporate transaction, such as any merger, consolidation,
separation, including a spin-off, or other distribution of stock or property of
the Company, any reorganization or partial or complete liquidation of the
Company, the Committee or the Company Board may make such substitutions or
adjustments in the aggregate number and class of shares reserved for issuance or
subject to outstanding Awards and in the number, kind and price of shares
subject to outstanding Options of SAR's as it may determine to be appropriate.

The 1996 Incentive Compensation Plan is not subject to the provisions of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
is not qualified under Section 401(a) of the Code.

108

OPTIONS

The term of Options granted under the 1996 Incentive Compensation Plan may
not exceed 10 years. The exercise price for each Option granted will be
determined by the Committee; PROVIDED that the exercise price may not be less
than 100% of the fair market value (as defined in the 1996 Incentive
Compensation Plan) of a share of Class A Common Stock on the date of grant.

A Participant exercising an Option may pay the exercise price in full in
cash, or, if approved by the Committee, with previously acquired shares of Class
A Common Stock. The Committee, in its discretion, may allow cashless exercise of
Options.

Options are nontransferable other than by will or laws of descent and
distribution (and, in the case of a nonqualified Option, pursuant to a domestic
relations order or by gift to members of the holder's immediate family, whether
directly or indirectly or by means of a trust or partnership), and, during the
Participant's lifetime, may be exercised only by the Participant or his legal
representative.

SARS

SARs may be granted by the Committee in connection with all or part of any
Option grant ("Tandem SARs"), or granted separately and unrelated to any Option
("Freestanding SARs"). A Tandem SAR may be exercised only with respect to the
shares for which its related Option is then exercisable. SARs permit the
Participant to receive in cash or shares of Class A Common Stock (or a
combination of both) an amount equal to the excess of the fair market value of a
share of Class A Common Stock on the date the SAR is exercised over the exercise
price for the SAR times the number of shares of Class A Common Stock with
respect to which such SAR is exercised.

The term of SARs granted under the 1996 Incentive Compensation Plan may not
exceed 10 years. The exercise price of a Freestanding SAR will be determined by
the Committee. The exercise price of a Tandem SAR will equal the exercise price
of the related Option.

SARs are nontransferable other than by will or laws of descent and
distribution, and, during the Participant's lifetime, may be exercised only by
the Participant; PROVIDED that, at the discretion of the Committee, an Award
agreement may permit transfer of an SAR by a Participant solely to members of
the Participant's immediate family or trusts or partnerships for the benefit of
such persons.

RESTRICTED STOCK

The Committee may grant Restricted Stock to eligible employees in such
amounts as the Committee determines. At the time of each award of Restricted
Stock the Committee will establish a restricted period, which may not, unless
specified conditions described below are satisfied, be less than three years
from the grant date (the "Restricted Period") during which such stock may not be
sold, transferred, pledged, assigned or otherwise alienated; PROVIDED that the
Committee may permit transfers of Restricted Stock during such period to members
of the Participant's immediate family or trusts or partnerships for the benefit
of such persons. If a Participant terminates his employment or is involuntarily
terminated for cause during the Restricted Period, all Restricted Stock held by
such Participant will be forfeited. If a Participant is involuntarily terminated
other than for cause, the Committee may waive all or part of any remaining
restrictions on such Participant's Restricted Stock. Up to one-third of the
shares of Class A Common Stock available for grant under the 1996 Incentive
Compensation Plan as Restricted Stock awards may be issued without a minimum
Restricted Period. After the Restricted Period has expired, the related
Restricted Stock is freely transferable.

The Committee has discretion to determine whether holders of Restricted
Stock will be entitled to dividends or other distributions thereon. If any such
dividends or distributions are in shares of Class A Common Stock, such shares
will be subject to the same restrictions as the related Restricted Stock. In the
event the holder of Restricted Stock on which dividends or distributions are
made is subject to Section 16 of the Exchange Act, the vesting period for such
dividend or distribution will be the longer of (i) the remaining vesting period
on the related Restricted Stock and (ii) six months.

109

PERFORMANCE AWARDS

The Committee may from time to time grant Performance Awards, which, as
determined by the Committee, may include, without limitation, cash, Common
Stock, performance units, performance shares or any combination thereof. The
Committee will set the performance goals and restrictions applicable to each
Performance Award, including establishing the applicable performance period and
the value of the Performance Award. After the applicable performance period has
ended, the holder of a Performance Award will be entitled to receive the payout
earned to the extent to which the corresponding performance goals were
satisfied.

Performance Awards are nontransferable other than by will or laws of
descent and distribution and during the Participant's lifetime may be exercised
only by the Participants; PROVIDED that, at the discretion of the Committee, an
award agreement may permit transfer of a Performance Award by a Participant
solely to members of the Participant's immediate family or trusts or
partnerships for the benefit of such persons.

CHANGE OF CONTROL

In the event of a Change of Control (as defined in the 1996 Incentive
Compensation Plan), (i) any Option or SAR that is not then exercisable and
vested will become fully exercisable and vested (PROVIDED that in the case of
any holder of an Option or SAR who is subject to Section 16(b) of the Exchange
Act, such Option or SAR has been outstanding for at least six months as of the
date of such Change of Control), (ii) the restrictions on any Restricted Stock
will lapse and (iii) all Performance Awards will be deemed earned.

During the 60-day period following a Change of Control, any Participant
will have the right to surrender all or part of any Option held by such
Participant, in lieu of payment of the exercise price, and to receive cash in an
amount equal to the difference between (i) the higher of the price received for
Common Stock in connection with the Change of Control and the fair market value
of a share of Common Stock in connection with the Change of Control and the fair
market value of a share of Common Stock on the date, if any, that such Option is
cancelled (the "Change of Control Price"), and (ii) the exercise price (the
difference between (i) and (ii) being referred to as the "Spread") multiplied by
the number of shares of Class A Common Stock granted in connection with the
exercise of such Option; PROVIDED that such Change of Control transaction would
not thereby be made ineligible for pooling of interests accounting; and
PROVIDED, FURTHER, that, if the Change of Control is within six months of the
grant date for any such Option, no such election may be made prior to six months
from such grant date; and PROVIDED, FURTHER, that, if the Option is an
"incentive stock option" under Section 422 of the Code, the Change of Control
Price will equal the fair market value of a share of the Class A Common Stock on
the date, if any, that such Option is cancelled. If such 60-day period ends
within the period six months after the grant date for an Option, any such Option
held by a Participant subject to Section 16 of the Exchange Act will be
cancelled and the holder thereof will receive six months and one day after the
grant of such Option, an amount equal to the Spread multiplied times the number
of shares of Class A Common Stock granted under or comprising such Option.

DEFERRALS

The Committee may permit a Participant to elect, or the Committee may
require, at its sole discretion, subject to the proviso set forth below, any one
or more of the following: (i) the deferral of a Participant's receipt of cash,
(ii) a delay in the exercise of an Option or SAR, (iii) a delay in the lapse or
waiver of restrictions with respect to Restricted Stock, or (iv) a delay of the
satisfaction of any requirements or goals with respect to Performance Awards;
PROVIDED that the Committee's authority to take such actions exists only to the
extent necessary to reduce or eliminate a limitation on the deductibility of
compensation paid to a Participant pursuant to (and so long as such action in
and of itself does not constitute the exercise of impermissible discretion
under) Section 162(m) of the Code, or any successor provision thereunder. If any
such deferral is required or permitted, the Committee will establish rules and
procedures for such deferrals, including provisions relating to periods of
deferral, the terms of payment following the expiration of the deferral periods,
and the rate of earnings, if any, to be credited to any amounts deferred
thereunder.

AMENDMENTS

The Company Board may at any time terminate, amend, or modify the 1996
Incentive Compensation Plan; PROVIDED that no amendment, alteration or
discontinuation will be made which will disqualify the 1996 Incentive
Compensation Plan from the exemption provided by Rule 16b-3 promulgated under
the Exchange Act, and, to

110

the extent required by law, no such amendment will be made without the approval
of the Company's stockholders.

FEDERAL INCOME TAX CONSIDERATIONS

The following brief summary of the United States federal income tax rules
currently applicable to nonqualified stock options, incentive stock options,
SARs, restricted stock and performance awards is not intended to be specific tax
advice to Participants under the 1996 Incentive Compensation Plan.

Two types of stock options may be granted under the 1996 Incentive
Compensation Plan: nonqualified stock Options ("NQOs") and incentive stock
Options ("ISOs"). SARs, Restricted Stock and Performance Awards may also be
granted under the Plan. The grant of an Award generally has no immediate tax
consequences to the Participant or the Company. Generally, Participants will
recognize ordinary income upon: (i) the exercise of NQOs or SARs; (ii) the
vesting of shares of Restricted Stock; and (iii) the actual receipt of cash or
stock pursuant to Performance Awards. In the case of NQOs and SARs, the amount
of income recognized is measured by the difference between the exercise price
and the fair market value of Common Stock on the date of exercise. In the case
of Restricted Stock and Performance awards, the amount of income is equal to the
fair market value of the stock or other property (including cash) received. The
exercise of an ISO for cash generally has no immediate tax consequences to a
Participant or to the Company. Participants may, in certain circumstances,
recognize ordinary income upon the disposition of shares acquired by exercise of
an ISO, depending upon how long such shares were held prior to disposition.
Special rules apply to shares acquired by exercise of ISOs for previously held
shares. In addition, special tax rules may result in the imposition of a 20%
excise tax on any "excess parachute payments" that result from the acceleration
of the vesting or exercisability of Awards upon a Change of Control.

The Company is generally required to withhold applicable income and Social
Security taxes ("employment taxes") from ordinary income which a Participant
recognizes on the exercise or receipt of an Award. The Company thus may either
require Participants to pay to the Company an amount equal to the employment
taxes the Company is required to withhold or retain or sell without notice a
sufficient number of the shares to cover the amount required to be withheld.

The Company generally will be entitled to a deduction for the amount
includible in a Participant's gross income for federal income tax purposes upon
the exercise or actual receipt of an Award. However, such deduction generally is
available only if the Company timely complies with applicable information
reporting requirements under Sections 6041 and 6041A of the Code. Furthermore,
Section 162(m) of the Code and the regulations thereunder may, in some
circumstances, limit deductibility with respect to "covered employees" whose
total annual compensation exceeds one million dollars, and Section 280G of the
Code and the regulations thereunder may render nondeductible amounts includible
in income by employees that are contingent upon a Change of Control and that are
characterized as "excess parachute payments".

RESALE OF SHARES

The registration requirements of any applicable state securities laws and
the resale restrictions of Rule 144 under the Securities Act may restrict the
sale of shares of Class A Common Stock acquired pursuant to the exercise of
Awards by "affiliates" of the Company within the meaning of the Securities Act.
For purposes of creating short-swing profit liability under Section 16 of the
Exchange Act, sales of such shares by affiliates will be matchable with market
purchases within less than six months before or after such sales.

THE DIRECTOR STOCK COMPENSATION PLAN

The Company has adopted the Bank United Director Stock Compensation Plan
(the "Director Stock Plan"). The purposes of the Director Stock Plan are to (i)
promote a greater identity of interest between the Company's non-employee
directors and its stockholders, and (ii) attract and retain individuals to serve
as directors and to provide a more direct link between directors' compensation
and stockholder value.

GENERAL

The Director Stock Plan will be administered by the Company Board or a
committee of the Company Board designated for such purpose.

Pursuant to the terms of the Director Stock Plan, non-employee directors of
the Company will be eligible to participate in the Director Stock Plan following
the Distribution (each, an "Eligible Director"). A total of

111

shares of Class A Common Stock will be reserved for issuance and
available for grants under the Director Stock Plan.

In the event of any change in corporate capitalization (such as a stock
split) or a corporate transaction (such as a merger, consolidation, separation
including a spin-off or other distribution of stock or property of the Company,
any reorganization or any complete liquidation of the Company), the Company
Board or the designated committee may make such substitution or adjustments in
the aggregate number and class of shares reserved for issuance under the
Director Stock Plan, in the number, kind and option price of shares subject to
outstanding Options, in the number and kind of shares subject to other
outstanding awards granted under the Director Stock Plan, and/or such other
equitable substitution or adjustments as it may determine to be appropriate in
its sole discretion; PROVIDED, HOWEVER, that the number of shares subject to any
award must always be a whole number.

Pursuant to the Director Stock Plan, each Eligible Director will receive an
initial award of shares of Class A Common Stock after serving the first three
months as a member of the Company Board.

CLASS A COMMON STOCK

With respect to the annual retainer paid to directors (the "Annual
Retainer"), each Eligible Director may make an annual irrevocable election to
receive shares of Class A Common Stock in lieu of all or any portion (in 25%
increments) of the Annual Retainer; PROVIDED that the election of cash, Class A
Common Stock and options under the Director Stock Compensation Plan are
alternatives and taken together, may not exceed 100% of such Annual Retainer.
The number of shares of Class A Common Stock granted to an Eligible Director
will be equal to the appropriate percentage of the Annual Retainer payable in
each fiscal quarter divided by the fair market value (as defined in the Director
Stock Compensation Plan) of a share of Class A Common Stock on the last business
day of such fiscal quarter rounded to nearest number of shares of Class A Common
Stock. Fractional shares of Class A Common Stock will not be granted and any
remainder in Annual Retainer which otherwise would have purchased fractional
shares will be paid in cash.

OPTIONS CLASS A

Each Eligible Director may also make an irrevocable election to receive an
Option for Class A Common Stock in lieu of all or any portion (in 25%
increments) of the Annual Retainer equal to:

PERCENT OF ANNUAL
NUMBER OF OPTIONS RETAINER FORGONE
- ------------------------------------- -----------------

100%
75%
50%
25%

The election of cash, Class A Common Stock and options under the Director Stock
Compensation Plan are alternatives and, taken together, may not exceed 100% of
such Annual Retainer. The exercise price for the options will be based on the
fair market value of Class A Common Stock on the date of the grant of such
option adjusted for the percentage of the Annual Retainer forgone, but in no
event will the exercise price be less than 50% of such fair market value. The
date of grant of any option will be the later of (i) the date of the annual
stockholders' meeting following the Eligible Director's election to receive an
Option in lieu of the Annual Retainer and (ii) six months and one day after such
election.

Except in the case of death, disability, retirement or termination, options
granted under the Director Stock Compensation Plan will have a term of ten years
and will vest and become exercisable on the last day of the fiscal year in which
such option is granted, PROVIDED that the Eligible Director remains on the
Company Board. An option shall vest immediately in the event of death. In the
event that an Eligible Director terminates his or her membership on the Company
Board due to disability or retirement, the amount of any outstanding options
which are not then vested will be adjusted to reflect that portion of such
Eligible Director's Annual Retainer actually earned in the year. In the event
that an Eligible Director's membership on the Company Board is terminated by the
Company for cause, options which have not become vested will be forfeited. As
used in the Director Stock Compensation Plan, "cause" means (i) the conviction
of a felony, or (ii) dishonesty in the course of performing the duties as a
director.

112

TRANSFERABILITY

Grants and awards under the Director Stock Plan are not assignable or
transferable nor may they be pledged or hypothecated. Any grant or award that
constitutes a "derivative security" within the meaning of the Exchange Act may
not be transferred other than by will or Laws of descent and distribution or
pursuant to domestic relations order or qualified domestic relations order.

AMENDMENTS

The Director Stock Compensation Plan may be amended by the Company Board,
PROVIDED that, to the extent required to qualify transactions under the Director
Stock Plan for exemption under Rule 16b-3 promulgated under the Exchange Act, no
amendment to the Director Stock Compensation Plan may be adopted without further
approval by the holders of at least a majority of the shares of Class A Common
Stock present, or represented, and entitled to vote at a meeting held for such
purpose; and PROVIDED, FURTHER, that, if and to the extent required for the
Director Stock Compensation Plan to comply with Rule 16b-3, no amendment to the
Director Stock Compensation Plan shall be made more than once in any six-month
period that would change the amount, price or timing of the grants of awards or
Options thereunder other than to comply with changes in the Code, ERISA, or the
regulations thereunder.

TERMINATION

The Director Stock Compensation Plan may be terminated at any time by
either the Company Board or by holders of a majority of the shares of Class A
Common Stock present and entitled to vote at a duly convened meeting of
stockholders.

CHANGE OF CONTROL

In the event of a Change of Control (as defined in the Director Stock
Plan), any outstanding options that are not then exercisable and vested will
become fully exercisable and vested. During the 60-day period following a Change
of Control, any Eligible Director will have the right to surrender all or part
of any option or award of Class A Common Stock held by such Eligible Director,
and, in the case of an option, in lieu of payment of the exercise price, to
receive cash in an amount equal to the Spread multiplied by the number of shares
of Class A Common Stock granted in connection with the exercise of such option
so surrendered, or, in the case of an award of Class A Common Stock, to receive
cash in an amount equal to the Change of Control Price multiplied by the number
of shares of Class A Common Stock so surrendered; PROVIDED that, if the Change
of control is within six months of the grant date for any such option or award,
no such election may be made prior to six months from such grant date. If such
60-day period ends within the period six months after the grant date for an
option or award, such option or award will be cancelled and the holder thereof
will receive six months and one day after the grant of such option or award, an
amount equal, in the case of an option, to the Spread multiplied times the
number of shares of Class A Common Stock granted under such option and in the
case of an award, the Change of Control Price multiplied by the number of Class
A Common Stock so awarded.

FEDERAL INCOME TAX CONSIDERATIONS

Eligible Directors electing Class A Common Stock in lieu of cash fees will
be taxed on the value of the Class A Common Stock at the time of receipt.
Eligible Directors making an irrevocable election to receive an option in lieu
of cash fees will be taxed at the time of exercise of the option on the
difference between the exercise price and the fair market value of the Class A
Common Stock covered by the option. In each case, the Company will receive a
corresponding deduction; PROVIDED that Section 280G of the Code and the
regulations thereunder may render nondeductible amounts that are contingent upon
a Change of Control and are characterized as "excess parachute payments".

RESALE OF SHARES. The holders of shares of Class A Common Stock received
upon the exercise of an option must comply with the resale requirements of the
Securities Act and the rules and regulations promulgated thereunder. Securities
registration requirements under the Securities Act may be applicable to resales
by any Eligible Director. The restrictions imposed by Section 16 of the Exchange
Act upon any Eligible Director and the registration requirements of any
applicable state securities laws may restrict the resales of shares acquired
pursuant to the exercise of options by an Eligible Director.

113

MANAGEMENT EMPLOYMENT ARRANGEMENTS

Mr. Burkholder's employment contract, which was recently amended and
extended for one year to April 10, 1997, provides for payment of an annual
salary of $375,000 and a discretionary bonus. In addition, as a result of the
Common Stock Offering, Mr. Burkholder will receive 42.5% of the Executive
Management Compensation Plan, which satisfies the terms of his present
employment agreement.

Mr. Bender's employment letter provides for payment of an annual salary and
a bonus up to 2.86% of the added economic value of the mortgage banking segment.
The employment letter provides that added economic value is defined to be the
sum of pre-tax income and the value of new loan servicing reduced by the sum of
excess servicing revenues and revenues from the sale of servicing.

Mr. Nocella's employment letter provides for the payment of an annual
salary, a discretionary bonus, and in the event Mr. Nocella's employment is
terminated without cause, payment of six months' base salary (or $157,500 based
on 1995 base salary).

NON-QUALIFIED RETIREMENT SAVINGS PLAN

In June 1995, the Board of Directors of the Bank approved the
implementation of a Supplemental Executive Savings Plan ("SESP"). The SESP was
effective on August 1, 1995. The 1995 SESP year covers the period of August 1,
1995 to December 31, 1995. In subsequent years, the SESP plan year will coincide
with the calendar year. The SESP is available to a select group of management
and other highly compensated employees. Eligible employees are allowed to make
irrevocable decisions prior to the beginning of the plan year to defer up to 20%
of compensation (as defined in the SESP) and up to 100% of bonus income. The
monies deferred earn interest at a rate approximately equal to the Bank's one
year certificate of deposit rate. The Bank does not contribute to the SESP.

The SESP is funded from the general assets of the Bank and participants are
general unsecured creditors of the Bank. As of March 31, 1996, there were 17
participants in the SESP, and the total amount of deferrals and interest equaled
approximately $380,000. The rate of interest for the SESP was 4.42% as of March
31, 1996.

DIRECTORS SUPPLEMENTAL SAVINGS PLAN

In June 1995, the Board of Directors of the Bank approved the
implementation of a Directors Supplemental Savings Plan ("DSSP"). The DSSP was
effective on August 1, 1995. The 1995 DSSP year covers the period of August 1,
1995 to December 31, 1995. In subsequent years, the plan year will coincide with
the calendar year. The DSSP is available to outside directors. Eligible
Directors are allowed to make irrevocable decisions prior to the beginning of
the plan year to defer up to 100% of retainer and meeting fees. The monies
deferred earn interest at a rate approximately equal to the Bank's one year CD
rate. The Bank does not contribute to the DSSP.

The DSSP is funded from the general assets of the Bank, and participants
are general unsecured creditors of the Bank. As of March 31, 1996, there was one
participant in the DSSP and the total amount of deferrals and interest equaled
approximately $29,000. The rate of interest for the DSSP was 4.42% as of March
31, 1996.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Company Board determines the compensation
of the Company's executive officers. The members of the Compensation Committee
are Lewis S. Ranieri, Salvatore A. Ranieri and Scott A. Shay, none of whom is an
executive officer of the Company. Lewis S. Ranieri, Salvatore A. Ranieri and
Scott A. Shay are also members of the Compensation Committee of the Board of
Directors of the Bank. No other member of the Bank Compensation Committee is an
officer or employee of the Company or the Bank.

The Bank is a party to a written investment advisory services agreement
which provides for payment by the Bank to Hyperion Capital, an affiliate of the
Bank, of $175,000 per year for investment advisory services and for payment by
Hyperion Capital to the Bank of $175,000 for information regarding the Bank's
mortgage pipeline.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

As of June 18, 1996 the outstanding capital stock of the Company consists
of 381,925 shares of Class A Common Stock, which entitles the holder thereof to
one vote per share on each matter on which the stockholders of the Company are
entitled to vote, and 28,481,075 shares of Class B Common Stock, which have no
voting

114

rights. Shares of Class B Common Stock are convertible, at the election of the
holder thereof, into shares of Class A Common Stock, subject to certain
restrictions set forth in the Certificate and the Letter Agreement, and except
to the extent that the holder of the Class B Common Stock is prohibited by any
applicable Federal or state regulation from holding voting securities of the
type or in the amount represented by the shares of Class A Common Stock that
such holder would hold upon such conversion. Certain Selling Stockholders hold
significant shares of Class B Common Stock and are expected to continue to hold
such shares after the Common Stock Offering. See "Common Stock Offering: Selling
Stockholders". Conversion of such shares of Class B Common Stock by a holder
thereof to shares of Class A Common Stock would have the effect of diluting the
voting power of the existing holders of Class A Common Stock and would increase
the voting power of such holder commensurately.

The following table sets forth information concerning the persons who
beneficially own more than 5% of the Company's voting stock assuming no
elective, nonsale conversion of Class B Common Stock.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
ESTIMATED
NAME AND AMOUNT AND PERCENT OF
ADDRESS NATURE OF PERCENT OF CLASS FOLLOWING
TITLE OF OF BENEFICIAL BENEFICIAL CLASS AS OF COMMON STOCK
CLASS OWNER OWNERSHIP JUNE 18, 1996 OFFERING(4)

- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Common Stock LSR Hyperion Corp.(1) 188,747 49% 2.1%
- ------------------------------------------------------------------------------------------------------------------
Class A Common Stock SAR Hyperion Corp.(2) 93,906 25% 1.1%
- ------------------------------------------------------------------------------------------------------------------
Class A Common Stock SAS Hyperion Corp.(3) 93,906 25% 1.1%
- ------------------------------------------------------------------------------------------------------------------
Class A Common Stock Hyperion Funding Corp.(5) 5,366 1% *
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

* Percentage does not exceed 1% of the issued and outstanding shares.

(1) The sole shareholder of LSR Hyperion Corp. is Lewis S. Ranieri, a Director
of the Company and the Chairman of the Company.

(2) The sole shareholder of SAR Hyperion Corp. is Salvatore A. Ranieri, a
Director of the Company.

(3) The sole shareholder of SAS Hyperion Corp. is Scott A. Shay, a Director of
the Company.

(4) Assumes the sale of 8,480,000 shares of Common Stock in the Offering, that
each such share is a share of Class B Common Stock immediately prior to such
sale, and that no elective, nonsale conversion of Class B Common Stock
occurs.

(5) Hyperion Funding Corp. is controlled by Lewis S. Ranieri, Salvatore A.
Ranieri and Scott A Shay.

115

The following table sets forth information about certain persons who would
own 5% or more of the Company's voting stock, assuming that each holder of
shares of Class B Common Stock converts each such share into one share of Class
A Common Stock, and assuming that each Selling Stockholder sells the maximum
number of shares such Selling Stockholder may sell in the Common Stock Offering
pursuant to the Letter Agreement. Significant restrictions apply to such
conversions. See "Common Stock Offering: Selling Stockholders".

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
ESTIMATED PERCENT OF
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF CLASS AS CLASS FOLLOWING
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF JUNE 18, 1996 COMMON STOCK OFFERING
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Prudential Insurance 5,279,895 18.29% 10.06%
Co. of America
- ------------------------------------------------------------------------------------------------------------------
American Home 2,790,772 9.67% 5.32%
Assurance Co.
- ------------------------------------------------------------------------------------------------------------------
Ameritech Pension 2,817,209 9.76% 5.37%
Trust
- ------------------------------------------------------------------------------------------------------------------
LW-SP1, L.P. and 2,146,748 7.44% 7.44%
LW-SP2, L.P.(6)
- ------------------------------------------------------------------------------------------------------------------
Lewis S. Ranieri(7) 1,926,879 6.68% 3.7%
- ------------------------------------------------------------------------------------------------------------------
The Equitable Life 1,730,705 6.0% 3.3%
Assurance Society of
the US
and The Equitable Variable
Life Insurance Co.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

(6) LW-SP1 and LW-SP2 are each limited partnerships in which an affiliate of
Lehman Brothers Inc. is general partner and owns a 99% interest.

(7) Includes 752 shares held as custodian for two minors, as to which Mr.
Ranieri disclaims beneficial ownership.

116

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth information, as of June , 1996, regarding
each class of equity securities of the Company beneficially owned by all
directors and each of the executive officers set forth in the Summary
Compensation Table.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
AMOUNT AND
NATURE OF
TITLE OF BENEFICIAL PERCENT OF
CLASS NAME OF BENEFICIAL OWNER OWNERSHIP CLASS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
-- Barry C. Burkholder, President and Chief --
Executive Officer --
- --------------------------------------------------------------------------------------------------------------
-- Anthony J. Nocella, Executive Vice --
President and Chief Financial Officer --
- --------------------------------------------------------------------------------------------------------------
-- Jonathon K. Heffron, Executive --
Vice President, General Counsel, and
Chief Operation Officer --
- --------------------------------------------------------------------------------------------------------------
-- George R. Bender, --
Executive Vice President --
- --------------------------------------------------------------------------------------------------------------
-- Leslie H. Green, Senior --
Vice President Operations &
Technology --
- --------------------------------------------------------------------------------------------------------------
Class A Common Stock Lewis R. Ranieri, Director(1) 188,747 49%
- --------------------------------------------------------------------------------------------------------------
Class A Common Stock Salvatore A. Ranieri, Director(2) 93,906 25%
- --------------------------------------------------------------------------------------------------------------
Class A Common Stock Scott A. Shay, Director(3) 93,906 25%
- --------------------------------------------------------------------------------------------------------------
Class B Common Stock Lewis R. Ranieri, Director 1,738,132(4) 6.1%
- --------------------------------------------------------------------------------------------------------------
Class B Common Stock Salvatore A. Ranieri, Director 866,310(5) 3.0%
- --------------------------------------------------------------------------------------------------------------
Class B Common Stock Scott A. Shay, Director 864,163 3.0%
- --------------------------------------------------------------------------------------------------------------
Directors and Executive Officers as a Group 3,845,162 (6)
- --------------------------------------------------------------------------------------------------------------
</TABLE>

(1) See Notes 1 and 4 to "Security Ownership of Certain Beneficial Owners,"
above.

(2) See Notes 2 and 4 to "Security Ownership of Certain Beneficial Owners,"
above.

(3) See Notes 3 and 4 to "Security Ownership of Certain Beneficial Owners,"
above.

(4) Includes 752 shares held as custodian for two minors as to which Mr. Ranieri
disclaims beneficial ownership.

(5) Includes 7,513 shares held as custodian for a minor as to which Mr. Ranieri
disclaims beneficial ownership.

(6) 100% of the outstanding Class A Common Stock and 13.32% of the outstanding
Common Stock.

117

PRINCIPAL STOCKHOLDERS, BANK PREFERRED STOCK

The following tables set forth with respect to the Bank Preferred Stock as
of , 1996: (i) shares beneficially owned by all directors of the Company; (ii)
each of the executive officers named in the Summary Compensation Table set forth
herein; and (iii) shares beneficially owned by all directors of the Company, and
executive officers as a group.

PREFERRED STOCK, SERIES A

NUMBER OF SHARES
AND NATURE OF
BENEFICIAL PERCENT
NAME OWNERSHIP(1) OF CLASS
- ------------------------------------- ---------------- --------

Lewis S. Ranieri..................... -- *
Salvatore A. Ranieri................. -- *
Scott A. Shay........................ -- *
Barry C. Burkholder.................. 8,000 *
George R. Bender..................... 4,000 *
Anthony J. Nocella................... 1,000 *
Jonathon K. Heffron.................. 1,400(2) *
Leslie H. Green...................... -- *
Directors and Executive Officers as a
Group.............................. 14,400 *

PREFERRED STOCK, SERIES B

NUMBER OF SHARES
AND NATURE OF
BENEFICIAL PERCENT
NAME OWNERSHIP(1) OF CLASS
- ------------------------------------- ---------------- --------

Lewis S. Ranieri..................... -- *
Salvatore A. Ranieri................. -- *
Scott A. Shay........................ -- *
Barry C. Burkholder.................. -- *
George R. Bender..................... -- *
Anthony J. Nocella................... 2,000 *
Jonathon K. Heffron.................. -- *
Leslie H. Green...................... -- *
Directors and Executive Officers as a
Group.............................. 2,000 *

- ------------

* Percentages do not exceed 1% of the issued and outstanding shares.

(1) Calculated in accordance with Rule 13d-3 under the Exchange Act. Nature of
beneficial ownership is direct unless indicated otherwise by footnote.
Beneficial ownership as shown in the table arises from sole investment power
unless otherwise indicated by footnote.

(2) 1,000 shares direct, 400 shares held as custodian for minor children.

118

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

CERTAIN TRANSACTIONS

The Bank may from time to time make home mortgage or consumer loans to
directors, officers, and employees. Any such loan will be made in the ordinary
course of business, and on the same terms and conditions, including interest
rates and collateral, as those of comparable transactions prevailing at the time
with non-affiliated parties. The Bank had no loans to directors or executive
officers outstanding during the six months ended March 31, 1996, or in fiscal
1995 or 1994.

Historically, expenses paid to related parties were (i) for services
provided in connection with hedging and asset and liability management
strategies, and (ii) for services provided in connection with the management and
marketing of real estate properties. No such expenses were incurred during the
six months ended March 31, 1996, or fiscal 1995 or 1994. At March 31, 1996 and
September 30, 1995 and 1994, the Company and the Bank had no outstanding
receivables from or payables to related parties other than those related to
participation in the filing of the consolidated tax return and there are no
loans outstanding to directors, executive officers, or principal holders of the
Company's equity securities.

As a general benefit to all full-time employees with at least six months of
service (excluding executive officers), the Bank, through its Mortgage Banking
Group, will waive the 1% origination fee for a mortgage loan for the purchase or
refinance of the employee's principal residence. In addition, the Bank offers a
0.50% discount on its posted rates for consumer installment loans made to
employees.

The Company is contemplating entering into a consulting agreement pursuant
to which Lewis S. Ranieri would serve as a consultant to the Company for a
three-year period.

119

COMMON STOCK OFFERING: SELLING STOCKHOLDERS

The Selling Stockholders consist of the limited and general partners of
Hyperion Partners. LW-SP1 and LW-SP2 are limited partners of Hyperion Partners
but are not Selling Stockholders. The partners received Class A Common Stock and
Class B Common Stock in the Restructuring which was effected in June 18, 1996
and LW-SP1 and LW-SP2 received shares of Class B Common Stock. See "Summary --
Recent Developments".

The following table sets forth information with respect to the beneficial
ownership of Common Stock by the Selling Stockholders, LW-SP1 and LW-SP2 as of
the date of this Prospectus and as adjusted to reflect the sale of the Class A
Common Stock offered hereby (assuming no exercise of the underwriters'
over-allotment option).

<S> <C> <C> <C> <C> <C>
LSR Hyperion Corp.(1)................ 188,747 49% 1,698,725 6.0%
Hyperion Funding Corp.(2)............ 5,366 1% 48,298 0.2%
SAR Hyperion Corp.(3)................ 93,906 25% 845,153 3.0%
SAS Hyperion Corp.(4)................ 93,906 25% 845,153 3.0%
KRW Hyperion Corp.(5)................ -- -- 281,036 1.0%
CJK Hyperion Corp.(6)................ -- -- 226,676 0.8%
David M. Golush(7)................... -- -- 423,251 1.5%
Patricia A. Sloan(8)................. -- -- 193,979 0.7%
David A. Marcus(9)................... -- -- 176,630 0.6%
Jeffrey P. Cheesman(10).............. -- -- 152,709 0.5%
Robert A. Perro(11).................. -- -- 98,149 0.3%
The Prudential Insurance Co. of
America............................. -- -- 5,279,895 18.6%
American Home Assurance Company...... -- -- 2,790,772 9.8%
LW-SP1 L.P........................... -- -- 2,029,372 7.1%
LW-SP2 L.P........................... -- -- 117,376 0.4%
Ameritech Pension Trust.............. -- -- 2,817,209 9.8%
The Equitable Life Assurance Society
of the United States................ -- -- 1,623,368 5.7%
The Equitable Variable Life Insurance
Company............................. -- -- 107,337 0.4%
Equitable Deal Flow Fund LP.......... -- -- 907,200 3.2%
Equitable Capital
Partners LP......................... -- -- 1,085,400 3.8%
Equitable Capital Partners
(Retirement Fund) LP................ -- -- 534,600 1.9%
Lewis S. Ranieri..................... -- -- 11,404 0.0%
Salvatore A. Ranieri Cust for
Margaret Ranieri NY UGMA-AGE 21..... -- -- 7,513 0.0%
Lewis S. Ranieri A/C/F Eric Jimenez
NJ UTMA-21.......................... -- -- 376 0.0%
</TABLE>
(TABLE CONTINUED ON FOLLOWING PAGE)

<TABLE>
<CAPTION>
SHARES OF CLASS A SHARES OF CLASS B
CLASS A COMMON CLASS B COMMON
COMMON STOCK -- COMMON STOCK --
STOCK-OWNED PERCENT OWNED STOCK OWNED PERCENT OWNED
AFTER COMMON AFTER COMMON AFTER COMMON AFTER COMMON
STOCK OFFERING STOCK OFFERING STOCK OFFERING STOCK OFFERING
--------------- -------------- --------------- --------------

<S> <C> <C> <C> <C>
LSR Hyperion Corp.(1)................
Hyperion Funding Corp.(2)............
SAR Hyperion Corp.(3)................
SAS Hyperion Corp.(4)................
KRW Hyperion Corp.(5)................
CJK Hyperion Corp.(6)................
David M. Golush(7)...................
Patricia A. Sloan(8).................
David A. Marcus(9)...................
Jeffrey P. Cheesman(10)..............
Robert A. Perro(11)..................
The Prudential Insurance Co. of
America.............................
American Home Assurance Company......
LW-SP1 L.P...........................
LW-SP2 L.P...........................
Ameritech Pension Trust..............
The Equitable Life Assurance Society
of the United States................
The Equitable Variable Life Insurance
Company.............................
Equitable Deal Flow Fund LP..........
Equitable Capital
Partners LP.........................
Equitable Capital Partners
(Retirement Fund) LP................
Lewis S. Ranieri.....................
Salvatore A. Ranieri Cust for
Margaret Ranieri NY UGMA-AGE 21.....
Lewis S. Ranieri A/C/F Eric Jimenez
NJ UTMA-21..........................
</TABLE>

<TABLE>
<CAPTION>
SHARES OF
CLASS A CLASS A SHARES OF CLASS B
COMMON COMMON CLASS B COMMON CLASS A
STOCK -- STOCK -- COMMON STOCK --PERCENT COMMON
OWNED PERCENT OWNED STOCK-OWNED OWNED STOCK OFFERED
BEFORE COMMON BEFORE COMMON BEFORE COMMON BEFORE COMMON IN COMMON
STOCK OFFERING STOCK OFFERING STOCK OFFERING STOCK OFFERING STOCK OFFERING
-------------- -------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Lewis S. Ranieri A/C/F Jason Jimenez
NJ UTMA-21.......................... -- -- 376 0.0%
Ranieri Family Trust F/B/O Claudia L.
Ranieri U/A 7/1/93.................. -- -- 4,938 0.0%
Ranieri Family Trust F/B/O Angela S.
Ranieri U/A 7/1/93.................. -- -- 4,938 0.0%
Scott A. Shay........................ -- -- 5,366 0.0%
Trust F/B/O Benjamin Jacob Shay U/A
7/23/93............................. -- -- 2,254 0.0%
Trust F/B/O Ariel Rebecca Shay U/A
7/23/93............................. -- -- 2,254 0.0%
Trust F/B/O Dara Jen Golush U/A
12/20/84............................ -- -- 3,086 0.0%
Trust F/B/O Jason Reid Golush U/A
12/20/84............................ -- -- 2,683 0.0%
Gail W. Marcus....................... -- -- 2,281 0.0%
Janet L. Perro....................... -- -- 1,073 0.0%
Ranieri Bros. Shay & Co., Inc........ -- -- 24,117 0.1%
The Sweater Trust.................... -- -- 644,024 2.3%
Sun Life Insurance Co. of America.... -- -- 1,073,374 3.8%
Marilyn B. Arison.................... -- -- 858,699 3.0%
Masco Capital Corp................... -- -- 536,687 1.9%
Wolfson Descendants' 1983 Trust...... -- -- 214,675 0.8%
South Ferry #2, L.P.................. -- -- 271,921 1.0%
EDN Equities......................... -- -- 135,961 0.5%
Leslie Wexner........................ -- -- 429,350 1.5%
The Airlie Group, L.P................ -- -- 429,350 1.5%
Julius Berman........................ -- -- 126,975 0.4%
FAME Associates...................... -- -- 193,207 0.7%
Institutional Interests.............. -- -- 336,097 1.2%
Houston Firemen's Relief and
Retirement Fund..................... -- -- 536,687 1.9%
Alpine Investment Partners........... -- -- 214,675 0.8%
Mortimer Zuckerman................... -- -- 21,467 0.1%
Edward Linde......................... -- -- 21,467 0.1%
Connie S. Maniatty................... -- -- 21,467 0.1%
Micha Astrachan...................... -- -- 66,232 0.2%
</TABLE>

<S> <C> <C> <C> <C>
Lewis S. Ranieri A/C/F Jason Jimenez
NJ UTMA-21..........................
Ranieri Family Trust F/B/O Claudia L.
Ranieri U/A 7/1/93..................
Ranieri Family Trust F/B/O Angela S.
Ranieri U/A 7/1/93..................
Scott A. Shay........................
Trust F/B/O Benjamin Jacob Shay U/A
7/23/93.............................
Trust F/B/O Ariel Rebecca Shay U/A
7/23/93.............................
Trust F/B/O Dara Jen Golush U/A
12/20/84............................
Trust F/B/O Jason Reid Golush U/A
12/20/84............................
Gail W. Marcus.......................
Janet L. Perro.......................
Ranieri Bros. Shay & Co., Inc........
The Sweater Trust....................
Sun Life Insurance Co. of America....
Marilyn B. Arison....................
Masco Capital Corp...................
Wolfson Descendants' 1983 Trust......
South Ferry #2, L.P..................
EDN Equities.........................
Leslie Wexner........................
The Airlie Group, L.P................
Julius Berman........................
FAME Associates......................
Institutional Interests..............
Houston Firemen's Relief and
Retirement Fund.....................
Alpine Investment Partners...........
Mortimer Zuckerman...................
Edward Linde.........................
Connie S. Maniatty...................
Micha Astrachan......................
</TABLE>

- ------------

(1) All stock owned by Lewis S. Ranieri.

(2) All stock owned by Lewis S. Ranieri, Salvatore A. Ranieri, Scott A. Shay
and Kendrick R. Wilson III.

(3) All stock owned by Salvatore A. Ranieri.

(4) All stock owned by Scott A. Shay.

(5) All stock owned by Kendrick R. Wilson III.

(6) All stock owned by Clinton J. Kendrick.

(7)

(8)

(10)

(11)

Since its formation in 1988, Hyperion Partners directly or indirectly has
made a number of investments, other than in the Bank, including: (i) Hyperion
Credit Capital Partners L.P., the partnership which purchased a portfolio of
commercial and multifamily loans and real estate from the RTC; (ii) Hyperion
Credit Services Corporation, which was formed to service the portfolio of real
estate loans owned by Hyperion Credit Capital Partners L.P., (iii) Suntex
Ventures, which made real estate investments in multifamily apartments and in
high-rise residential condominiums; (iv) the Centeq Companies, which were real
estate service companies, (v) Hyperion Capital, a Commission-registered
investment advisory firm; (vi) Cardholder Partners L.P., which held accounts and
other intangibles related to a credit card portfolio; (vii) DE MINIMIS minority
equity investments in a Spanish mortgage banker and a mortgage conduit vehicle
for the securitization of Spanish residential mortgage loans; and (viii)
miscellaneous investments in marketable financial instruments.

The general partner of Hyperion Partners is Hyperion Ventures L.P.
("Hyperion Ventures"). Four corporations are general partners of Hyperion
Ventures: (i) LSR Hyperion Corp., which is wholly owned by Lewis S. Ranieri;
(ii) Hyperion Funding Corp., which is owned by Lewis S. Ranieri, Salvatore A.
Ranieri, Scott A. Shay and Kendrick R. Wilson III; (iii) SAR Hyperion Corp.,
which is wholly owned by Salvatore A. Ranieri; and (iv) SAS Hyperion Corp.,
which is wholly owned by Scott A. Shay.

In June 1995, Lewis S. Ranieri and Scott A. Shay established a new private
equity fund, Hyperion Partners II. Hyperion Partners II follows many of the same
investment strategies as Hyperion Partners. Both the general partner of and the
advisor to Hyperion Partners II are controlled by Lewis S. Ranieri and Scott A.
Shay, who were also among the founders, and remain two of the three control
persons, of Hyperion Partners and are members of the Company Board. See "Risk
Factors -- Concentration of Ownership".

Prior to the Restructuring, Hyperion Partners held all of the Company's
common stock, other than the Class C Common Stock, through its wholly owned
subsidiary, Hyperion Holdings. On June 18, 1996, Hyperion Holdings was merged
with and into the Company in the Merger.

SELLING STOCKHOLDER LETTER AGREEMENTS

Each of the Selling Stockholders, LW-SP1 and LW-SP2 (which are subject to
each of the provisions described herein as applicable to Selling Stockholders,
except as otherwise indicated) have entered into a Letter Agreement, dated as of
June 17, with each of Hyperion Partners and the Company (the "Letter
Agreement"). Pursuant to the Letter Agreement, each Selling Stockholder
consented to the Distribution and agreed to hold the common stock of Hyperion
Holdings received pursuant to the Distribution according to the terms of such
Letter Agreement. Also, each Selling Stockholder (including those who prior to
the Merger held voting shares of capital stock of Hyperion Holdings and those
who prior to the Merger held shares of Class C Common Stock), by executing the
Letter Agreement and agreeing to be bound thereby, consented to and approved of,
for purposes of Section 228 of the DGCL and otherwise, the Merger Agreement,
dated as of June 17, 1996, by and between Hyperion Holdings and the Company (the
"Merger Agreement"), and the Merger.

Pursuant to the Letter Agreement, each Selling Stockholder acknowledged (i)
that under the By-laws of Hyperion Holdings, it is not permitted to Transfer any
shares of capital stock of Hyperion Holdings except pursuant to the Merger
Agreement and (ii) that, under the By-Laws, after the Distribution and prior to
the consummation of the Common Stock Offering, such Selling Stockholder would
not effect any Transfer of shares of capital stock of the Company (a) in the
case of such shares received in respect of Class C Common Stock in the Merger,
except as such Selling Stockholder would have been permitted to transfer such
Class C Common Stock under the Stockholders' Agreement, dated as of August 1,
1989, by and among the Company and the other parties specified therein, and (b)
in the case of any other such shares, except in accordance with the terms of the
limited partnership agreement of Hyperion Partners applicable to the transfer of
partnership interests of Hyperion Partners. Each 5% Stockholder acknowledged
that it is not permitted, prior to the earlier of an IPO or October 31, 1996, to
Transfer any such shares owned by such 5% Stockholder or its affiliates (other
than to a person of whom the 5% Stockholder is a wholly-owned subsidiary) or
acquire any additional such shares. If an IPO is not consummated within six
months of the date of the Transaction Agreement, the Company is obligated to
provide each Selling Stockholder with registration and tag-along rights
substantially similar to those set forth in the Stock Purchase Agreement, dated
as of August 1, 1989, by and among the Company and certain Selling Stockholders

122

and the Stockholders' Agreement. Under the Letter Agreements, each Selling
Stockholder is also obligated to provide certain cooperation to the Company in
the case of an IPO, including entering into customary underwriting and lockup
agreements.

Selling Stockholders retaining shares of Common Stock may not sell such
shares for (1) one year after the Common Stock Offering, if such stock was
received in respect of general partnership interests in Hyperion Partners or (2)
six months after the Common Stock Offering, if such shares were received in
respect of limited partnership interests in Hyperion Partners (although a
regulated insurance company may sell shares in a private off-market transaction
subject to Rule 144 limits and reasonable representations requested by the
underwriters). Subject to certain adjustments by the Company Board based upon
advice of the underwriters to improve the marketability of the shares of Common
Stock to be sold in the Common Stock Offering, each 5% Stockholder may sell up
to 45% of such holder's shares of Common Stock in the Common Stock Offering,
except for LW-SP1 and LW-SP2, affiliates of Lehman Brothers Inc., which are
prohibited from selling any shares until August 8, 1998, and any other Selling
Stockholder may sell up to 16% of its shares in the Common Stock Offering
(subject to increase pro rata in the discretion of the Company Board if the 5%
Stockholders elect to sell fewer than the maximum number of shares they are
permitted to sell in the Common Stock Offering). Each Selling Stockholder
acknowledged that, except for shares that could have been sold pursuant to the
Common Stock Offering but were not sold at the election of such 5% Stockholder,
no 5% Stockholder is permitted by the By-Laws to acquire or Transfer any shares
of capital stock of the Company for three years following the Common Stock
Offering (or upon termination of the Letter Agreement, if earlier) unless as of
an earlier date the Company Board determines that such acquisition or Transfer
would not be reasonably likely to have a material adverse effect on the tax
position of the Company.

Pursuant to the Letter Agreement, as soon as practicable after the Common
Stock Offering, the Company is obligated to file, and to use best efforts to
cause to promptly become effective, a registration statement under the
Securities Act with respect to shares of class A or Class B Common Stock then
held by any Selling Stockholder. The Company is also obligated to take action to
keep such registration statement effective (subject to occasional periods of
suspension of such effectiveness as necessary) until the later of the date on
which all Common Stock registered thereunder has been sold pursuant thereto, but
in no case later than December 31, 1999, or until such registration under the
Securities Act is no longer required to sell such shares without restriction.

The Letter Agreement also restricts the conversion rights of holders of
Class B Common Stock.

In connection with the Letter Agreement, each of the Selling Stockholders,
Hyperion Partners, Hyperion Holdings and the Company have made certain
representations and warranties. The Letter Agreement may be terminated by
consent of each of the parties thereto and if not earlier terminated will
terminate on the earlier of the third anniversary of the Common Stock Offering
or of October 31, 1996 (except for certain provisions restricting transfers and
pertaining to registration rights and conversion of Class B Common Stock).

123

DESCRIPTION OF THE SENIOR NOTES

The Rule 144A Notes were issued under the Original Indenture between the
Company and the Bank of New York, as Trustee (the "Trustee"). Subsequently, upon
approval by the requisite number of holders of Rule 144A Notes, the Supplemental
Indenture was executed by the Company and the Trustee, effective as of January
23, 1995. The Supplemental Indenture clarified and/or modified the Original
Indenture (i) to permit the Company to redeem the Senior Notes at 101% of their
principal amount plus accrued interest to the date of redemption in connection
with any sale or other disposition of the Bank or at least 80% of its assets;
(ii) to provide that in the event of such a sale or other disposition, the
holders of the Senior Notes shall have the right to have their Senior Notes
repurchased by the Company at 101% of their principal amount plus accrued
interest to the date of redemption if the Company has not exercised its option
to redeem the Senior Notes; (iii) to provide that the Company would not
consummate the Exchange Offer prior to December 31, 1994, with the result that
the interest rate on the Rule 144A Notes would continue to be 9.05% until at
least that date. The Original Indenture and the Supplemental Indenture are
collectively referred to as the "Indenture."

The Indenture is by its terms subject to and governed by the Trust
Indenture Act of 1939, as amended. The statements under this caption relating to
the Senior Notes and the Indenture are summaries and do not purport to be
complete, and where reference is made to particular provisions of the Indenture,
such provisions, including the definition of certain terms, are incorporated by
reference as a part of such summaries or terms, which are qualified in their
entirety by such reference. Unless otherwise indicated, references under this
caption to sections, "^" or articles are references to the Indenture.

GENERAL

The Senior Notes are unsecured obligations of the Company, are limited to
$115 million aggregate principal amount at any one time outstanding (including
both the Rule 144A Notes and the Exchange Notes) and will mature on May 15,
1998.

The Senior Notes bear interest at the rate of 8.05% per annum from May 17,
1993 or from the most recent Interest Payment Date to which interest has been
paid or provided for, payable semi-annually on May 15 and November 15 of each
year, commencing November 15, 1993, to the Person in whose name the Senior Note
(or any predecessor Senior Note) is registered at the close of business on the
preceding May 1 or November 1, as the case may be. Interest on the Senior Notes
is computed on the basis of a 360-day year of twelve 30-day months. (^ ^ 301,
307 and 310) Principal of and premium, if any, and interest on the Senior Notes
is payable at the Corporate Trust Office of the Trustee in New York, New York.
At the option of the Company, payment of interest may be made by check mailed to
the address of the Person entitled thereto as it appears in the Security
Register. (^ ^ 301, 305 and 1002) Upon any exchange of Rule 144A Notes for
Exchange Notes pursuant to the Exchange Offer, the Rule 144A Notes so exchanged
shall be cancelled and shall no longer be deemed Outstanding for any purpose. In
no event shall the aggregate principal amount of Rule 144A Notes and Exchange
Notes Outstanding exceed $115 million. The Rule 144A Notes and the Exchange
Notes constitute one class for all purposes under the Indenture, including
without limitation amendments, waivers, redemptions and Offers to Purchase, and
for purposes of this Description of the Senior Notes all references herein to
"Senior Notes" shall be deemed to refer collectively to Rule 144A Notes and any
Exchange Notes, unless the context otherwise requires. (^^ 301, 305 and 1002)

The interest rate on the Senior Notes was increased because the Company did
not consummate the Exchange Offer (or, under certain circumstances, in lieu
thereof, a "shelf" registration permitting resale of Senior Notes by the holders
thereof) by certain dates, all as further described under "-- Registration
Covenant; Exchange Offer". The additional interest on the Senior Notes is
computed on the basis of a 365-day year.

Except as described under "-- Change of Control; Sale or Other Disposition
of Bank's Assets", the Senior Notes are not subject to redemption prior to
maturity. The Notes do not have the benefit of any sinking fund obligation.

The Trustee acts as Paying Agent and Registrar. The Senior Notes may be
presented for registration of transfer and exchange at the offices of the
Registrar. (^ 305)

124

FORM, DENOMINATION AND BOOK-ENTRY PROCEDURES

The Rule 144A Notes initially sold to "qualified institutional buyers"
pursuant to Rule 144A under the Securities Act are represented by a global
Senior Note (the "Book-Entry Note") in definitive fully registered form without
coupons, which is registered in the name of a nominee of DTC as depositary. The
Book Entry Note is exchangeable for certificated Rule 144A Notes, in definitive,
fully registered form without coupons in denominations of $250,000 and integral
multiples of $1,000 in excess thereof in the circumstances described below.

In connection with the issuance of the Book-Entry Note, DTC credited on its
book-entry registration and transfer system the respective principal amounts of
Book-Entry Note represented by the global Senior Note deposited with it to the
accounts of institutions that have accounts with DTC or its nominee
("participants") and that beneficially own (or hold for persons who beneficially
own) interests in such Book-Entry Note. Ownership of beneficial interests in the
Book-Entry Note is limited to participants or persons that may hold beneficial
interests through participants. Ownership of beneficial interests in the
Book-Entry Note is shown on, and the transfer of those ownership interests may
be effected only through, records maintained by DTC (with respect to
participants' interests) or such participants (with respect to persons that may
hold beneficial interests in the Book-Entry Note through such participants).

So long as DTC or its nominee is the registered holder and owner of a
global Senior Note representing the Book-Entry Note, DTC or such nominee, as the
case may be, will be considered the sole owner and Holder of the related
Book-Entry Note for all purposes of such Book-Entry Note and for all purposes
under the Indenture. Unless (a) DTC notifies the Company that it is unwilling or
unable to continue as depositary for such Book-Entry Note, (b) DTC ceases to be
a clearing agency registered under the Securities Exchange Act of 1934, (c) the
Company delivers to the Trustee a written notice that the Book-Entry Note shall
be exchangeable for definitive Rule 144A Notes or (d) an Event of Default or
event that after notice or lapse of time, or both, would become an Event of
Default has occurred and is continuing with respect to the Rule 144A Notes,
owners of beneficial interests in the Book-Entry Note are not entitled to have
certificated Rule 144A Notes registered in their names, will not receive and are
not entitled to receive physical delivery of certificated Rule 144A Notes in
definitive form and are not considered to be the owners or holders of any Senior
Notes under the Indenture or of such Book-Entry Note.

Payment of principal of and premium and interest, if any, on the Book-Entry
Note will be made to the depositary or its nominee, as the case may be, as the
registered owner and holder thereof.

Rule 144A Notes sold to accredited investors within the meaning of Rule 501
of Regulation D under the Securities Act are in registered, certificated form
without interest coupons. Such Senior Notes are subject to certain restrictions
on transfer as described under "Risk Factors -- Restrictions on Transfer".

Exchange Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 and any integral multiples thereof.
Transfers of Exchange Notes may be made only by presentation of the Exchange
Notes, duly endorsed, to the Trustee for registration of transfer on the
Security Register maintained by the Trustee for such purposes. Unless and until
an Exchange Note is duly presented to the Trustee for registration of transfer,
the Company and the Trustee may treat the Person in whose name such Exchange
Note is registered on the Security Register as the sole owner thereof for all
purposes under the Indenture, notwithstanding any notice to the contrary.

REGISTRATION COVENANT; EXCHANGE OFFER

The Company will be obligated to use its best efforts to consummate the
Exchange Offer. The Company has further agreed to hold such offer open for at
least 30 days and exchange Exchange Notes for all Rule 144A Notes validly
tendered and not withdrawn prior to the expiration of such offer. Under existing
Commission interpretations, the new Exchange Notes would in general be freely
transferable after the Exchange Offer without further registration under the
Securities Act. However, if, prior to consummation of the Exchange Offer, such
existing Commission interpretations are changed such that the Exchange Notes
would not in general be freely transferable in such manner, the Company will, in
lieu of effecting a registration of Exchange Notes, use its best efforts to

125

effect a "shelf" registration of the Rule 144A Notes for resale by holders (the
"Resale Registration"). The terms of the Company's agreement regarding the
Exchange Offer are set forth in Annex A hereto.

Because the Company did not consummate the Exchange Offer (or, in lieu
thereof, the Resale Registration did not become effective) by October 14, 1993,
the interest rate on the Rule 144A Notes increased by 0.5% to 8.55% per annum
until such time as the Company consummates the Exchange Offer (or, in lieu
thereof, such Resale Registration has become effective). Because the Company did
not consummate the Exchange Offer (or, in lieu thereof, such Resale Registration
did not become effective) by February 11, 1994, the interest rate on the Rule
144A Notes increased by an additional 0.5% to 9.05% per annum until such time as
the Company consummates the Exchange Offer (or, in lieu thereof, such Resale
Registration becomes effective). The interest rate on the Rule 144A Notes will
revert to 8.05% per annum from and including the date on which the Exchange
Offer is consummated (or, in lieu thereof, such Resale Registration becomes
effective). See "Purpose of the Exchange Offer".

CERTAIN COVENANTS

The Indenture contains, among others, the following covenants:

LIMITATION ON COMPANY DEBT

The Company may not Incur any Debt, except (i) Debt represented by the
Notes; (ii) Debt owed by the Company to any Wholly Owned Subsidiary of the
Company (but only so long as such Debt is held by a Wholly Owned Subsidiary of
the Company), PROVIDED, that the obligations of the Company to any of its Wholly
Owned Subsidiaries with respect to such Debt shall be evidenced by an
intercompany promissory note and shall be Subordinated Debt; (iii) Debt issued
(A) the proceeds of which Debt are used to effect acquisitions of the capital
stock or assets of, assume the liabilities of, or make capital contributions to,
Insured Depository Institutions, (B) which Debt does not exceed in outstanding
principal amount any then unused binding capital commitments available to it to
enable it to repay such Debt, (C) the Company in fact receives such amount and
uses such amount to repay all of such Debt within 60 days of the incurrence
thereof and (D) such Debt shall be evidenced by an intercompany promissory note
and shall be Subordinated Debt; and (iv) Debt the proceeds of which are
immediately applied to redeem or repurchase Senior Notes, in an amount not to
exceed the principal amount of the Senior Notes so redeemed or repurchased,
PROVIDED that, if the Senior Notes are redeemed or repurchased only in part,
such refunding or refinancing Debt does not require the payment of all or a
portion of the principal thereof (whether pursuant to repurchase, redemption,
repayment, defeasance, retirement or sinking fund payment obligation, payment at
stated maturity or otherwise) prior to the stated maturity of the Senior Notes.
(^ 1008) The Indenture does not contain a limitation on the Incurrence of Debt
by Subsidiaries of the Company.

LIMITATION ON INVESTMENTS

The Company (i) may not have or make any Investment other than (a)
Qualified Investments and (b) Investments in Subsidiaries that are Insured
Depository Institutions, PROVIDED, that the Company may make an Investment in an
Unrestricted Subsidiary to the extent such Investment complies with the covenant
described under "Limitation on Restricted Payments", and (ii) may not permit any
Subsidiary to have or make any Investment other than Investments that are not in
contravention of any Regulatory Requirement applicable to the Company or any of
its Subsidiaries. (^ 1009)

LIMITATION ON CONDUCT OF BUSINESS

The Company may not engage in any line of business other than the ownership
of the Capital Stock of, and the making of Investments in, Subsidiaries that are
Insured Depository Institutions, except to the extent the Company is otherwise
permitted to make an investment in an Unrestricted Subsidiary; PROVIDED, that
any Subsidiary of the Company may engage in any line of business that is not in
contravention of any Regulatory Requirement applicable to the Company and its
Subsidiaries. The Company will cause each Subsidiary that is an Insured
Depository Institution to maintain its status as an Insured Depository
Institution and to do all things necessary to ensure that savings accounts of
such Subsidiary are insured by the FDIC (or any successor organization) up to
the maximum amount permitted by the FDIA and the regulations thereunder (or any
succeeding legislation). (^ 1010)

126

LIMITATION ON RESTRICTED PAYMENTS

The Company may not, and may not permit any Subsidiary of the Company to,
directly or indirectly, (i) declare or pay any dividend, or make any
distribution, in respect of its Capital Stock or to the holders thereof
(including pursuant to a merger or consolidation of the Company or such
subsidiary, but excluding (a) any pro rata dividend or distribution payable
solely in shares of its Capital Stock or in options, warrants or rights to
acquire shares of its Capital Stock and (b) any dividends or distributions
payable by any Subsidiary to the Company or another Subsidiary), (ii) purchase,
redeem, or otherwise retire or acquire for value (a) any Capital Stock of the
Company, any Subsidiary of the Company (other than a Wholly Owned Subsidiary) or
any Related Person of the Company or (b) any options, warrants or rights to
purchase or acquire shares of Capital Stock of the Company, any Subsidiary of
the Company or any Related Person of the Company or any securities convertible
or exchangeable into shares of Capital Stock of the Company, any Subsidiary of
the Company or any Related Person of the Company, (iii) make any Investment in,
or payment on a Guarantee of any obligation of, any Affiliate or any Related
Person of the Company, other than the Company or a Wholly Owned Subsidiary which
is a Wholly Owned Subsidiary prior to such Investment, (iv) redeem, defease,
repurchase, retire or otherwise acquire or retire for value prior to any
scheduled maturity, repayment or sinking fund payment, Debt of the Company
(other than the Senior Notes) and (v) make any Investment in any Unrestricted
Subsidiary (each of clauses (i) through (v) being a "Restricted Payment") if:
(1) an Event of Default, or an event that with the lapse of time or the giving
of notice, or both, would constitute an Event of Default, shall have occurred
and be continuing or (2) upon giving effect to such Restricted Payment, the
aggregate of all Restricted payments from March 31, 1993, exceeds the sum of:
(a) 50% of cumulative Consolidated Net Income after March 31, 1993 through the
last day of the last full fiscal quarter immediately preceding such Restricted
Payment for which quarterly or annual financial statements of the Company are
available (or if such cumulative Consolidated Net Income shall be a deficit,
minus 100% of such deficit) plus (b) 100% of the aggregate net proceeds,
including the fair value of property other than cash (determined in good faith
by the Company Board as evidenced by a resolution of the Company Board filed
with the Trustee), from the issuance of Capital Stock (other than Disqualified
Stock) of the Company and options, warrants or other rights on Capital Stock
(other than Disqualified Stock) of the Company (other than to a Subsidiary of
the Company) and the amount by which Debt of the Company is reduced on the
Company's balance sheet upon the conversion of such Debt into Capital Stock
(other than Disqualified Stock) of the Company (other than by a Subsidiary of
the Company) after March 31, 1993 plus (c) $12 million.

The foregoing provision will not be violated by reason of (i) the payment
of any dividend within 60 days after the declaration thereof if at the
declaration date such payment would have complied with the foregoing provision,
(ii) the declaration and payment of quarterly dividends by the Bank on its
Preferred Stock, Series A, pursuant to the terms thereof as in effect on the
date of the Indenture, PROVIDED, that amounts so paid shall be deducted from
amounts available for Restricted Payments pursuant to the preceding paragraph,
(iii) payments made in lieu of dividends with respect to periods after the date
of the Indenture to the extent such payments are required to be made under the
terms of the FSLIC Warrants as in effect on the date of the Indenture, PROVIDED,
that amounts so paid shall be deducted from amounts available for Restricted
Payments pursuant to the preceding paragraph or (iv) dividends paid on a pro
rata basis by the Bank with respect to common stock issued pursuant to the FSLIC
Warrant to the extent such stock is not then held by an Affiliate of the
Company, PROVIDED, that amounts so paid shall be deducted from amounts available
for Restricted Payments pursuant to the preceding paragraph. (^ 1011)

LIMITATIONS CONCERNING DISTRIBUTIONS BY SUBSIDIARIES

The Company may not, and may not permit any Subsidiary of the Company that
is an Insured Depository Institution ("Bank Subsidiary") and that is not a
Subsidiary of another Subsidiary or Subsidiaries of the Company (a "Direct Bank
Subsidiary") to, suffer to exist any consensual encumbrance or restriction
(other than pursuant to law or regulation) on the ability of such Direct Bank
Subsidiary (i) to pay directly or indirectly dividends or make any other
distributions in respect of its Capital Stock or pay any Debt or other
obligation owed to the Company or any other Subsidiary of the Company (other
than a Subsidiary of such Direct Bank Subsidiary); (ii) to make loans or
advances to the Company or any Subsidiary of the Company (other than a

127

Subsidiary of such Direct Bank Subsidiary); or (iii) to transfer any of its
property or assets to the Company; but only if such encumbrance or restriction
shall consist of either (x) an express encumbrance or restriction on the ability
of the Company or such Direct Bank Subsidiary to take any such action, or (y)
the right of any party to encumber or restrict the Company or such Direct Bank
Subsidiary from taking any such action through enforcing the specific
performance of a term of covenant that does not expressly encumber or restrict
the ability of the Company or such Direct Bank Subsidiary from taking any such
action. Notwithstanding the foregoing, the Company may permit a Direct Bank
Subsidiary to suffer to exist any such encumbrance or restriction (a) pursuant
to the terms of Preferred Stock issued by such Subsidiary on terms no more
restrictive than the terms of the Bank Preferred Stock as in effect on the date
of the Indenture, (b) pursuant to an agreement relating to any Debt Incurred by
such Subsidiary prior to the date on which such Direct Bank Subsidiary was
acquired, directly or indirectly, by the Company and outstanding on such date
and not Incurred in anticipation of becoming a Subsidiary of the Company, or (c)
pursuant to an agreement effecting a renewal, refunding, refinancing or
extension of Debt or Preferred Stock Incurred pursuant to an agreement referred
to in clause (a) or (b) above; PROVIDED, HOWEVER, that the provisions contained
in such renewal, refunding, refinancing or extension agreement relating to such
encumbrance or restriction are no more restrictive in any material respect than
the provisions contained in the agreement the subject thereof in the reasonable
judgment of the Company Board as evidenced by a resolution of the Company Board
filed with the Trustee. (^ 1012)

LIMITATION ON DISPOSITIONS OF, AND LIENS UPON, CERTAIN CAPITAL STOCK OF
SUBSIDIARIES THAT ARE INSURED DEPOSITORY INSTITUTIONS

The Company may not, and may not permit any Subsidiary of the Company to,
directly or indirectly, (i) transfer, convey, sell, lease or otherwise dispose
of any Common Stock or Voting Stock of any Subsidiary of the Company that is a
Bank Subsidiary to any Person other than the Company or a Wholly Owned
Subsidiary of the Company or such Subsidiary, unless such transfer, conveyance,
sale, lease or other disposition shall consist of a sale of all of the Common
Stock and Voting Stock of such Bank Subsidiary owned by the Company and any
Subsidiary of the Company, the Company receives consideration at the time of
such sale at least equal to the fair market value of the Common Stock or Voting
Stock sold (as determined in good faith by the Company Board) in the form of
cash or readily marketable cash equivalents and the Net Available Proceeds from
such sale within 90 days after such sale either are reinvested as an Investment
in a Wholly Owned Bank Subsidiary or are applied to make an Offer to Purchase
the Senior Notes at a purchase price in cash equal to 100% of their principal
amount plus accrued interest to the date of purchase, (ii) permit any Bank
Subsidiary to merge or consolidate with any other Person unless either (a) the
surviving entity is the Company, a Wholly Owned Subsidiary of the Company or, in
the case of a Bank Subsidiary that is a Subsidiary of another Subsidiary of the
Company, such other Subsidiary or a Wholly Owned Subsidiary thereof, or (b) the
Company receives consideration at the time of the merger or consolidation at
least equal to the fair market value of the investment of the Company in the
Bank Subsidiary that is merged or consolidated (as determined in good faith by
the Company Board) in the form of cash or readily marketable cash equivalents
and the Net Available Proceeds from such sale within 90 days either are
reinvested as an Investment in a Wholly Owned Bank Subsidiary or are applied to
make an Offer to Purchase the Senior Notes at a purchase price in cash equal to
100% of their principal amount plus accrued interest to the date of purchase,
(iii) permit any Bank Subsidiary to convey or transfer its properties and assets
substantially as an entirety to any Person except the Company, a Wholly Owned
Subsidiary of the Company or, in the case of a Bank Subsidiary that is a
Subsidiary of another Subsidiary of the Company, such other Subsidiary or a
Wholly Owned Subsidiary thereof, unless the Company receives consideration at
the time of the conveyance or transfer at least equal to the fair market value
of the properties and assets sold (as determined in good faith by the Company
Board) in the form of cash or readily marketable cash equivalents and the Net
Available Proceeds from such sale within 90 days either are reinvested as an
Investment in a Wholly Owned Bank Subsidiary or are applied to make an Offer to
Purchase the Senior Notes at a purchase price in cash equal to 100% of their
principal amount plus accrued interest to the date of purchase, (iv) permit any
Bank Subsidiary to issue shares of its Common Stock or Voting Stock (other than
directors' qualifying shares), or securities convertible into, or warrants,
rights or options to subscribe for or purchase shares of, its Common Stock or
Voting Stock, to any Person other than the Company or a Wholly Owned Subsidiary
of the Company or, in the case of a Bank Subsidiary that is a Subsidiary of
another Subsidiary of the Company, such other Subsidiary or a Wholly Owned

128

Subsidiary thereof, and (v) Incur or suffer to exist a Lien upon the Voting
Stock or Common Stock of any Subsidiary that is an Insured Depository
Institution as security for indebtedness for money borrowed or for bonds,
debentures, notes or similar instruments; PROVIDED, HOWEVER, that this covenant
will not be deemed to be violated by, or to prohibit, (i) the existence of the
FSLIC Warrent or the exercise thereof or (ii) the FSLIC Pledge. (^ 1015)

LIMITATION ON LIENS

The Company may not Incur any Debt that is secured, directly or indirectly,
by any Lien upon any property or assets of the Company now owned or hereafter
acquired without making effective provision for securing the Notes (and, if the
Company shall so determine, any other Debt of the Company which is not
subordinate to the Notes) equally and ratably with such Debt or, in the event
such Debt is Subordinated Debt, prior to such Debt, in either case as to such
property or assets for so long as such Debt shall be so secured. The foregoing
restrictions shall not apply to (i) the FSLIC Pledge, (ii) Liens securing only
the Senior Notes, or (iii) Liens upon property or assets of Subsidiaries of the
Company securing Debt of Subsidiaries of the Company. (^ 1013)

LIMITATION ON TRANSACTIONS WITH AFFILIATES AND RELATED PERSONS

The Company may not, and may not permit any Subsidiary of the Company to,
enter into any transaction or series of related transactions with an Affiliate
or Related Person of the Company (other than between the Company and Wholly
Owned Subsidiaries of the Company) unless (i) such transaction is on terms no
less favorable to the Company or such Subsidiary than those that could be
obtained in a comparable arm's length transaction with an entity that is not an
Affiliate or a Related Person, (ii) with respect to a transaction or series of
transactions involving aggregate value in excess of $1,000,000, the transaction
or series of transactions is approved by a majority of the Company Board, and
(iii) with respect to a transaction or series of transactions involving
aggregate value in excess of $5,000,000, the Company delivers to the Trustee an
opinion of a nationally recognized investment banking firm stating that the
transaction or series of transactions is fair (from a financial point of view)
to the Company. A capital contribution to the Company or the issuance by the
Company of Debt otherwise permitted under the Indenture shall not be deemed to
be a transaction for purposes of the foregoing. (^ 1014)

CHANGE OF CONTROL; SALE OR OTHER DISPOSITION OF BANK'S ASSETS

Upon the occurrence of a Change of Control, the Company may at its option,
as evidenced by a resolution of the Company Board filed with the Trustee, redeem
the Senior Notes in whole but not in part at 101% of their principal amount plus
accrued interest to the date of redemption. If the Company or any Subsidiary,
directly or indirectly, in a transaction or series of transactions pursuant to a
plan evidenced by a resolution of the Company Board filed with the Trustee,
conveys or transfers properties or assets of the Bank representing in the
aggregate at least 80% of the value of all of the assets of the Bank (as
determined in good faith by a majority of the Company Board filed with the
Trustee) to any Person except the Company or a Wholly Owned Subsidiary of the
Company, then the Company may at its option, as evidenced by a resolution of the
Company Board filed with the Trustee, redeem the Senior Notes in whole but not
in part at 101% of their principal amount plus accrued interest to the date of
redemption.

In either case, such redemption shall be made upon not less than 30 nor
more than 60 days' notice mailed to each Holder of the Senior Notes at his last
address as it appears in the Security Register. If within 15 days of such Change
of Control or the consummation of such transaction or transactions, the Company
has not exercised its option to redeem the Senior Notes, the Company will
commence an Offer to Purchase all Outstanding Senior Notes at a purchase price
in cash equal to 101% of their principal amount plus accrued interest to the
date of purchase. The Company will give Holders notice of such Offer to Purchase
not more than 45 days following such Change of Control or the consummation of
such transaction or series of transactions mailed by first class mail to the
Holders' last addresses as they appear in the Security Register. In the event
that the Company is required to offer to repurchase the Notes, the Company
intends to comply with any applicable securities laws and regulations, including
any applicable requirements of Section 14(e) of, and Rule 14e-1 under, the 1934
Act.

A "Change of Control" will be deemed to have occurred in the event that
either (a) any Person or any Persons (other than one or more Permitted Holders)
acting together that would constitute a group (for purposes of

129

Section 13(d) of the Exchange Act, or any successor provision thereto) (a
"Group"), together with any Affiliates thereof, shall beneficially own (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, or any
successor provision thereto) at least 50% of the Voting Stock of the Company or
the Bank; or (b) any Person or Group (other than one or more Permitted Holders),
together with any Affiliates thereof, shall succeed in having sufficient of its
nominees elected to the Company Board or the Board of Directors of the Bank such
that such nominees, when added to any existing directors remaining on the Board
of Directors or the Board of Directors of the Bank after such election who were
nominated by or at the suggestion of, or who is an Affiliate of, such Person or
Group, will constitute a majority of the Company Board or the Board of Directors
of the Bank. "Permitted Holder" means Hyperion Partners or any Affiliate of
Hyperion Partners. (^1015(d); ^ 1016)

The Company does not have in place any commitment to fund any purchase or
redemption pursuant to the provisions described above, and would not anticipate
seeking any such alternative funding unless and until it is advised that any
such transaction is contemplated. No assurance can be given that, if it were
needed, any such alternative funding arrangement would be available.

PROVISION OF FINANCIAL INFORMATION

Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act or any successor provision thereto, the Company shall prepare the
annual reports, quarterly reports and other documents which the Company would
have been required to file with the Commission pursuant to such Section 13(a) or
15(d) or any successor provision thereto if the Company were so required, and,
unless such filing is not permitted under the Exchange Act, file such reports
and other documents with the Commission on or prior to the respective dates (the
"Required Filing Dates") by which the Company would have been required so to
file such documents if the Company were so required. The Company shall also in
any event (a) within 15 days of each Required Filing Date (i) transmit by mail
to all Holders, as their names and addresses appear in the Security Register,
without cost to such Holders, and (ii) file with the Trustee copies of such
annual reports, quarterly reports and other documents and (b) if filing such
documents by the Company with the Commission is not permitted under the Exchange
Act, promptly upon written request supply copies of such documents to any
prospective Holder or prospective purchaser of Book-Entry Notes. (^ 1017)

MERGERS, CONSOLIDATIONS AND CERTAIN SALES AND PURCHASES OF ASSETS

The Company (i) may not consolidate with or merge into any other Person or
permit any other Person to consolidate with or merge into the Company or any
Subsidiary of the Company (in a transaction in which such Subsidiary remains a
Subsidiary of the Company); (ii) may not, directly or indirectly, transfer,
convey, sell, lease or otherwise dispose of all or substantially all of its
consolidated properties and assets; (iii) may not, and may not permit any
Subsidiary of the Company to, directly or indirectly, acquire Capital Stock or
other ownership interests of any other Person such that such Person becomes a
Subsidiary of the Company; and (iv) may not, and may not permit any Subsidiary
of the Company to, directly or indirectly, purchase, lease or otherwise acquire
(x) all or substantially all of the assets or (y) any existing business (whether
existing as a separate entity, subsidiary, division, unit or otherwise) of any
Person unless: (1) in a transaction in which the Company does not survive or in
which the Company directly or indirectly transfers, conveys, sells, leases or
otherwise disposes of all or substantially all of its consolidated assets, the
Successor Company is organized under the laws of the United States of America,
any State thereof or the District of Columbia and shall expressly assume, by a
supplemental indenture executed and delivered to the Trustee in form
satisfactory to the Trustee, all of the Company's obligations under the
Indenture; (2) immediately before and after giving effect to such transaction
and treating any Debt which becomes an obligation of the Company or a Subsidiary
as a result of such transaction as having been incurred by the Company or such
Subsidiary at the time of the transaction, no Event of Default or event that
with the passing of time or the giving of notice, or both, would become an Event
of Default shall have happened and be continuing; (3) immediately after giving
effect to such transaction, the Consolidated Net Worth of the Company or the
Successor Company is equal to or greater than that of the Company immediately
prior to the transaction; (4) if, as a result of any such transaction, property
or assets of the Company would become subject to a Lien prohibited by the
provisions of the Indenture described under "-- Certain

130

Covenants -- Limitation on Liens", the Company or the Successor Company shall
have secured the Notes as required by said covenant; and (5) certain other
conditions are met. (^ 801)

CERTAIN DEFINITIONS

Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided. (^ 101)

"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person.

"Asset Disposition" by any Person means any transfer, conveyance, sale,
lease or other disposition by such Person or any of its Subsidiaries (including
a consolidation or merger or other sale of any such Subsidiary with, into or to
another Person in a transaction in which such Subsidiary ceases to be a
Subsidiary, but excluding a disposition by a Subsidiary of such Person to such
Person or to a Wholly Owned Subsidiary of such Person) of (i) shares of Capital
Stock (other than directors' qualifying shares) or other ownership interests of
a Subsidiary of such Person, (ii) substantially all of the assets of such Person
or any of its Subsidiaries representing a division or line of business or (iii)
other assets or rights of such Person or any of its Subsidiaries outside of the
ordinary course of business. Notwithstanding the foregoing, an Asset Disposition
shall not be deemed to include (i) any sale of a Covered Asset in the ordinary
course of business or (ii) the sale in the ordinary course of business of any
ownership interest in, or the assets of, any special purpose entity formed for
the purpose of acquiring mortgages, mortgage-backed securities and related
assets and issuing mortgage-backed securities.

"Capital Distribution Requirement" means that the Bank shall (a) be a "Tier
1 association" as defined in the OTS regulation regarding capital distributions
as in effect on the date of the Indenture (12 C.F.R. 563.134), (b) be treated as
a Tier 1 association for all purposes of such regulation, and (c) not be subject
to any written agreement, order, prohibition or directive with or by the OTS,
the FDIC or any other supervisory entity restricting capital distributions
(other than the Regulatory Capital Agreement; PROVIDED, that if an entity
meeting the definition of Tier 1 association as in effect on the date of the
Indenture under the OTS regulation regarding capital distributions would not, as
a result of a change or addition to applicable Regulatory Requirements, be
permitted, without prior approval by a supervisory entity, to make capital
distributions in at least the amount provided in such regulation as in effect at
the date of the Indenture, then "Capital Distribution Requirement" shall mean
(x) that the Bank shall be permitted, without prior approval by a supervisory
entity, to make capital distributions to the Company in an aggregate amount
equal to the aggregate interest payments scheduled to be made with respect to
the Senior Notes for the two next succeeding Interest Payment Dates or (y) until
such time, if any, as a supervisory entity shall have disapproved the making of
any such capital distribution, that the Company shall have delivered to the
Trustee an officers' certificate (and shall continue to deliver such certificate
thereafter on a quarterly basis for so long as it proposes to rely on this
clause (y)) of the CEO and the Chief Financial Officer of the Bank, in the form
set forth in the Indenture, to the effect that such officers, in their good
faith judgment, reasonably believe that the Bank would be granted all regulatory
approvals that may be necessary to permit the Bank to make in a timely fashion
capital distributions to the Company in amounts as are necessary in order for
the Company to make the next two scheduled interest payments with respect to the
Senior Notes, as such payments become due.

"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock of
such Person.

"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.

"Consolidated Net Income" of any Person means for any period the
consolidated net income (or loss) of such Person for such period determined on a
consolidated basis in accordance with generally accepted accounting principles;
PROVIDED that there shall be excluded therefrom (a) the net income (or loss) of
any Person acquired by such Person or a Subsidiary of such Person in a
pooling-of-interests transaction for any period prior to the date of such
transaction, (b) the net income (but not net loss) of any Subsidiary of such
Person which is subject to

131

restrictions which prevent the payment of dividends or the making of
distributions to such Person to the extent of such restrictions, (c) the net
income (or loss) of any Person that is not a Subsidiary of such Person except to
the extent of the amount of dividends or other distributions actually paid to
such Person by such other Person during such period, (d) gains or losses on
Asset Dispositions by such Person or its Subsidiaries and (e) all extraordinary
gains and extraordinary losses; PROVIDED, FURTHER that there shall be added
thereto the aggregate amount of dividends paid with respect to Preferred Stock
of Subsidiaries of the Company to the extent such amount was otherwise deducted
in the foregoing calculation of Consolidated Net Income.

"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
generally accepted accounting principles, less amounts attributable to
Redeemable Stock of such Person; PROVIDED that, with respect to the Company,
adjustments following the date of the Indenture to the accounting books and
records of the Company in accordance with Accounting Principles Board Opinions
Nos. 16 and 17 (or successor opinions thereto) or otherwise resulting from the
acquisition of control of the Company by another Person shall not be given
effect to.

"Debt" means, with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed, (ii) every obligation of such
person evidenced by bonds, debentures, notes or other similar instruments,
including obligations Incurred in connection with the acquisition of property,
assets or businesses, (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person, (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business), (v) the maximum fixed redemption or repurchase price of Redeemable
Stock of such Person at the time of determination and (vi) every obligation of
the type referred to in clauses (i) through (v) of another Person and all
dividends of another Person the payment of which, in either case, such Person
has Guaranteed or is responsible or liable for, directly or indirectly, as
obligor, Guarantor or otherwise.

"Disqualified Stock" of any Person means any Capital Stock of such Person
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the Company, any
Subsidiary of the Company or the holder thereof, in whole or in part, on or
prior to the final Stated Maturity of the Senior Notes.

"FSLIC Pledge" means the pledge of the Capital Stock of the Bank pursuant
to the Regulatory Capital Maintenance Agreement dated December 30, 1988, among
the Company, the Bank, Hyperion Holdings, Inc., Hyperion Partners, L.P. and the
FSLIC.

"FSLIC Warrant" means the warrant issued pursuant to the Warrant Agreement
dated December 30, 1988 between the Bank and the FSLIC as amended by the Amended
and Restated Warrant Agreement dated December 28, 1993, between the Bank and the
FDIC.

"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing any Debt of any other Person (the "primary obligor") in
any manner, whether directly or indirectly, and including, without limitation,
any obligation of such Person (i) to purchase or pay (or advance or supply funds
for the purchase of payment of) such Debt or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of such Debt,
(ii) to purchase property, securities or services for the purpose of assuring
the holder of such Debt of the payment of such Debt, or (iii) to maintain
working capital, equity capital or other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Debt (and "Guaranteed", "Guaranteeing" and "Guarantor" shall have meanings
correlative to the foregoing); PROVIDED, HOWEVER, that the term "Guarantee"
shall not include endorsements for collection or deposit, in either case, in the
ordinary course of business.

"Hyperion Partners" means Hyperion Partners L.P., a limited partnership
organized under the laws of the State of Delaware.

"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or

132

other obligation or the recording, as required pursuant to generally accepted
accounting principles or otherwise, of any such Debt or other obligation on the
balance sheet of such Person; PROVIDED, HOWEVER, that a change in generally
accepted accounting principles that results in an obligation of such Person that
exists at such time becoming Debt shall not be deemed an Incurrence of such
Debt.

"Investment" in any Person means the acquisition or ownership of Capital
Stock, bonds, notes, debentures or other securities or evidence of Debt of such
Person, any capital contribution to such Person, any deposit with, or advance,
loan or other extension of credit to, such Person, any Guarantee of, or other
contingent obligation with respect to, Debt or other liability of such action
Person or any amount committed to be advanced, lent or extended to such Person.

"Insured Depository Institution" means an insured depository institution
within the meaning of 12 U.S.C. ^ 1813(c)(2) or any successor law, rule or
regulation.

"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such property or assets (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).

"Net Available Proceeds" from any disposition by any Person means cash or
readily marketable cash equivalents received (including by way of sale or
discounting of a note, installment receivable or other receivable) therefrom by
such Person, net of (i) all legal, title and recording tax expenses, commissions
and other fees and expenses Incurred and all federal, state, provincial, foreign
and local taxes required to be accrued as a liability as a consequence of such
disposition, (ii) all payments made by such Person or its Subsidiaries on any
Debt which is secured by such assets in accordance with the terms of any Lien
upon or with respect to such assets or which must by the terms of such Lien, or
in order to obtain a necessary consent to such disposition or by applicable law,
be repaid out of the proceeds from such disposition and (iii) all distributions
and other payments made to minority interest holders in Subsidiaries of such
Person or joint ventures as a result of such disposition.

"Offer to Purchase" means a written offer (the "Offer") sent by the Company
by first class mail, postage prepaid, to each Holder at his address appearing in
the Security Registrar on the date of the Offer offering to purchase up to the
principal amount of Senior Notes specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to this Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration date
(the "Offer Expiration Date") of the Offer to Purchase which shall be, subject
to any contrary requirements of applicable law, not less than 30 days or more
than 60 days after the date of such Offer and a settlement date (the "Purchase
Date") for purchase of Securities within five Business Days after the Offer
Expiration Date. The Company shall notify the Trustee at least 15 Business Days
(or such shorter period as is acceptable to the Trustee) prior to the mailing of
the Offer of the Company's obligation to make an Offer to Purchase, and the
Offer shall be mailed by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company. The Offer shall contain
information concerning the business of the Company and its Subsidiaries which
the Company in good faith believes will enable such Holders to make an informed
decision with respect to the Offer to Purchase (which at a minimum will include
(i) the most recent annual and quarterly financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in the documents required to be filed with the Trustee (which
requirements may be satisfied by delivery of such documents together with the
Offer), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such financial statements referred to in
Clause (i) (including a description of the events requiring the Company to make
the Offer to Purchase), (iii) if applicable, appropriate pro forma financial
information concerning the Offer to Purchase and the events requiring the
Company to make the Offer to Purchase and (iv) any other information required by
applicable law to be

133

included therein. The Offer shall contain all instructions and materials
necessary to enable such Holders to tender Senior Notes pursuant to the Offer to
Purchase. The Offer shall also state:

(1) the Section of the Indenture pursuant to which the Offer to
Purchase is being made;

(2) the Offer Expiration Date and the Purchase Date;

(3) the aggregate principal amount of the Outstanding Senior Notes
offered to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such has been
determined) (the "Purchase Amount");

(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Senior Notes accepted for payment (as
specified pursuant to the Indenture) (the "Purchase Price");

(5) that the Holder may tender all or any portion of the Senior Notes
registered in the name of such Holder and that any portion of a Senior Note
tendered must be tendered in an integral multiple of $1,000 principal
amount, PROVIDED, that if such Holder does not tender all of such Holder's
Senior Notes and the Senior Notes are not Exchange Notes, the principal
amount of the remaining Senior Notes of such Holder shall be equal to at
least $250,000 plus integral multiples of $1,000 in excess thereof;

(6) the place or places where Senior Notes are to be surrendered for
tender pursuant to the Offer to Purchase;

(7) that interest on any Senior Note not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue to
accrue;

(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Senior Note accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue on and after the
Purchase Date;

(9) that each Holder electing to tender a Senior Note pursuant to the
Offer to Purchase will be required to surrender such Senior Note at the
place or places specified in the Offer prior to the close of business on
the Offer Expiration Date (such Senior Note being, if the Company or the
Trustee so requires, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Trustee
duly executed by, the Holder thereof or his attorney duly authorized in
writing);

(10) that Holders will be entitled to withdraw all or any portion of
Senior Notes tendered if the Company (or its Paying Agent) receives, not
later than the close of business on the Offer Expiration Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Senior Note the Holder tendered, the
certificate number of the Senior Note the Holder tendered and a statement
that such Holder is withdrawing all or a portion of his tender;

(11) that (a) if Senior Notes in an aggregate principal amount less
than or equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all such
Senior Notes and (b) if Senior Notes in an aggregate principal amount in
excess of the Purchase Amount are tendered and not withdrawn pursuant to
the Offer to Purchase, the Company shall purchase Senior Notes having an
aggregate principal amount equal to the Purchase Amount on a pro rata basis
(with such adjustments as may be deemed appropriate so that only Senior
Notes in denominations of $1,000 or integral multiples thereof shall be
purchased and, if the Senior Notes of a particular Holder are not Exchange
Senior Notes, so that the principal amount of the remaining Senior Notes of
such Holder shall be equal to at least $250,000); and

(12) that in case of any Holder whose Senior Note is purchased only in
part, the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Senior Note without service charge, a new
Senior Note or Notes, of any authorized denomination as requested by such
Holder, in an aggregate principal amount equal to and in exchange for the
unpurchased portion of the Senior Note so tendered.

Any Offer to Purchase shall be governed by and effected in accordance with the
Offer for such Offer to Purchase.

134

"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior to, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.

"Qualified Investments" means investments in the following types
instruments:

(a) direct obligations of the United States of America or any agency
or instrumentality thereof, or obligations guaranteed by the United States
of America or any agency or instrumentality thereof, provided that such
obligations mature within one year from the date of acquisition thereof;

(b) demand deposit accounts, or certificates of deposit or other
obligations, maturing within one year after acquisition thereof, either
fully insured by the FDIC (or any successor Federal agency) or issued by a
national or state bank, trust or thrift institution having capital, surplus
and undivided profits of at least $250,000,000, and having (or being the
Wholly Owned Subsidiary of a holding company having) a short-term credit
rating, at the time of purchase, within one of the two then-highest rating
categories of Moody's Investors Service or Standard & Poor's Corporation;
or

(c) commercial paper rated at the time of purchase in one of the two
then-highest rating categories by Moody's Investors Service or by Standard
& Poor's Corporation and maturing not more than 270 days from the date of
creation thereof; or

(d) guaranteed invesment contracts of insurance companies whose
claims-paying ability at the time of purchase is rated AA/Aa or higher by
Moody's Investors Service or by Standard & Poor's Corporation, PROVIDED
that the total amount of investments in such contracts which may constitute
Qualified Investments at any one time pursuant to this section (d) shall
not at any time exceed 20% of the Company's total Qualified Investments; or

(e) repurchase agreements with respect to direct obligations of the
United States of America or any agency or instrumentality thereof, or
obligations guaranteed by the United States of America or any agency or
instrumentality thereof, provided that such repurchase agreements mature
within one year from the date of creation thereof; or

(f) cash.

"Redeemable Stock" of any Person means any equity security of such Person
that by its terms or otherwise is required to be redeemed prior to the final
Stated Maturity of the Senior Notes or is redeemable at the option of the holder
thereof at any time prior to the final Stated Maturity of the Senior Notes.

"Regulatory Capital Agreement" means the Regulatory Capital Maintenance
Agreement, dated December 30, 1988, by and among the Bank, the Company, certain
of its direct and indirect parents and FSLIC, as in effect at the date of the
Indenture.

"Regulatory Requirement", as to any Person, means any law, ordinance,
administrative or governmental rule, regulation or official interpretation
applicable to it or any of its properties or any order, directive or decree of
any court or governmental agency or body having jurisdiction over such Person or
any of its properties, including any such order or directive by the OTS
applicable to OTS regulated institutions generally, including such Person.

"Related Person" of any Person means any other Person directly or
indirectly owning (a) 5% or more of the outstanding Common Stock of such Person
(or, in the case of a Person that is not a corporation, 5% or more of the equity
interest in such Person) or (b) 5% or more of combined voting power of the
Voting Stock of such Person.

"Subordinated Debt" means Debt of the Company as to which the payment of
principal of (and premium, if any) and interest and other payment obligations in
respect of such Debt shall be subordinate to the prior payment in full of the
Senior Notes to at least the following extent: (i) no payments of principal of
(or premium, if any) or interest on or otherwise due in respect of such Debt may
be permitted for so long as any default in the payment of principal (or premium,
if any) or interest on the Senior Notes exists; (ii) in the event that any other
default that with the passing of time or the giving of notice, or both, would
constitute an event of default exists with respect

135

to the Senior Notes, upon notice by 25% or more in principal amount of the Notes
to the Trustee, the Trustee shall have the right to give notice to the Company
and the holders of such Debt (or trustees or agents therefor) of a payment
blockage, and thereafter no payments of principal of (or premium, if any) or
interest on or otherwise due in respect of such Debt may be made for a period of
179 days from the date of such notice; and (iii) such Debt may not (x) provide
for payments of principal of such Debt at the stated maturity thereof or by way
of a sinking fund applicable thereto or by way of any mandatory redemption,
defeasance, retirement or repurchase thereof by the Company (including any
redemption, retirement or repurchase which is contingent upon events or
circumstances, but excluding any retirement required by virtue of acceleration
of such Debt upon an event of default thereunder), in each case prior to the
final Stated Maturity of the Senior Notes or (y) permit redemption or other
retirement (including pursuant to an offer to purchase made by the Company) of
such other Debt at the option of the holder thereof prior to the final Stated
Maturity of the Senior Notes (unless the Senior Notes shall no longer then be
Outstanding), other than a redemption or other retirement at the option of the
holder of such Debt (including pursuant to an offer to purchase made by the
Company) which is conditioned upon the change of control of the Company pursuant
to provisions substantially similar to those contained in the Indenture.

"Subsidiary" of any Person means (i) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority of ownership and power to direct the
policies, management and affairs thereof. For purposes of the Indenture, no
Unrestricted Subsidiary created in accordance with the definition of
Unrestricted Subsidiary shall be deemed to be a Subsidiary of the Company.

"Unrestricted Subsidiary" means (1) any entity which, but for its
designation as an Unrestricted Subsidiary by the Company Board would be a
Subsidiary of the Company, but only if (a) neither the Company nor any of its
other Subsidiaries (i) provides credit support for, or a Guarantee of, any Debt
of such entity or any Subsidiary of such entity (including any undertaking,
agreement or instrument evidencing such Debt) or (ii) is directly or indirectly
liable for any Debt of such entity or any Subsidiary of such entity, and (b) no
default with respect to any Debt of such entity or any Subsidiary of such entity
(including any right which the holders thereof may have to take enforcement
action against such entity or Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Debt of the Company and its Subsidiaries
to declare a default on such other Debt or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity and (2) any
Subsidiary of an Unrestricted Subsidiary. The Company Board may designate any
Subsidiary (other than the Bank or its successor) to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, any other Subsidiary of the Company which is not a
Subsidiary of the Subsidiary to be so designated, PROVIDED that either (x) the
Subsidiary to be so designated has total assets of $1,000 or less or (y)
immediately after giving pro forma effect to such designation, the Company would
then be permitted to make a Restricted Payment pursuant to the "Limitation on
Restricted Payments" covenant in an amount equal to the greater of (A) the
aggregate amount of all Investments made by the Company and all Subsidiaries of
the Company in such Subsidiary and its Subsidiaries prior to such designation
and (B) the Consolidated Net Worth of such Subsidiary, and upon such designation
such amount shall be deemed to be a Restricted Payment. The Company Board may
designate any Unrestricted Subsidiary to be a Subsidiary, provided that (i) had
such Unrestricted Subsidiary been a Subsidiary of the Company immediately prior
thereto there would not have occurred and be continuing any Event of Default or
event that with the lapse of time or the giving of notice, or both, would
constitute an Event of Default, and (ii) for purposes of the definition of
"Consolidated Net Income," only the net income of such entity for the period
beginning on the date of such designation shall be included therein. Any such
designation by the Company Board shall be evidenced by filing a resolution with
the Trustee and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.

"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.

"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person. For purposes of
the covenants described under "Limitation

136

on Company Debt", "Limitation on Dispositions of, and Liens upon Certain Capital
Stock of Subsidiaries that are Insured Depository Institutions", "Limitation on
Transactions with Affiliates and Related Persons" and "Limitation on Restricted
Payments", and for the purpose of the definition of "Asset Dispositions", the
Bank shall be deemed to be a Wholly Owned Subsidiary of the Company provided
that it is wholly owned by the Company except to the extent of (i) common stock
issued pursuant to the FSLIC Warrant and not then held by an Affiliate of the
Company and (ii) any Preferred Stock that is not Voting Stock and is not issued
in contravention of the terms of the Indenture.

EVENTS OF DEFAULT

The following are Events of Default under the Indenture: (a) failure to pay
principal of (or premium, if any, on) any Senior Note when due; (b) failure to
pay any interest on any Senior Note when due, continued for 30 days; (c) default
in the payment of principal and interest on Senior Notes required to be
repurchased pursuant to an Offer to Purchase as described under "Limitation on
Dispositions of, and Liens upon, Certain Capital Stock of Subsidiaries that are
Insured Depository Institutions" and "Change of Control; Sale or Other
Disposition of Bank's Assets" when due and payable; (d) failure to perform or
comply with the provisions described under "Mergers, Consolidations and Certain
Sales and Purchases of Assets"; (e) failure to perform any other covenant or
agreement of the Company under the Indenture or the Senior Notes continued for
30 days after written notice to the Company by the Trustee or Holders of at
least 25% in aggregate principal amount of Outstanding Senior Notes; (f) the
occurrence of any event under the terms of any instrument evidencing or securing
Debt for money borrowed by the Company or any Subsidiary in an aggregate
principal amount in excess of $10 million, individually or in the aggregate, (i)
which shall consist of the failure to pay any portion of principal of such Debt
when due or the failure to pay any portion of interest on such Debt when due and
beyond any applicable grace period therefor or (ii) which results in, or (with
the giving of any notice of the lapse of time or both) would permit the holder
or holders of such Debt (or a trustee or agent on behalf of such holder or
holders) to cause, such Debt becoming or being declared due and payable prior to
the date on which it would otherwise have become due and payable; (g) the
failure to declare or pay in full any quarterly dividend with respect to the
Preferred Stock, Series A or Series B, or any preferred stock issued by any
Subsidiary of the Company; (h) the failure of the Bank at any time to meet the
Capital Distribution Requirement; (i) the rendering of a final judgment or
judgments (not subject to appeal) against the Company or any Subsidiary in an
amount in excess of $10 million which remains undischarged or unstayed for a
period of 60 days after the date on which the right to appeal has expired; and
(j) certain events of bankruptcy, insolvency or reorganization affecting the
Company or any Subsidiary. (^ 501) Subject to the provisions of the Indenture
relating to the duties of the Trustee in case an Event of Default shall occur
and be continuing, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request or direction of any of
the Holders, unless such Holders shall have offered to the Trustee reasonable
security or indemnity. (^ 603) Subject to such provisions for the
indemnification of the Trustee, the Holders of a majority in aggregate principal
amount of the Outstanding Senior Notes will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee. (^ 512)

If an Event of Default (other than an Event of Default described in clause
(j) above) shall occur and be continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the Outstanding Notes may
accelerate the maturity of all Senior Notes; PROVIDED HOWEVER, that after such
acceleration, but before a judgment or decree based on acceleration, the Holders
of a majority in aggregate principal amount of Outstanding Senior Notes may,
under certain circumstances, rescind and annul such acceleration if all Events
of Default, other than the non-payment of accelerated principal, have been cured
or waived as provided in the Indenture. If an Event of Default specified in
clause (j) above occurs, the Outstanding Senior Notes will IPSO FACTO become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. (^ 502) For information as to waiver of defaults, see
"-- Modification and Waiver".

No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless also (i) the Holders of at least 25% in aggregate principal
amount of the Outstanding Senior Notes shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, (ii) the Trustee shall not have received from the Holders of a majority
in aggregate principal amount of the Outstanding Senior Notes a direction
inconsistent with such request and (iii) the Trustee shall have failed to
institute such proceeding within 60 days. (^ 507) However, such limitations

137

do not apply to a suit instituted by a Holder of a Senior Note for enforcement
of payment of the principal of and premium, if any, or interest on such Senior
Note on or after the respective due dates expressed in such Senior Note. (^ 508)

The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (^ 1019)

GOVERNING LAW

The Indenture and the Senior Notes will be governed by the laws of the
State of New York.

MODIFICATION AND WAIVER

Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Senior Notes; PROVIDED, HOWEVER, that no
such modification or amendment may, without the consent of the Holder of each
Outstanding Senior Note affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of interest on, any Senior Note, (b) reduce the
principal amount of, or the premium or interest on, any Senior Note, (c) change
the place or currency of payment of principal of, or premium or interest on, any
Senior Note, (d) impair the right to institute suit for the enforcement of any
payment on or with respect to any Senior Note, (e) reduce the above-stated
percentage of Outstanding Senior Notes necessary to modify or amend the
Indenture, (f) reduce the percentage of aggregate principal amount of
Outstanding Senior Notes necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults, (g) modify any
provisions of the Indenture relating to the modification and amendment of the
Indenture or the waiver of past defaults or covenants, except as otherwise
specified, or (h) following the mailing of any Offer to Purchase, modify any
Offer to Purchase for the Senior Notes required under the "Limitation on
Dispositions of, and Liens upon, Certain Capital Stock of Subsidiaries that are
Insured Depository Institutions" and "Change of Control" covenants contained in
the Indenture in a manner materially adverse to the Holders thereof. (^ 902)

The Holders of a majority in aggregate principal amount of the Outstanding
Notes, on behalf of all Holders of Notes, may waive compliance by the Company
with certain restrictive provisions of the Indenture. (^ 1020) Subject to
certain rights of the Trustee, as provided in the Indenture, the Holders of a
majority in aggregate principal amount of the Outstanding Notes, on behalf of
all Holders of Notes, may waive any past default under the Indenture, except a
default in the payment of principal, premium or interest or a default arising
from a Change of Control. (^ 513)

DEFEASANCE

The Indenture provides that (A) if applicable, the Company will be
discharged from any and all obligations in respect of then Outstanding Senior
Notes, other than the obligation to duly and punctually pay the principal of,
and premium and interest on, the Senior Notes in accordance with the terms of
the Senior Notes and the Indenture, or (B) if applicable, the Company may omit
to comply with certain restrictive covenants, and that such omission shall not
be deemed to be an Event of Default under the Indenture or the Senior Notes, in
either case (A) or (B) upon irrevocable deposit with the Trustee, in trust, of
money and/or U.S. government obligations which will provide money in an amount
sufficient in the opinion of a nationally recognized accounting firm to pay the
principal of and premium, if any, and each instalment of interest, if any, on
the Outstanding Senior Notes. With respect to clause (B), the obligations under
the Indenture other than with respect to such covenants shall remain in full
force and effect. Such trust may only be established if, among other things, (i)
with respect to clause (A), the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or there has been a change
in law, which in the opinion of counsel provides that Holders of the Senior
Notes will not recognize gain or loss for Federal income tax purposes as a
result of such deposit, defeasance and discharge and will be subject to Federal
income tax on the same amount, in the same manner and at the same times as would
have been the case if such deposit, defeasance and discharge had not occurred;
or with respect to clause (B), the Company has delivered to the Trustee an
opinion of counsel to the effect that the Holders of the Senior Notes will not
recognize gain or loss for Federal income tax purposes as a result of such
deposit and defeasance and will be subject to Federal income tax on the same
amount, in the same manner and at the same times as would have been the case if
such deposit and defeasance had not occurred; (ii) no Event of Default or event
that with the passing of time or the giving of notice, or both, shall constitute
an Event of Default shall have occurred or be continuing; and (iii) certain
other customary conditions precedent are satisfied. (Article Twelve)

138

THE TRUSTEE

The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise as a prudent person would exercise
under the circumstances in the conduct of such person's own affairs. (^^ 601 and
605)

The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company, to obtain payment of claims in certain cases
or to realize on certain property received by it in respect of any such claim as
security or otherwise. The Trustee is permitted to engage in other transactions
with the Company or any Affiliate; PROVIDED, HOWEVER, that if it acquires any
conflicting interest (as defined in the Indenture or in the Trust Indenture
Act), it must eliminate such conflict or resign. (^608)

PLAN OF DISTRIBUTION

Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Rule 144A Notes where such Rule 144A Notes were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that for a period of 90 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until ......, 199.., all
dealers effecting transactions in the Exchange Notes may be required to deliver
a prospectus.

The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.

For a period of 90 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal.

LEGAL MATTERS

Certain legal matters in connection with the issuance of the Exchange Notes
will be passed upon for the Company by Bryan Cave LLP, Washington, D.C.

EXPERTS

The consolidated financial statements of the Company as of September 30,
1995 and 1994 and for each of the three years in the period ended September 30,
1995 included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and have been
so included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.

139

INDEX OF CERTAIN DEFINED TERMS

TERM PAGE

15.75% Notes................................... 56
1988 Act....................................... 92
1995 Amendments................................ 89
1996 Incentive Compensation Plan............... 108
5% Stockholder................................. 15
ACE............................................ 96
Acquisition.................................... 10
ADA............................................ 94
adequately capitalized......................... 80
affiliate...................................... 87
ALCO........................................... 9
American Marine................................ 102
AMT............................................ 96
AMTI........................................... 96
Annual Retainer................................ 112
APY............................................ 93
Assistance Agreement........................... 20
Awards......................................... 108
Bank........................................... 4
Bank Common Stock.............................. 12
Bank Preferred Stock........................... 12
Bank Subsidiary................................ 127
Barnett........................................ 104
BIF............................................ 16
Book-Entry Note................................ 125
BSA............................................ 92
capital distributions.......................... 83
CDs............................................ 48
CEO............................................ 9
CGSA........................................... 76
Change of Control.............................. 129
Change of Control Price........................ 110
Class A Common Stock........................... 7
CMOs........................................... 70
Code........................................... 15
Commission..................................... 1
Committee...................................... 108
Common Stock Offering.......................... 7
Company........................................ 1
Company Board.................................. 10
Compensation Plan.............................. 108
core capital................................... 82
Covered Assets................................. 77
Covered Transactions........................... 87
CRA............................................ 86
DBL............................................ 95
DGCL........................................... 17
Direct Bank Subsidiary......................... 127
Director Stock Plan............................ 111
Distribution................................... 9
DSSP........................................... 114
DTC............................................ 5
ECOA........................................... 19
EFTA........................................... 93
Eligible Director.............................. 111
Eligible Institution........................... 24
employment taxes............................... 111
ERISA.......................................... 108
Exchange Act................................... 23
Exchange Notes................................. 1
Exchange Offer................................. 1
Expedited Funds Act............................ 93
Expiration Date................................ 1
FASB........................................... 45
FDIA........................................... 86
FDIC........................................... 1
Federal Reserve Board.......................... 14
FH Act......................................... 19
FHA............................................ 17
FHLB........................................... 10
FHLB Dallas.................................... 15
FHLBB.......................................... 101
FHLMC.......................................... 17
FIRREA......................................... 10
First Amendment to Warrant Agreement........... 78
FNMA........................................... 17
Forbearance Agreement.......................... 10
FRA............................................ 86
Freestanding SARs.............................. 109
FRF............................................ 10
FSLIC.......................................... 10
GAAP........................................... 82
gap............................................ 36
GNMA........................................... 17
Goldman Sachs.................................. 4
Group.......................................... 130
HELOC.......................................... 61
HMDA........................................... 91
HOLA........................................... 79
Holder......................................... 26
interest rate sensitivity gap.................. 74
HUD............................................ 90
Hyperion Capital............................... 102
Hyperion Holdings.............................. 9
Hyperion Partners.............................. 9
Hyperion Partners II........................... 18
Hyperion Ventures.............................. 122
Indenture...................................... 2

140

TERM PAGE

IRR............................................ 83
ISOs........................................... 111
Letter Agreement............................... 122
Maxxam......................................... 19
MBF............................................ 8
MBS............................................ 7
Merger......................................... 9
Merger Agreement............................... 122
Meritor........................................ 104
MSRs........................................... 7
NASD........................................... 4
Net Tax Benefits............................... 96
NOLs........................................... 10
non-agency securities.......................... 70
nonconforming subsidiaries..................... 82
non-qualifying loans........................... 95
NQOs........................................... 111
Offer.......................................... 133
Offer Expiration Date.......................... 133
Old USAT....................................... 10
operating subsidiary........................... 85
Options........................................ 108
Order.......................................... 100
Original Indenture............................. 2
OTS............................................ 1
Ownership Change............................... 15
Participants................................... 108
participants................................... 125
Performance Awards............................. 108
Permitted Holder............................... 130
portfolio Assets............................... 85
Purchase Amount................................ 134
Purchase Date.................................. 133
Purchase Price................................. 134
Principal Shareholder.......................... 86
qualified investments.......................... 92
qualifying real property loans................. 95
QTL............................................ 79
REMICs......................................... 95
REO............................................ 43
Registration Statement......................... 3
repurchase agreements.......................... 45
Required Filing Dates.......................... 130
Resale Registration............................ 125
RESPA.......................................... 19
Restricted Payment............................. 127
Restricted Period.............................. 109
Restricted Stock............................... 108
Restructuring.................................. 9
reverse repurchase agreement................... 15
RTC............................................ 12
Rule 144A...................................... 1
Rule 144A Notes................................ 1
SAIF........................................... 7
Salomon........................................ 102
SARs........................................... 108
Section 203.................................... 18
Securities Act................................. 1
Selling Stockholders........................... 7
Senior Notes................................... 2
SESP........................................... 114
Settlement Agreement........................... 77
SFAS........................................... 34
Spread......................................... 110
Supplemental Indenture......................... 2
Tandem SARs.................................... 109
Tangible capital............................... 82
Tier 1 association............................. 83
Tier 2 association............................. 83
Tier 3 association............................. 83
Tier 1 risk-based capital...................... 80
TILA........................................... 19
TISA........................................... 93
total capital.................................. 82
total risk-based capital....................... 80
Transfers...................................... 16
Trustee........................................ 124
UFM............................................ 76
undercapitalized............................... 80
VA............................................. 17
Voting Stock................................... 18
Warrant Agreement.............................. 78
Warrants....................................... 12
well capitalized............................... 80
Winstar cases.................................. 101

141

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----

Independent Auditors' Report......... F-2

Consolidated Statements of Financial
Condition as of March 31, 1996
(unaudited) and September 30, 1995
and 1994........................... F-3

Consolidated Statements of Operations
for the Six Months Ended March 31,
1996 (unaudited) and March 31, 1995
(unaudited) and for the Years Ended
September 30, 1995, 1994, and
1993............................... F-4

Consolidated Statements of
Stockholders' Equity for the Six
Months Ended March 31, 1996
(unaudited) and March 31, 1995
(unaudited) and for the Years Ended
September 30, 1995, 1994, and
1993............................... F-5

Consolidated Statements of Cash Flows
for the Years Ended September 30,
1995, 1994, and 1993............... F-6

Consolidated Statements of Cash Flows
for the Six Months Ended March 31,
1996 (unaudited) and March 31, 1995
(unaudited)........................ F-8

Notes to Consolidated Financial
Statements......................... F-10

All supplemental schedules are omitted as inapplicable or because the
required information is included in the Consolidated Financial Statements or
Notes thereto.

F-1

INDEPENDENT AUDITORS' REPORT

Board of Directors of Bank United Corp. (formerly USAT Holdings Inc.):

We have audited the accompanying consolidated statements of financial
condition of Bank United Corp. (formerly USAT Holdings Inc.) and its subsidiary
(collectively known as the "Company") as of September 30, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended September 30, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of the Company at
September 30, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1995 in
conformity with generally accepted accounting principles.

Our audits were conducted for the purpose of forming an opinion on the
basic consolidated financial statements taken as a whole. The information as of
September 30, 1993, 1992, and 1991 and for the years ended September 30, 1992
and 1991 included in notes 3, 4, 5, and 8 are presented for the purpose of
additional analysis, and are not a required part of the basic consolidated
financial statements. This information is the responsibility of the Company's
management. Such information has been subjected to the auditing procedures
applied in our audits of the basic consolidated financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
consolidated financial statements from which such information has been derived.

As discussed in notes 1 and 6 to the consolidated financial statements,
effective October 1, 1994, the Company changed its method of accounting for
mortgage servicing rights to conform with Statement of Financial Accounting
Standards No. 122.

DELOITTE & TOUCHE LLP
New York, New York
October 31, 1995, except for Note 21, as to
which the date is June , 1996

F-2

BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
SEPTEMBER 30,
MARCH 31, ---------------------------
NOTES 1996 1995 1994
--------- ------------- ------------- ------------

(UNAUDITED)
ASSETS
<S> <C> <C> <C> <C>
Cash and cash equivalents............ 21 $ 135,691 $ 112,931 $ 76,938
Securities purchased under agreements
to resell and federal funds sold... 2 659,279 471,052 358,710
Trading account assets, at fair
value.............................. 1,267 1,081 1,011
Securities 3, 12
Held to maturity, at amortized cost
(fair value of $3.0 million in 1996,
$2.7 million in 1995, and $2.8 million in
1994)......................... 1,903 1,902 2,358
Available for sale, at fair
value......................... 56,448 114,111 111,757
Mortgage-backed securities 4, 9, 10
Held to maturity, at amortized cost (fair value of $657.6 million in 1996,
$2,031 million in 1995, and $2,341
million in 1994).............. 674,488 2,051,304 2,394,978
Available for sale, at fair
value......................... 1,279,582 346,959 433,925
Loans 5, 9
Held to maturity (net of the allowance for credit losses of $36.4 million
in 1996, $36.8 million in 1995, and $23.4
million in 1994).............. 7,447,500 7,763,676 4,780,328
Held for sale (net of the
allowance for credit losses of
$44 thousand in 1996, $38
thousand in 1995, and $76
thousand in 1994)............. 430,580 496,564 265,846
FHLB stock........................... 233,038 225,952 132,816
Premises and equipment............... 36,157 37,687 40,537
Mortgage servicing rights............ 6 83,383 75,097 56,677
Intangible assets.................... 23,105 26,519 36,446
Real estate owned (net of allowance
for losses of $727 thousand in
1996, $1.1 million in 1995, and
$373 thousand in 1994)............. 27,539 23,764 20,311
Other assets......................... 4, 13, 21 176,676 234,935 197,523
------------- ------------- ------------
TOTAL ASSETS......................... $ 11,266,636 $ 11,983,534 $ 8,910,161
============= ============= ============
LIABILITIES, MINORITY INTEREST, AND
STOCKHOLDERS' EQUITY
LIABILITIES
Deposits............................. 8 $ 4,963,321 $ 5,182,220 $ 4,764,204
FHLB advances........................ 4, 5, 9 4,139,023 4,383,895 2,620,329
Securities sold under agreements to
repurchase and federal funds
purchased.......................... 4, 10 949,936 1,172,533 553,000
Senior Notes......................... 11 115,000 115,000 115,000
Advances from borrowers for taxes and
insurance.......................... 104,749 183,968 145,383
Other liabilities.................... 282,666 264,315 175,383
------------- ------------- ------------
Total liabilities.......... 10,554,695 11,301,931 8,373,299
------------- ------------- ------------
COMMITMENTS AND CONTINGENCIES........ 12, 17
MINORITY INTEREST
Preferred stock issued by
consolidated subsidiary............ 16 185,500 185,500 85,500
------------- ------------- ------------
STOCKHOLDERS' EQUITY................. 15, 16
Common stock
Class A: 13,238 shares
outstanding................... 21 1 1 1
Class C: 2,797 shares
outstanding................... 21 1 1 1
Paid-in capital...................... 118,009 118,009 121,767
Retained earnings.................... 21 411,498 384,739 343,020
Unrealized gains (losses) on
securities and mortgage-backed
securities available for sale, net
of tax............................. 4 (3,068) (6,647) (13,427)
------------- ------------- ------------
Total stockholders'
equity................... 526,441 496,103 451,362
------------- ------------- ------------
TOTAL LIABILITIES, MINORITY INTEREST,
AND STOCKHOLDERS' EQUITY........... $ 11,266,636 $ 11,983,534 $ 8,910,161
============= ============= ============
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-3

BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED SEPTEMBER
MARCH 31, 30,
-------------------- -------------------------------
NOTES 1996 1995 1995 1994 1993
------ --------- --------- --------- --------- ---------

(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Short-term interest-earning assets... $ 17,360 $ 14,415 $ 29,675 $ 19,019 $ 14,301
Trading account assets............... 35 29 62 (144) 6,224
Securities........................... 3 2,112 2,950 5,893 5,007 63
Mortgage-backed securities........... 4 70,699 87,134 173,155 151,972 83,525
Loans................................ 5 323,930 218,370 526,528 308,804 344,515
FHLB stock........................... 7,085 4,688 11,446 5,558 3,095
Covered Assets and related assets.... 7 -- -- -- 4,490 30,767
--------- --------- --------- --------- ---------
Total interest income........ 421,221 327,586 746,759 494,706 482,490
--------- --------- --------- --------- ---------
INTEREST EXPENSE
Deposits............................. 8 138,510 122,504 264,366 209,034 225,983
FHLB advances........................ 9 136,501 92,281 224,767 91,060 48,594
Securities sold under agreements to
repurchase and federal funds
purchased.......................... 10 29,073 19,973 53,220 10,574 11,180
Long-term debt....................... 11 -- -- -- -- 10,214
Senior Notes......................... 11 5,205 5,202 10,407 10,177 3,446
Other................................ -- -- -- 79 1,414
--------- --------- --------- --------- ---------
Total interest expense....... 309,289 239,960 552,760 320,924 300,831
--------- --------- --------- --------- ---------
Net interest income.......... 111,932 87,626 193,999 173,782 181,659
PROVISION FOR CREDIT LOSSES.......... 5 5,850 4,157 24,293 6,997 4,083
--------- --------- --------- --------- ---------
Net interest income after
provision for credit
losses..................... 106,082 83,469 169,706 166,785 177,576
--------- --------- --------- --------- ---------
NON-INTEREST INCOME
Net gains (losses)
Sales of single family servicing
rights and single family
warehouse loans................ 19,157 38,464 60,495 63,286 67,403
Securities and mortgage-backed
securities..................... 3,4 2,863 8 26 10,404 43,702
Other loans...................... 3,485 (380) (1,210) 163 1,496
Loan servicing fees and charges...... 22,107 22,813 43,508 31,741 21,780
Other fees and charges............... 6,997 5,748 12,162 13,295 12,310
--------- --------- --------- --------- ---------
Total non-interest income.... 54,609 66,653 114,981 118,889 146,691
--------- --------- --------- --------- ---------
NON-INTEREST EXPENSE
Compensation and benefits............ 14 39,898 43,192 83,520 86,504 81,472
Occupancy............................ 17 9,439 9,072 18,713 17,196 15,971
Data processing...................... 17 8,120 8,116 16,360 15,821 15,072
Advertising and marketing............ 4,053 4,782 9,262 10,796 8,772
Amortization of intangibles.......... 9,801 10,718 21,856 18,247 24,469
SAIF deposit insurance premiums...... 6,129 5,630 11,428 11,329 10,162
Furniture and equipment.............. 3,128 3,219 6,428 6,810 5,535
Other................................ 18,736 16,916 27,009 32,890 40,511
--------- --------- --------- --------- ---------
Total non-interest expense... 99,304 101,645 194,576 199,593 201,964
--------- --------- --------- --------- ---------
Income before income taxes,
minority interest, and
extraordinary loss......... 61,387 48,477 90,111 86,081 122,303
INCOME TAX EXPENSE (BENEFIT)......... 13, 21 25,278 20,186 37,415 (31,899) (26,153)
--------- --------- --------- --------- ---------
INCOME BEFORE MINORITY INTEREST AND
EXTRAORDINARY LOSS................. 36,109 28,291 52,696 117,980 148,456
Less minority interest:
Subsidiary preferred stock
dividends...................... 9,126 4,326 10,600 8,653 6,537
Payments in lieu of dividends.... 16, 21 224 306 377 357 --
--------- --------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY LOSS..... 26,759 23,659 41,719 108,970 141,919
Extraordinary loss -- early
extinguishment of debt............. 11 -- -- -- -- 14,549
--------- --------- --------- --------- ---------
NET INCOME........................... $ 26,759 $ 23,659 $ 41,719 $ 108,970 $ 127,370
========= ========= ========= ========= =========
EARNINGS PER COMMON SHARE:
Income before extraordinary loss..... 16, 21 $ 0.87 $ 0.76 $ 1.35 $ 3.55 $ 4.61
Extraordinary loss................... -- -- -- -- 0.50
--------- --------- --------- --------- ---------
Net income........................... $ 0.87 $ 0.76 $ 1.35 $ 3.55 $ 4.11
========= ========= ========= ========= =========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-4

BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------
CLASS A CLASS C UNREALIZED
--------------- --------------- PAID-IN RETAINED GAINS
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS (LOSSES)
------ ------ ------ ------ -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1992..................... 13,238 $1 2,797 $1 $125,691 $106,680 $ --
Net income.................................... -- -- -- -- -- 127,370 --
Cost of subsidiary's preferred stock
issuance.................................... -- -- -- -- (3,924) -- --
Change in unrealized gains (losses)........... -- -- -- -- -- -- 33,384
------ ------ ------ ------ -------- -------- -----------
BALANCE AT SEPTEMBER 30, 1993..................... 13,238 1 2,797 1 121,767 234,050 33,384
Net income.................................... -- -- -- -- -- 108,970 --
Change in unrealized gains (losses)........... -- -- -- -- -- -- (46,811)
------ ------ ------ ------ -------- -------- -----------
BALANCE AT SEPTEMBER 30, 1994..................... 13,238 1 2,797 1 121,767 343,020 (13,427)
Net income.................................... -- -- -- -- -- 41,719 --
Cost of subsidiary's preferred stock
issuance.................................... -- -- -- -- (3,758) -- --
Change in unrealized gains (losses)........... -- -- -- -- -- -- 6,780
------ ------ ------ ------ -------- -------- -----------
BALANCE AT SEPTEMBER 30, 1995..................... 13,238 $1 2,797 $1 $118,009 $384,739 $ (6,647)
====== ====== ====== ====== ======== ======== ===========
(UNAUDITED)
BALANCE AT SEPTEMBER 30, 1994..................... 13,238 $1 2,797 $1 $121,767 $343,020 $ (13,427)
Net income.................................... -- -- -- -- -- 23,659 --
Change in unrealized gains (losses)........... -- -- -- -- -- -- 1,672
------ ------ ------ ------ -------- -------- -----------
BALANCE AT MARCH 31, 1995......................... 13,238 $1 2,797 $1 $121,767 $366,679 $ (11,755)
====== ====== ====== ====== ======== ======== ===========
(UNAUDITED)
BALANCE AT SEPTEMBER 30, 1995..................... 13,238 $1 2,797 $1 $118,009 $384,739 $ (6,647)
Net income.................................... -- -- -- -- -- 26,759 --
Change in unrealized gains (losses)........... -- -- -- -- -- -- 3,579
------ ------ ------ ------ -------- -------- -----------
BALANCE AT MARCH 31, 1996......................... 13,238 $1 2,797 $1 $118,009 $411,498 $ (3,068)
====== ====== ====== ====== ======== ======== ===========
</TABLE>

TOTAL
STOCKHOLDERS'
EQUITY
------------
BALANCE AT SEPTEMBER 30, 1992..................... $232,373
Net income.................................... 127,370
Cost of subsidiary's preferred stock
issuance.................................... (3,924)
Change in unrealized gains (losses)........... 33,384
------------
BALANCE AT SEPTEMBER 30, 1993..................... 389,203
Net income.................................... 108,970
Change in unrealized gains (losses)........... (46,811)
------------
BALANCE AT SEPTEMBER 30, 1994..................... 451,362
Net income.................................... 41,719
Cost of subsidiary's preferred stock
issuance.................................... (3,758)
Change in unrealized gains (losses)........... 6,780
------------
BALANCE AT SEPTEMBER 30, 1995..................... $496,103
============
BALANCE AT SEPTEMBER 30, 1994..................... $451,362
Net income.................................... 23,659
Change in unrealized gains (losses)........... 1,672
------------
BALANCE AT MARCH 31, 1995......................... $476,693
============
BALANCE AT SEPTEMBER 30, 1995..................... $496,103
Net income.................................... 26,759
Change in unrealized gains (losses)........... 3,579
------------
BALANCE AT MARCH 31, 1996......................... $526,441
============

See accompanying Notes to Consolidated Financial Statements.

F-5

BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
-------------------------------------------

1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income...................................................................... $ 41,719 $ 108,970 $ 127,370
Adjustments to reconcile net income to net cash (used) provided by operating
activities:
Provision for credit losses................................................ 24,293 6,997 4,083
Net gains on sales of assets............................................... (72,918) (80,524) (112,349)
Net depreciation, amortization, and accretion.............................. (49,335) (7,921) (8,781)
Amortization of intangibles................................................ 21,856 18,247 24,469
FHLB stock dividend........................................................ (11,446) (5,558) (3,095)
Purchases of trading account assets........................................ (203) (46) (222,593)
Proceeds from sales of trading account assets.............................. 143 103 30,220
Repayments of trading account assets....................................... -- -- 29,590
Originations of loans held for sale........................................ (2,275,058) (4,128,979) (6,116,430)
Purchases of loans held for sale........................................... (103,926) (60,900) (58,879)
Proceeds from sales of loans held for sale................................. 2,164,407 4,838,051 6,258,670
Change in loans held for sale.............................................. 5,661 53,117 207,477
Change in interest receivable.............................................. (37,778) (10,284) 791
Change in other assets..................................................... (1,547) (4,213) 41,616
Change in other liabilities................................................ 89,056 (44,432) 131,034
------------- ------------- -------------
Net cash (used) provided by operating activities...................... (205,076) 682,628 333,193
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in securities purchased under agreements to resell and federal
funds sold............................................................... (117,342) 189,278 (341,988)
Purchases of securities held to maturity................................... (2,920) (32,812) (2,500)
Proceeds from maturities of securities held to maturity.................... 3,472 33,000 5,500
Purchases of mortgage-backed securities held to maturity................... (38,515) (83,854) (480,915)
Proceeds from sales of mortgage-backed securities held to maturity......... -- 38,294 --
Repayments of mortgage-backed securities held to maturity.................. 390,364 162,328 40,966
Purchases of securities available for sale................................. -- (135,930) --
Proceeds from sales of securities available for sale....................... -- 61,482 --
Purchases of mortgage-backed securities available for sale................. (230) (735,757) (731,677)
Proceeds from sales of mortgage-backed securities available for sale....... 77,626 187,189 403,129
Repayments of mortgage-backed securities available for sale................ 16,346 760,111 289,304
Change in mortgage-backed securities available for sale.................... -- (12,148) --
Purchases of loans held to maturity........................................ (2,658,093) (1,406,275) (1,212,103)
Proceeds from sales of loans held to maturity.............................. 31,543 27,093 2,878
Change in loans held to maturity........................................... (379,229) (734,276) (404,530)
Change in Covered Assets................................................... -- 318,176 152,467
Purchases of FHLB stock.................................................... (100,190) (793) (55,030)
Redemption of FHLB stock................................................... 18,500 -- --
Purchases of premises and equipment........................................ (6,132) (10,379) (14,401)
Proceeds from sales of real estate owned acquired through
foreclosure.............................................................. 34,137 31,212 29,117
Proceeds from sales of servicing rights.................................... 34,080 67,198 64,260
------------- ------------- -------------
Net cash used by investing activities................................. (2,696,583) (1,276,863) (2,255,523)
------------- ------------- -------------
</TABLE>
(CONTINUED ON FOLLOWING PAGE)

F-6

BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
-----------------------------------------

1995 1994 1993
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
<S> <C> <C> <C>
Net change in deposits.......... $ 419,738 $ (73,290) $ (72,284)
Proceeds from FHLB advances..... 3,821,754 2,161,384 8,454,000
Repayment of FHLB advances...... (2,058,200) (1,726,500) (6,900,900)
Net change in securities sold
under agreements to repurchase
and federal funds purchased... 619,533 243,000 310,000
Change in advances from
borrowers for taxes and
insurance..................... 38,585 1,191 11,693
Repayment of long-term debt..... -- -- (102,000)
Repayment of notes payable to
related party................. -- -- (4,090)
Proceeds from issuance of Senior
Notes......................... -- -- 115,000
Proceeds from issuance of the
Bank's Preferred Stock........ 96,242 -- 81,576
----------- ----------- -----------
Net cash provided by
financing activities..... 2,937,652 605,785 1,892,995
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH
EQUIVALENTS........................ 35,993 11,550 (29,335)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR.................. 76,938 65,388 94,723
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF
YEAR............................... $ 112,931 $ 76,938 $ 65,388
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION AND NONCASH INVESTING
ACTIVITIES
Cash paid for interest.......... $ 523,250 $ 313,092 $ 298,643
Cash paid for income taxes...... 9,863 5,102 --
Cash paid in lieu of taxes...... 157 4,000 2,800
Real estate owned acquired
through foreclosure........... 49,403 44,753 30,751
Covered real estate owned
acquired through
foreclosure................... -- 3,744 26,320
Sales of real estate owned
financed by the Bank.......... 30 2,732 16,752
Securitization of loans......... -- 1,182,172 572,582
Transfer of loans from held to
maturity to held for sale..... -- 88,100 575,306
Transfer of loans from held for
sale to held to maturity...... -- 486,745 --
Transfer of mortgage-backed
securities from available for
sale to held to maturity...... -- 1,318,877 8,907
Transfer of mortgage-backed
securities from held to
maturity to loans held to
maturity...................... -- -- 23,125
Transfer of mortgage-backed
securities from held to
maturity to available for
sale.......................... -- 68,741 202,509
Transfer of trading account
assets to mortgage-backed
securities available for
sale.......................... -- -- 214,926
Transfer of trading account
assets to securities available
for sale...................... -- -- 41,526
Change in unrealized gains
(losses) on securities and
mortgage-backed securities
available for sale............ 6,780 (46,811) 33,384
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-7

BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
MARCH 31,
--------------------------

1996 1995
------------ ------------

(UNAUDITED)

<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.......................................................................... $ 26,759 $ 23,659
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses.................................................... 5,850 4,157
Net gains on sales of assets................................................... (26,783) (40,976)
Net depreciation, amortization, and accretion.................................. (7,753) (11,386)
Amortization of intangibles.................................................... 9,801 10,718
FHLB stock dividend............................................................ (7,086) (4,687)
Purchases of trading account assets............................................ (10,722) (30)
Proceeds from sales of trading account assets.................................. 10,620 --
Originations of loans held for sale............................................ (1,492,463) (826,541)
Purchases of loans held for sale............................................... (52,957) (63,074)
Proceeds from sales of loans held for sale..................................... 1,810,776 932,582
Change in loans held for sale.................................................. 11,368 (455)
Change in interest receivable.................................................. 19,443 (11,304)
Change in other assets......................................................... 27,365 (8,691)
Change in other liabilities.................................................... 18,350 16,164
------------ ------------
Net cash provided by operating activities................................. 342,568 20,136
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in securities purchased under agreements to resell and federal funds
sold.......................................................................... (188,227) (277,564)
Purchases of securities held to maturity....................................... (1,460) (1,451)
Proceeds from maturities of securities held to maturity........................ 1,500 1,972
Purchases of mortgage-backed securities held to maturity....................... (3,841) (38,515)
Repayments of mortgage-backed securities held to maturity...................... 135,527 183,210
Purchases of securities available for sale..................................... (9,142) --
Proceeds from sales of securities available for sale........................... 67,375 --
Proceeds from sales of mortgage-backed securities available for sale........... 201,523 77,651
Repayments of mortgage-backed securities available for sale.................... 115,954 10,819
Purchases of loans held to maturity............................................ (100,247) (765,118)
Change in loans held to maturity............................................... 203,214 (399,890)
Purchases of FHLB stock........................................................ -- (47,875)
Redemption of FHLB stock....................................................... -- 18,500
Purchases of premises and equipment............................................ (2,989) (1,228)
Proceeds from sales of real estate owned acquired through foreclosure.......... 20,099 14,134
Proceeds from sales of servicing rights........................................ 6,174 28,304
------------ ------------
Net cash provided (used) by investing activities.......................... 445,460 (1,197,051)
------------ ------------
</TABLE>

(CONTINUED ON FOLLOWING PAGE)

F-8

BANK UNITED CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
MARCH 31,
--------------------------

1996 1995
------------ ------------

(UNAUDITED)

CASH FLOWS FROM FINANCING ACTIVITIES
<S> <C> <C>
Net change in deposits......................................................... $ (218,952) $ 251,521
Proceeds from FHLB advances.................................................... 200,000 1,620,000
Repayment of FHLB advances..................................................... (444,500) (958,200)
Net change in securities sold under agreements to repurchase and
federal funds purchased...................................................... (222,597) 286,939
Change in advances from borrowers for taxes and insurance...................... (79,219) (9,371)
------------ ------------
Net cash (used) provided by financing activities.......................... (765,268) 1,190,889
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS........................................... 22,760 13,974
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.................................... 112,931 76,938
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.......................................... $ 135,691 $ 90,912
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION AND
NONCASH INVESTING ACTIVITIES
Cash paid for interest......................................................... $ 318,849 $ 226,171
Cash paid for income taxes..................................................... 2,044 6,440
Real estate owned acquired through foreclosure................................. 33,983 20,700
Transfer of loans from held to maturity to held for sale....................... 188,748 --
Transfer of mortgage-backed securities from held to maturity to
available for sale........................................................... 1,244,945 --
Change in unrealized gains (losses) on securities and mortgage-backed
securities available for sale................................................. 3,579 1,672
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-9

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND PRINCIPLES OF CONSOLIDATION

Bank United Corp. (formerly USAT Holdings Inc.) (the "Parent Company") was
incorporated in the State of Delaware on December 19, 1988, and became the
holding company for Bank United (formerly Bank United of Texas), a federal
savings bank (the "Bank") upon the Bank's formation on December 30, 1988. The
Parent Company has no significant assets other than its equity interest in the
Bank. The Parent Company owns all of the outstanding common stock of the Bank,
subject to a potential minority interest represented by certain warrants. The
Parent Company and the Bank, are referred to on a consolidated basis as the
"Company". Substantially all of the Parent Company's revenues are derived from
the operations of the Bank.

The accompanying consolidated financial statements include the accounts of
the Parent Company, the Bank, and the Bank's wholly-owned subsidiaries. To date,
the results of operations of these subsidiaries are not significant to the
Bank's consolidated results of operations. All intercompany accounts and
balances of these subsidiaries have been eliminated in consolidation.

The accompanying consolidated financial statements and information as of
March 31, 1996 and for the six months ended March 31, 1996 and 1995 are
unaudited, and include all adjustments (consisting of only normal recurring
adjustments), that are necessary, in the opinion of management, for a fair
presentation.

The accounting and reporting policies conform to generally accepted
accounting principles and general practices within the thrift and mortgage
banking industries. The following summarizes the more significant of these
policies.

SHORT-TERM INTEREST-EARNING ASSETS

Short-term interest-earning assets are comprised of cash, cash equivalents,
securities purchased under agreements to resell ("repurchase agreements"), and
federal funds sold. Short-term instruments with original maturities of three
months or less (measured from their acquisition date) and highly liquid
instruments readily convertible to cash are generally considered to be cash
equivalents. Cash and cash equivalents consist primarily of interest-earning and
non-interest earning deposits in other banks.

The Parent Company's cash is principally invested in repurchase agreements
that mature on a daily basis. Cash required for operating activities is
withdrawn prior to the daily purchase of the securities.

Federal Reserve Board regulations require average cash reserve balances
based on deposit liabilities to be maintained by the Bank with the Federal
Reserve Bank. The required reserve balances were approximately $62.6 million,
$63.7 million, and $45.4 million for the periods including March 31, 1996 and
September 30, 1995, and 1994. The Bank was in compliance with these requirements
for each of these periods.

TRADING ACCOUNT ASSETS, SECURITIES, AND MORTGAGE-BACKED SECURITIES

Debt and equity securities, including mortgage-backed securities, are
classified into one of three categories: held to maturity, available for sale,
or trading securities.

Trading account assets are carried at fair value with any realized or
unrealized gains and losses recognized in current operations. Trading account
assets are generally comprised of assets that are actively and frequently bought
and sold with the objective of generating income on short-term changes in price.

Securities and mortgage-backed securities that the Bank has the positive
intent and ability to hold to maturity are classified as held to maturity and
recorded at cost, adjusted for the amortization of premiums and the accretion of
discounts. Under certain circumstances (including the deterioration of the
issuer's creditworthiness or a change in tax law, statutory requirements, or
regulatory requirements), securities and mortgage-back securities held to
maturity may be sold or transferred to another portfolio.

F-10

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Securities and mortgage-back securities that the Bank intends to hold for
indefinite periods of time are classified as available for sale and are recorded
at fair value. Unrealized holding gains or losses are excluded from earnings and
reported net of tax as a separate component of stockholders' equity until
realized.

In connection with the securitization of certain loans into mortgage-backed
securities, a portion of the original loan basis is allocated to an excess
servicing receivable. This receivable represents the present value of the
estimated future servicing revenue in excess of a "normal" service fee. The
securitized portion of the receivable is classified and accounted for as
mortgage-backed securities in the Consolidated Statements of Financial
Condition. That portion of the receivable not securitized is classified as other
assets in the Consolidated Statements of Financial Condition and is amortized to
operations over the lives of the underlying mortgages. The Bank reviews this
asset periodically for valuation impairment in a manner similar to its mortgage
servicing rights ("MSRs").

The overall return or yield earned on mortgage-backed securities depends on
the amount of interest collected over the life of the security and the
amortization of any premium or discount. Premiums and discounts are recognized
in income using the level-yield method over the assets' remaining lives
(adjusted for anticipated prepayments). The actual yields and maturities of
mortgage-backed securities depend on the timing of the payment of the underlying
mortgage principal and interest. Accordingly, changes in interest rates and
prepayments can have a significant impact on the yields of mortgage-backed
securities.

If the fair value of a security or mortgage-backed security classified as
held to maturity or available for sale was to decline for reasons other than
temporary market conditions, the carrying value of such a security would be
written down to current fair value by a charge to operations.

LOANS

Loans that the Bank has the intent and ability to hold to maturity are
classified as held to maturity and are carried at unpaid principal balances,
adjusted for unamortized premiums, unearned discounts, the allowance for credit
losses, and net deferred loan origination fees (costs) ("Book Value"). Loans
held for sale, excluding single family mortgage warehouse loans, are carried at
the lower of allocated Book Value, as applicable, or fair value on an aggregate
basis, as determined by discounting contractual cash flows (adjusted for
anticipated prepayments) and using discount rates based on secondary market
sources. The Book Value is allocated to loans and the MSRs in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 122. See "-- Loan
Servicing". Single family mortgage warehouse loans held for sale are carried at
the lower of aggregate allocated Book Value or market value, as determined by
commitments from investors or current investor yield requirements. Any net
unrealized losses on loans held for sale are recognized in a valuation allowance
by a charge to current operations.

Interest income on loans, including impaired loans, is recognized
principally using the level-yield method. Based upon management's periodic
evaluation or at the time a loan is ninety days past due ("nonperforming"), the
related accrued interest is generally reversed by a charge to operations and the
subject loan is simultaneously placed on nonaccrual. Once a loan becomes current
and the borrower demonstrates a continuation of its ability to repay the loan,
the loan is returned to accrual status.

Premiums, discounts and loan fees (net of certain direct loan origination
costs) on warehouse loans held for sale are recognized in income when the
related loans are sold. Premiums, discounts and loan fees (net of certain direct
loan origination costs) associated with other loans for which collection is
probable and estimable are recognized in income using the level-yield method,
over the loans' remaining lives (adjusted for anticipated prepayments) or when
such loans are sold. Net discounts associated with loans for which collection
may not be probable and estimable are not accreted to income ("non-accretable
discounts"). These non-accretable discounts relate to bulk purchases of loans, a
portion of which were nonperforming and acquired at discounts from their
principal balance. Management periodically evaluates current loss estimates on
loans with non-accretable discounts to determine if the remaining non-accretable
discounts should be accreted to income.

F-11

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ALLOWANCE FOR CREDIT LOSSES

The allowance for credit losses is maintained at levels management deems
adequate to cover estimated losses on loans. The adequacy of the allowance is
based on management's periodic evaluation of the loan portfolio and considers
such factors as historical loss experience, delinquency status, identification
of adverse situations that may affect the ability of obligors to repay, known
and inherent risks in the portfolio, assessment of economic conditions,
regulatory policies, and the estimated value of the underlying collateral, if
any. Provisions for credit losses are charged to current operations when they
are determined to be both probable and estimable. Losses are charged to the
allowance for credit losses when the loss actually occurs or when a
determination is made that a loss is likely to occur. Cash recoveries are
credited to the allowance for credit losses.

The Bank adopted SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan," and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan --
Income Recognition and Disclosures, an amendment of SFAS No. 114," effective
October 1, 1995. These statements address the accounting by creditors for
impairment of certain loans. They apply to all creditors and to all loans,
uncollateralized as well as collateralized, except for large groups of
small-balance homogenous loans that are collectively evaluated for impairment,
loans that are measured at fair value or at lower of cost or fair value, leases,
and debt securities. These statements apply to all loans that are restructured
in a troubled debt restructuring involving a modification of terms. Loans within
the scope of these statements are considered impaired when, based on current
information and events, it is probable that all principal and interest amounts
due will not be collected in accordance with the contractual terms of the loans.

The adoption of SFAS No. 114 did not result in additional provisions for
credit losses. SFAS No. 114 requires that impaired loans that are within the
scope of this statement be measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or the fair value of
the collateral if the loan is collateral dependent. Any excess of the Bank's
recorded investment in the loans (unpaid principal balance, adjusted for
unamortized premium or discount and net deferred loan origination fees or costs)
over the measured value of the loans is provided for in the allowance for credit
losses.

LOAN SERVICING

In September 1995, the Bank adopted SFAS No. 122, "Accounting for Mortgage
Servicing Rights, an amendment of FASB Statement No. 65," effective October 1,
1994. (See Note 6). This statement requires mortgage loan servicing rights to be
recognized as separate assets from the related loans, regardless of how those
servicing rights are acquired. Upon origination of a mortgage loan, the Book
Value of the mortgage loan is allocated to the MSR and to the loan (without the
MSR) based on its estimated relative fair value, provided there is a plan to
sell or securitize the related loan. The allocation of the Book Value of the
loan between the MSR and the loan basis results in increased gains on the sales
of the loan, reflecting the value of the servicing rights. Prior to the
implementation of SFAS No. 122, the value of the originated mortgage servicing
rights ("OMSRs") was not recognized until the servicing rights were sold.

The statement further requires that MSRs, both OMSRs and purchased mortgage
servicing rights ("PMSRs"), periodically be evaluated for impairment based on
the fair value of those rights. The fair value of MSRs is determined by
discounting the present value of estimated expected future cash flows using a
discount rate commensurate with the risks involved. This method of valuation
incorporates assumptions that market participants would use in their estimates
of future servicing income and expense, including assumptions about prepayment,
default, and interest rates. For purposes of measuring impairment, the loans
underlying the MSRs are stratified on the basis of interest rate and type
(conventional or government). The amount of impairment is the amount by which
the MSRs, net of accumulated amortization, exceed their fair value. Impairment,
if any, is recognized through a valuation allowance and a charge to current
operations.

F-12

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

MSRs, net of valuation allowances, are amortized in proportion to, and over
the period of, the estimated net servicing revenue of the underlying mortgages,
which are collateralized by single family properties. The amortization expense
is reflected in amortization of intangibles in the Consolidated Statements of
Operations.

An allowance for other losses associated with the mortgage servicing
portfolio and certain receivables, advances, and other assets associated with
that portfolio is established for expected costs that are incurred as a result
of the Bank's responsibility as servicer of Federal Housing Administration
("FHA") insured and Department of Veteran Affairs ("VA") guaranteed loans and is
determined based on a number of variables. The allowance is netted against the
related assets in the Consolidated Statements of Financial Condition and the
related provision is included in non-interest expense in the Consolidated
Statements of Operations.

SALES OF SINGLE FAMILY LOANS

Loans are sold periodically to institutional and private investors. Gains
or losses on loan sales are recognized at the time of sale, determined using the
specific identification method, and reflect the extent that net sales proceeds
differ from the allocated Book Value of the loans. Single family mortgage
warehouse loans are generally packaged into pools and sold as mortgage-backed
securities. Accordingly, gains or losses on loan sales include both gains from
sales of mortgage-backed securities created from single family mortgage
warehouse loans and whole loan sales. Certain of the loans and servicing rights
are sold with general representations and warranties under contracts for sales
of loans and servicing rights. Repurchases of the loans and servicing rights may
be required when a loan fails to meet certain conditions specified in the
contract pursuant to which the loans and servicing rights were sold and that
failure was caused by a matter covered by the general representations and
warranties. An accrual is determined for the estimated future costs of such
obligations and is maintained at a level management believes is adequate to
cover estimated losses. This accrual is included in other liabilities on the
Consolidated Statements of Financial Condition and the related expense is
reflected in non-interest expense in the Consolidated Statements of Operations.

FEDERAL HOME LOAN BANK STOCK

As a member of the Federal Home Loan Bank (the "FHLB") System, the Bank is
required to purchase and maintain stock in the FHLB of Dallas in an amount equal
to the greater of 1% of the aggregate unpaid balance of loans and securities
secured by single family and multi-family properties, .3% of total assets, or 5%
of total FHLB advances. FHLB stock is redeemable by the Bank at par value at the
discretion of the FHLB of Dallas and is used to collateralize FHLB advances.

PREMISES AND EQUIPMENT

Premises and equipment are carried at cost, less accumulated depreciation,
and include certain branch facilities and the related furniture, fixtures, and
equipment. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets ranging from two to 40 years.

INTANGIBLE ASSETS

Intangible assets consist of the excess cost over fair value of net assets
acquired, acquisition costs and debt issuance costs. The excess of cost over
fair value of net assets acquired is comprised of identifiable and
unidentifiable intangibles. The identifiable portion relates to core deposit
premiums paid and the value of mortgage origination networks acquired. The core
deposit premiums are amortized using an accelerated method over the estimated
lives of the deposit relationships acquired. The premiums paid for mortgage
origination networks are amortized using the straight-line method over 5 years.
The unidentifiable intangible, or goodwill, resulting from thrift related
acquisitions is amortized at a constant rate applied to the carrying amount of
the long-term interest-earning assets acquired that are expected to be
outstanding at the beginning of each subsequent period based on their terms. The
original estimated lives of these long-term interest-earning assets ranged from
one to 26 years. The amortization periods of the identifiable and unidentifiable
intangibles are evaluated on an

F-13

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ongoing basis to determine whether events and circumstances have developed that
warrant revision of the estimated lives of the related assets. Acquisition costs
are being amortized over 5 years using the straight-line method. Debt issuance
costs are being amortized over the life of the notes using the straight-line
method.

REAL ESTATE OWNED

At the time of foreclosure, REO is recorded at the lower of the outstanding
loan amount (including accrued interest, if any) or fair value (less estimated
costs to sell). The resulting loss, if any, is charged to the allowance for
credit losses. Subsequent to foreclosure, REO is carried at the lower of its new
cost basis or fair value, with any further declines in fair value charged to
current operations. Revenues, expenses, gains or losses on sales and increases
or decreases in the allowance for losses are charged to operations as incurred.
Net gains on sales of certain REO properties, primarily single family
residences, are deferred (a) when such properties are acquired through the
foreclosure of loans that are part of discounted bulk purchases of loans and,
(b) uncertainty exists as to the total gains or losses that would be realized
from foreclosures associated with the bulk loan purchase. Upon obtaining
sufficient loss history or seasoning of the purchases, the deferred net gains
are recognized.

OTHER FINANCIAL INSTRUMENTS

The Bank enters into traditional financial instruments such as interest
rate exchange agreements ("swaps"), interest rate caps and floors, financial
options and futures contracts, and forward delivery contracts in the normal
course of business in an effort to reduce its exposure to changes in interest
rates. Fees incurred to enter into these financial contracts are amortized over
the lives of the contracts as a component of the income or expense on the asset
or liability hedged. Gains or losses on early termination of such contracts, if
any, are amortized over the remaining terms of the hedged items. The Bank does
not utilize instruments such as leveraged derivatives or structured notes.

INTEREST RATE EXCHANGE AGREEMENTS, CAPS, FLOORS, AND OPTIONS. Amounts
receivable and payable are accrued and offset against interest income or expense
on the hedged items.

FINANCIAL FUTURES CONTRACTS. Changes in the market value of futures
contracts are deferred and recognized as interest income or expense over the
remaining terms of the hedged items or recognized at the time the hedged items
are sold.

FORWARD DELIVERY CONTRACTS. Any gains or losses resulting from entering
into forward delivery contracts are recognized when the hedged items are sold as
net gains (losses) on sales of single family warehouse loans. Fees paid for
commitments to deliver loans are charged to other non-interest expense if the
likelihood that the commitment will be exercised is remote or the fees are
offset against the related net gains as the commitment is filled.

OTHER OFF-BALANCE-SHEET INSTRUMENTS. The Bank has entered into other
off-balance-sheet financial instruments consisting of commitments to extend
credit. Such financial instruments are recorded in the financial statements when
they are funded.

FEDERAL INCOME TAXES

The Parent Company and the Bank are members of a consolidated group of
corporations as defined by the Internal Revenue Code of 1986, as amended (the
"Code") and accordingly participate in the filing of a consolidated tax return.
For financial reporting purposes, however, the Parent Company and the Bank each
compute their tax on a separate company basis and the results are combined for
purposes of preparing the consolidated financial statements. Deferred tax assets
and liabilities are recognized for the estimated tax consequences attributable
to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. A deferred tax asset has
been recognized for certain net operating losses and credit carryforwards that
will be utilized against future taxable income.

F-14

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

RECENTLY ISSUED ACCOUNTING STANDARDS

In March 1995, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." This statement establishes accounting
standards for recognizing and measuring impairment of long-lived assets (and
related goodwill) to be held and used and for such assets held for disposal. The
statement is effective for financial statements with fiscal years beginning
after December 15, 1995, with earlier application encouraged. Implementation of
this pronouncement should have no material adverse effect on the Consolidated
Financial Statements.

EARNINGS PER COMMON SHARE

Earnings per common share is calculated by dividing net income (adjusted
for earnings on the common stock equivalents attributable to the Bank's warrants
outstanding) by the weighted average number of Parent Company common shares
outstanding. Common stock equivalents on the Bank's warrants are computed using
the treasury stock method. Earnings per common share results have been
retroactively restated for all periods presented to reflect an 1,800 to one
stock conversion. See Notes 16 and 21.

RELATED PARTY TRANSACTIONS

All transactions with the Parent Company's and the Bank's related parties
have been reflected herein. Management believes that the amounts, terms, and
conditions of such transactions are reasonably indicative of the marketplace at
the time the transaction occurred. During the six months ended March 31, 1996
and for fiscal 1995, 1994, and 1993, there were no material transactions with
related parties. At March 31, 1996 and September 30, 1995 and 1994, the Parent
Company and the Bank had no outstanding receivables from or payables to related
parties other than those related to participation in the filing of the
consolidated tax return and there were no loans outstanding to directors,
executive officers, or principal shareholders of the Bank's or the Parent
Company's voting securities.

RECLASSIFICATIONS

Certain amounts within the accompanying Consolidated Financial Statements
and the related Notes as of March 31, 1995 and September 30, 1995, 1994, 1993,
1992, and 1991 have been reclassified to conform to the current presentation.
Such reclassifications had no effect on previously presented net income or
retained earnings.

F-15

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL AND
FEDERAL FUNDS SOLD

<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED SEPTEMBER 30,
MARCH 31, ----------------------------------
1996 1995 1994 1993
--------------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS
Balance outstanding at
period-end.................... $ 631,279 $ 428,052 $ 248,710 $ 547,988
Fair value of collateral at
period-end.................... 668,538 449,152 255,210 557,013
Maximum outstanding at any
month-end..................... 666,836 602,274 768,200 656,000
Daily average balance........... 518,839 420,355 422,745 374,407
Average interest rate........... 5.89% 6.28% 4.04% 3.45%

FEDERAL FUNDS SOLD
Balance outstanding at
period-end.................... $ 28,000 $ 43,000 $ 110,000 $ --
Maximum outstanding at any
month-end..................... 69,000 75,000 110,000 65,000
Daily average balance........... 47,060 37,493 16,948 3,559
Average interest rate........... 5.39% 5.68% 4.01% 3.00%
</TABLE>

The repurchase agreements outstanding at March 31, 1996 and September 30,
1995 were collateralized by single family, multi-family, and commercial real
estate loans and mortgage-backed securities. The loans and mortgage-backed
securities underlying the repurchase agreements are held by the counterparty in
safekeeping for the account of the Bank or by a third party custodian for the
benefit of the Bank. All of the investments in repurchase agreements and federal
funds sold at March 31, 1996 matured on or before April 24, 1996 and those
outstanding at September 30, 1995 matured on or before October 5, 1995. The
repurchase agreements provide for the same loans and mortgage-backed securities
to be resold at maturity. At March 31, 1996 and September 30, 1995, the
following concentrations of repurchase agreements and federal funds sold
outstanding with individual counterparties exceeded ten percent of stockholders'
equity:

AT MARCH 31, AT SEPTEMBER 30,
1996 1995
------------ ----------------
CARRYING VALUE
--------------------------------
(IN THOUSANDS)
Donaldson, Lufkin, and Jenrette
Mortgage Capital................... $204,936 $185,000
Salomon Brothers Holding Company
Inc. .............................. 120,000 88,000
Paine Webber Inc..................... 120,000 75,000
Merrill Lynch Mortgage Capital
Inc. .............................. 80,000 --
Bear Stearns and Company, Inc. ...... -- 58,500
------------ ----------------
$524,936 $406,500
============ ================

F-16

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. SECURITIES
<TABLE>
<CAPTION>
AT MARCH 31, 1996
--------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
HELD TO MATURITY
Federal agency.................. $ 1,903 $1,107 $-- $ 3,010 $ 1,903
========== ========== ==========
AVAILABLE FOR SALE
Federal agency.................. 4,278 $-- $-- 4,278
U.S. Treasury notes............. 52,466 -- 296 52,170
---------- ---------- ---------- ----------
Available for sale......... 56,744 $-- $ 296 56,448 $ 56,448
========== ========== ==========
---------- ----------
Total securities........... $ 58,647 $ 59,458
========== ==========

AT SEPTEMBER 30, 1995
--------------------------------------------------------------
HELD TO MATURITY
Federal agency.................. $ 1,902 $ 799 $ 1 $ 2,700 $ 1,902
========== ========== ==========
AVAILABLE FOR SALE
U.S. Treasury notes............. 114,924 $-- $ 813 114,111 $ 114,111
========== ========== ==========
---------- ----------
Total securities........... $ 116,826 $ 116,811
========== ==========

AT SEPTEMBER 30, 1994
--------------------------------------------------------------
HELD TO MATURITY
Federal agency.................. $ 1,894 $ 541 $ 76 $ 2,359
U.S. Treasury notes............. 464 -- -- 464
---------- ---------- ---------- ----------
Held to maturity........... 2,358 $ 541 $ 76 2,823 $ 2,358
========== ========== ==========
---------- ----------
AVAILABLE FOR SALE
U.S. Treasury notes............. 114,833 $-- $3,076 111,757 $ 111,757
========== ========== ==========
---------- ----------
Total securities........... $ 117,191 $ 114,580
========== ==========

AT SEPTEMBER 30, 1993
--------------------------------------------------------------
HELD TO MATURITY
Federal agency.................. $ 1,904 $ 492 $-- $ 2,396 $ 1,904
========== ========== ==========
AVAILABLE FOR SALE
Mutual funds.................... 41,526 $-- $-- 41,526 $ 41,526
========== ========== ==========
---------- ----------
Total securities........... $ 43,430 $ 43,922
========== ==========
</TABLE>

During the six months ended March 31, 1996, there were $67.4 million of
available for sale securities sold with proceeds of $67.4 million and a gross
gain of $1,000. During fiscal 1994, there were $62.7 million of available for
sale securities sold with proceeds of $61.5 million and a gross loss of $1.2
million. There were no sales of securities during fiscal 1995 or 1993. At
September 30, 1995, securities with carrying values totalling $13.5 million and
fair values totalling $13.3 million, were pledged towards margin requirements
for futures transactions and interest rate swap agreements.

F-17

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Securities outstanding at March 31, 1996 and September 30, 1995 mature as
follows:

<TABLE>
<CAPTION>
AT MARCH 31, 1996
-----------------------------------------------------
HELD TO MATURITY AVAILABLE FOR SALE
---------------------- -----------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
---------- --------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less...................... $1,903 $ 3,010 $ 52,466 $ 52,170
Due from one to five years................... -- -- 4,278 4,278
---------- --------- ---------- ----------
$1,903 $ 3,010 $ 56,744 $ 56,448
========== ========= ========== ==========

AT SEPTEMBER 30, 1995
-----------------------------------------------------

Due in one year or less...................... $1,902 $ 2,700 $ 64,972 $ 64,838
Due from one to five years................... -- -- 49,952 49,273
---------- --------- ---------- ----------
$1,902 $ 2,700 $114,924 $ 114,111
========== ========= ========== ==========
</TABLE>
F-18

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. MORTGAGE-BACKED SECURITIES

<TABLE>
<CAPTION>
AT MARCH 31, 1996
--------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
------------ ---------- ---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
HELD TO MATURITY
Agency
CMOs -- fixed-rate............ $ 3,061 $ 61 $ -- $ 3,122
Non-agency
Fixed-rate.................... 7,529 1,837 93 9,273
Adjustable-rate............... 559,365 635 12,526 547,474
CMOs -- fixed-rate............ 104,286 7 6,893 97,400
Other........................... 303 -- -- 303
------------ ---------- ---------- ------------
674,544 $2,540 $ 19,512 657,572
========== ==========
Allowance for losses............ (56) --
------------ ------------
Held to maturity........... 674,488 657,572 $ 674,488
============
------------ ------------
AVAILABLE FOR SALE
Agency
Adjustable-rate............... 386,876 $3,335 $ 5 390,206
CMOs -- fixed-rate............ 4,032 6 -- 4,038
CMOs -- adjustable-rate....... 245,565 1,219 121 246,663
Non-agency
Fixed-rate.................... 72,760 2,390 1 75,149
Adjustable-rate............... 440,638 687 2,723 438,602
CMOs -- fixed-rate............ 79,944 -- 1,460 78,484
CMOs -- adjustable-rate....... 37,851 12 1,017 36,846
Other........................... 8,360 1,234 -- 9,594
------------ ---------- ---------- ------------
Available for sale......... 1,276,026 $8,883 $ 5,327 1,279,582 $ 1,279,582
========== ========== ============
------------ ------------
Total mortgage-backed
securities............... $ 1,950,514 $ 1,937,154
============ ============
</TABLE>

F-19

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1995
--------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
------------ ---------- ---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
HELD TO MATURITY
Agency
Fixed-rate.................... $ 4,259 $ 167 $ 77 $ 4,349
Adjustable-rate............... 489,412 5,212 2,711 491,913
CMOs -- fixed-rate............ 57,935 96 1,623 56,408
Non-agency
Fixed-rate.................... 126,562 4,489 318 130,733
Adjustable-rate............... 1,130,102 4,343 21,256 1,113,189
CMOs -- fixed-rate............ 239,487 173 8,643 231,017
Other........................... 3,603 -- -- 3,603
------------ ---------- ---------- ------------
2,051,360 $ 14,480 $ 34,628 2,031,212
========== ==========
Allowance for losses............ (56) --
------------ ------------
Held to maturity........... 2,051,304 2,031,212 $ 2,051,304
============
------------ ------------
AVAILABLE FOR SALE
Agency
CMOs -- adjustable-rate....... 250,208 $ 1,132 $ 217 251,123
Non-agency
Fixed-rate.................... 22,060 627 -- 22,687
CMOs -- fixed-rate............ 36,895 -- 640 36,255
CMOs -- adjustable-rate....... 37,580 7 693 36,894
------------ ---------- ---------- ------------
Available for sale......... 346,743 $ 1,766 $ 1,550 346,959 $ 346,959
========== ========== ============
------------ ------------
Total mortgage-backed
securities............... $ 2,398,047 $ 2,378,171
============ ============

AT SEPTEMBER 30, 1994
--------------------------------------------------------------------

HELD TO MATURITY
Agency
Fixed-rate.................... $ 5,313 $ 20 $ 15 $ 5,318
Adjustable-rate............... 563,629 830 15,290 549,169
CMOs -- fixed-rate............ 81,395 -- 3,967 77,428
Non-agency
Fixed-rate.................... 184,929 603 2,057 183,475
Adjustable-rate............... 1,288,271 226 23,048 1,265,449
CMOs -- fixed-rate............ 267,658 -- 11,601 256,057
Other........................... 3,896 -- -- 3,896
------------ ---------- ---------- ------------
2,395,091 $ 1,679 $ 55,978 2,340,792
========== ==========
Allowance for losses............ (113) --
------------ ------------
Held to maturity........... 2,394,978 2,340,792 $ 2,394,978
============
------------ ------------
AVAILABLE FOR SALE
Agency
Fixed-rate.................... 85,492 $ 1,688 $ 1,552 85,628
CMOs -- adjustable-rate....... 254,933 -- 2,727 252,206
Non-agency
Fixed-rate.................... 22,141 -- 1,198 20,943
CMOs -- fixed-rate............ 41,825 -- 2,634 39,191
CMOs -- adjustable-rate....... 37,733 -- 1,776 35,957
------------ ---------- ---------- ------------
Available for sale......... 442,124 $ 1,688 $ 9,887 433,925 $ 433,925
========== ========== ============
------------ ------------
Total mortgage-backed
securities............... $ 2,837,102 $ 2,774,717
============ ============
</TABLE>

F-20

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1993
----------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
--------- ---------- ---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
HELD TO MATURITY
Agency CMOs -- fixed-rate................ $ 8,809 $ 166 -$- $ 8,975
Non-agency
Fixed-rate............................. 46,573 3,461 -- 50,034
Adjustable-rate........................ 205,482 1,271 371 206,382
CMOs -- fixed-rate..................... 95,169 1,396 115 96,450
Other.................................... 3,436 -- -- 3,436
--------- ---------- ---------- ---------
359,469 $ 6,294 $486 365,277
========== ==========
Allowance for losses..................... (573) --
--------- ---------
Held to maturity.................... 358,896 365,277 $ 358,896
=========
--------- ---------
AVAILABLE FOR SALE
Agency
Fixed-rate............................. 149,519 $ 6,514 $189 155,844
CMOs -- fixed-rate..................... 50,827 -- 7 50,820
CMOs -- adjustable-rate................ 505,046 1,202 25 506,223
Non-agency
Fixed-rate............................. 365,433 41,122 -- 406,555
Adjustable-rate........................ 619,874 4,833 41 624,666
CMOs -- fixed-rate..................... 21,982 -- 20 21,962
CMOs -- adjustable-rate................ 35,563 28 3 35,588
Other.................................... 15,371 -- -- 15,371
--------- ---------- ---------- ---------
Available for sale.................. 1,763,615 $ 53,699 $285 1,817,029 $1,817,029
========== ========== =========
--------- ---------
Total mortgage-backed securities.... $2,122,511 $2,182,306
========= =========
</TABLE>

In November 1995, the FASB issued, "A Guide to Implementation of Statement
115 on Accounting for Certain Investments in Debt and Equity Securities." This
implementation guide provided the Bank the opportunity to reassess the
appropriateness of the classifications of its securities. It further stated that
reclassifications of securities from the held to maturity category resulting
from this one-time reassessment would not call into question the intent to hold
other securities to maturity in the future. During the first quarter of fiscal
1996, the Bank reassessed its securities portfolios and reclassified $1.2
billion in mortgage-backed securities from the held to maturity portfolio to the
available for sale portfolio. An unrealized gain of $4.2 million before tax, or
$2.6 million after tax, was recorded in stockholders' equity as a result of this
transfer.

During fiscal 1994, $68.7 million of fixed-rate collateralized mortgage
obligations ("CMOs") were transferred at fair value from the held to maturity
portfolio to the available for sale portfolio. The related unrealized gain
($66,000 at the time of transfer, before taxes) is included as a component of
stockholders' equity. This transfer was made in response to the classification
of securities as high-risk under the FASB's Emerging Issues Task Force
guidelines in effect at that time. Subsequent to the transfer, $45.5 million of
these securities were sold and the remaining $23.2 million was no longer
classified as high-risk.

During fiscal 1994, $38.3 million of non-agency mortgage-backed securities
that had been included in the held to maturity portfolio were sold. This sale
was made due to a deterioration of the issuer's creditworthiness and resulted in
a gross gain of $42,000.

Mortgage-backed securities of approximately $1.3 billion were transferred
from the available for sale portfolio to the held to maturity portfolio at fair
value during fiscal 1994. The gross unrealized loss of $10.8 million on these
securities at the time of transfer is included as a component of stockholders'
equity and is being amortized over the remaining lives of the securities.

F-21

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At March 31, 1996 and September 30, 1995, mortgage-backed securities with
carrying values totalling $1,213.9 million and $1,691.1 million and fair values
totalling $1,199.4 million and $1,678.1 million were used to collateralize FHLB
advances and securities sold under agreements to repurchase ("reverse repurchase
agreements").

CHANGES IN UNREALIZED GAINS (LOSSES)

<TABLE>
<CAPTION>
MORTGAGE-BACKED
SECURITIES
----------------------- SECURITIES
AVAILABLE HELD TO AVAILABLE TAX
FOR SALE MATURITY FOR SALE EFFECT TOTAL
--------- --------- ----------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1993........ $ 53,414 $ -- $-- $(20,030) $ 33,384
Market value changes and the
effect of prepayments......... (60,960) -- (4,264) 24,457 (40,767)
(Gains) losses realized due to
sales......................... (11,488) -- 1,188 3,862 (6,438)
Transfer to held to maturity.... 10,835 (10,835) -- -- --
Amortization of held to
maturity...................... -- 633 -- (239) 394
--------- --------- ----------- -------- --------
Balance at September 30, 1994........ (8,199) (10,202) (3,076) 8,050 (13,427)
--------- --------- ----------- -------- --------
Market value changes and the
effect of prepayments......... 8,431 -- 2,263 (4,005) 6,689
(Gains) losses realized due to
sales......................... (16) -- -- 6 (10)
Amortization of held to
maturity...................... -- 162 -- (61) 101
--------- --------- ----------- -------- --------
Balance at September 30, 1995........ 216 (10,040) (813) 3,990 (6,647)
--------- --------- ----------- -------- --------
Market value changes and the
effect of prepayments......... 3,070 -- 526 (1,348) 2,248
(Gains) losses realized due to
sales......................... (2,770) -- (9) 1,042 (1,737)
Transfer from held to
maturity...................... 3,040 1,114 -- (1,558) 2,596
Amortization of held to
maturity...................... -- 755 -- (283) 472
--------- --------- ----------- -------- --------
Balance at March 31, 1996............ $ 3,556 $ (8,171) $ (296) $ 1,843 $ (3,068)
========= ========= =========== ======== ========
</TABLE>

During fiscal 1994 and 1993, the Banking Segment securitized single family
loans from its own portfolio as follows:

SECURITIZATIONS

FOR THE YEAR ENDED
SEPTEMBER 30,
------------------------
1994 1993
------------ ----------
(IN THOUSANDS)

Principal securitized, gross......... $ 1,178,999 $ 674,132
Principal securitized, net........... 1,182,172 572,582
Principal sold....................... 161,864 269,511
Gains recognized..................... 10,441 41,001

The activity in the excess servicing receivable generated as a result of
these securitizations was as follows:

EXCESS SERVICING RECEIVABLE
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED SEPTEMBER
ENDED MARCH 31, 30,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period....... $ 11,116 $ 12,182 $ 12,182 $ 15,023 $ 3,623
Additions....................... -- -- -- 2,044 13,534
Amortization.................... (512) (506) (1,066) (4,885) (2,134)
--------- --------- --------- --------- ---------
Balance at end of period............. $ 10,604 $ 11,676 $ 11,116 $ 12,182 $ 15,023
========= ========= ========= ========= =========
</TABLE>

Approximately $3.7 million, $4.0 million, $4.3 million, and $5.5 million of
the excess servicing receivable balance at March 31,1996 and at September 30,
1995, 1994, and 1993 represented the securitized portion of the

F-22

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
receivable, which was included in the mortgage-backed securities portfolio. The
remaining balance was included in other assets.

The following table provides information related to the sales of
mortgage-backed securities available for sale, including those assets
securitized by the Bank.

5. LOANS

The loan portfolio, less the non-accretable unearned discounts and the
undisbursed portion of loans in process, was as follows:

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, -----------------------------------------------------
1996 1995 1994 1993 1992 1991
------------ --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
HELD TO MATURITY
Single family.................... $6,651,723 $7,061,088 $4,203,614 $2,847,602 $2,302,073 $3,053,914
Single family residential
construction................... 179,505 115,436 57,786 35,904 31,920 24,215
Consumer......................... 130,356 123,096 108,179 57,902 21,732 19,826
Multi-family..................... 341,094 392,017 276,799 112,055 50,741 23,870
Commercial real estate........... 45,098 31,006 61,919 49,510 58,521 58,931
Business credit.................. 15,008 6,495 -- -- -- --
Mortgage banker finance line of
credit......................... 141,781 109,339 147,754 385,548 -- --
------------ --------- --------- --------- --------- ---------
7,504,565 7,838,477 4,856,051 3,488,521 2,464,987 3,180,756
Allowance for credit losses...... (36,445) (36,763) (23,378) (27,970) (25,529) (9,919)
Accretable unearned discounts.... (17,168) (34,784) (50,384) (25,486) (53,174) (193,900)
Net deferred loan origination
fees........................... (3,452) (3,254) (1,961) (625) (402) (485)
------------ --------- --------- --------- --------- ---------
Held to maturity............. 7,447,500 7,763,676 4,780,328 3,434,440 2,385,882 2,976,452
------------ --------- --------- --------- --------- ---------
HELD FOR SALE
Single family mortgage
warehouse...................... 379,720 411,287 252,153 899,602 1,016,854 457,137
Single family.................... -- -- -- 528,579 783,002 --
Multi-family..................... 52,510 87,781 12,535 -- -- --
Business credit.................. 4,007 825 -- -- -- --
------------ --------- --------- --------- --------- ---------
436,237 499,893 264,688 1,428,181 1,799,856 457,137
Allowance for credit losses...... (44) (38) (76) (1,894) (2,685) (229)
Unrealized losses................ (256) (1,142) -- -- -- --
Accretable unearned discounts.... (7,284) (3,676) (266) (2,437) (85,115) (3,160)
Net deferred loan origination
costs.......................... 1,927 1,527 1,500 4,089 3,778 954
------------ --------- --------- --------- --------- ---------
Held for sale................ 430,580 496,564 265,846 1,427,939 1,715,834 454,702
------------ --------- --------- --------- --------- ---------
Total loans.................. $7,878,080 $8,260,240 $5,046,174 $4,862,379 $4,101,716 $3,431,154
============ ========= ========= ========= ========= =========
SUPPLEMENTAL INFORMATION
Non-accretable unearned
discounts...................... $ (11,210) $ (15,423) $ (31,917) $ (42,975) $ (41,060) $ (41,306)
Undisbursed portion of loans in
process........................ (195,478) (179,737) (136,797) (39,162) (41,534) (25,975)
</TABLE>
F-23

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following tables set forth the geographic distribution of loans by
states with concentrations of 4% of loans or greater at March 31, 1996 and
September 30, 1995. The geographic data is based on gross loan principal and
includes REO.

<TABLE>
<CAPTION>
AT MARCH 31, 1996
--------------------------------------------------------------------------
COMMERCIAL
SINGLE % OF REAL ESTATE % OF % OF
FAMILY TOTAL AND BUSINESS TOTAL TOTAL
STATE AND OTHER ASSETS CREDIT ASSETS TOTAL ASSETS
- ------------------------------------- ------------ ------ ------------ ------ ------------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
California........................... $ 3,793,197 33.67% $ -- -- % $ 3,793,197 33.67%
Texas................................ 1,299,730 11.54 44,660 0.39 1,344,390 11.93
Florida.............................. 448,958 3.98 1,986 0.02 450,944 4.00
Other................................ 1,851,933 16.44 18,313 0.16 1,870,246 16.60
------------ ------ ------------ ------ ------------ ------
7,393,818 65.63% 64,959 0.57% 7,458,777 66.20%
------------ ====== ------------ ====== ------------ ======
Mortgage banker finance line of
credit............................. 141,781 -- 141,781
Single family mortgage warehouse..... 379,720 -- 379,720
------------ ------------ ------------
Total........................... $ 7,915,319 $ 64,959 $ 7,980,278
============ ============ ============
</TABLE>

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1995
--------------------------------------------------------------------------
COMMERCIAL
SINGLE % OF REAL ESTATE % OF % OF
FAMILY TOTAL AND BUSINESS TOTAL TOTAL
STATE AND OTHER ASSETS CREDIT ASSETS TOTAL ASSETS
- ------------------------------------- ------------ ------ ------------ ------ ------------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
California........................... $ 3,958,401 33.03% $ -- --% $ 3,958,401 33.03%
Texas................................ 1,340,063 11.18 15,065 0.13 1,355,128 11.31
Florida.............................. 477,479 3.98 1,999 0.02 479,478 4.00
Other................................ 2,038,953 17.02 24,971 0.20 2,063,924 17.22
------------ ------ ------------ ------ ------------ ------
7,814,896 65.21% 42,035 0.35% 7,856,931 65.56%
------------ ====== ------------ ====== ------------ ======
Mortgage banker finance line of
credit............................. 109,339 -- 109,339
Single family mortgage warehouse..... 411,287 -- 411,287
------------ ------------ ------------
Total........................... $ 8,335,522 $ 42,035 $ 8,377,557
============ ============ ============
</TABLE>

F-24

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Contractual maturities of the loans held to maturity portfolio as of March
31, 1996 and September 30, 1995, were as follows:

<TABLE>
<CAPTION>
PRINCIPAL PAYMENTS CONTRACTUALLY DUE IN YEARS ENDED MARCH 31,
---------------------------------------------------------------------------
2000- 2002- 2007- 2012 AND
1997 1998 1999 2001 2006 2011 THEREAFTER TOTAL
--------- --------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TYPE OF LOAN
Single family........................ $ 105,763 $ 113,983 $ 122,841 $ 275,066 $ 897,988 $1,265,826 $3,870,256 $6,651,723
Single family residential
construction....................... 179,505 -- -- -- -- -- -- 179,505
Consumer............................. 74,627 9,303 10,244 23,698 12,484 -- -- 130,356
Multi-family......................... 93,097 101,389 55,140 4,943 85,329 1,196 -- 341,094
Commercial real estate............... 2,780 3,018 3,276 6,593 17,652 6,453 5,326 45,098
Business credit...................... 8,619 6,389 -- -- -- -- -- 15,008
Mortgage banker finance line of
credit............................. 136,606 -- -- 2,685 2,490 -- -- 141,781
--------- --------- --------- --------- --------- --------- --------- ---------
Total............................ $ 600,997 $ 234,082 $ 191,501 $ 312,985 $1,015,943 $1,273,475 $3,875,582 $7,504,565
========= ========= ========= ========= ========= ========= ========= =========
TYPE OF INTEREST
Fixed-rate loans..................... $ 39,979 $ 43,349 $ 46,558 $ 104,417 $ 333,122 $ 298,805 $ -- $ 866,230
Adjustable-rate loans................ 561,018 190,733 144,943 208,568 682,821 974,670 3,875,582 6,638,335
--------- --------- --------- --------- --------- --------- --------- ---------
Total............................ $ 600,997 $ 234,082 $ 191,501 $ 312,985 $1,015,943 $1,273,475 $3,875,582 $7,504,565
========= ========= ========= ========= ========= ========= ========= =========

PRINCIPAL PAYMENTS CONTRACTUALLY DUE IN YEARS ENDED SEPTEMBER 30,
---------------------------------------------------------------------------
1999- 2001- 2006- 2011 AND
1996 1997 1998 2000 2005 2010 THEREAFTER TOTAL
--------- --------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
TYPE OF LOAN
Single family........................ $ 106,424 $ 114,883 $ 124,015 $ 278,393 $ 914,393 $1,221,214 $4,301,766 $7,061,088
Single family residential
construction....................... 115,436 -- -- -- -- -- -- 115,436
Consumer............................. 80,277 7,624 8,398 19,437 7,360 -- -- 123,096
Multi-family......................... 82,207 89,932 57,012 3,740 158,086 1,040 -- 392,017
Commercial real estate............... 607 655 706 1,584 14,385 6,507 6,562 31,006
Business credit...................... 2,154 2,201 2,140 -- -- -- -- 6,495
Mortgage banker finance line of
credit............................. 102,274 -- -- 4,587 2,478 -- -- 109,339
--------- --------- --------- --------- --------- --------- --------- ---------
Total............................ $ 489,379 $ 215,295 $ 192,271 $ 307,741 $1,096,702 $1,228,761 $4,308,328 $7,838,477
========= ========= ========= ========= ========= ========= ========= =========
TYPE OF INTEREST
Fixed-rate loans..................... $ 34,770 $ 37,643 $ 40,857 $ 92,814 $ 397,784 $ 229,547 $ -- $ 833,415
Adjustable-rate loans................ 454,609 177,652 151,414 214,927 698,918 999,214 4,308,328 7,005,062
--------- --------- --------- --------- --------- --------- --------- ---------
Total............................ $ 489,379 $ 215,295 $ 192,271 $ 307,741 $1,096,702 $1,228,761 $4,308,328 $7,838,477
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>

The performing single family loans are pledged, under a blanket lien, as
collateral securing advances from the FHLB at March 31, 1996 and September 30,
1995.

F-25

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PRINCIPAL BALANCE OF NONACCRUAL LOANS

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, -------------------------------
1996 1995 1994 1993
------------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
NONACCRUAL LOANS
Single family................... $ 101,936 $ 83,954 $ 85,722 $ 61,451
Single family residential
construction.................. 35 505 -- --
Consumer........................ 745 563 506 427
Multi-family.................... 510 213 3,802 3,233
Commercial real estate.......... 488 -- 2,342 --
------------- --------- --------- ---------
Total...................... $ 103,714 $ 85,235 $ 92,372 $ 65,111
============= ========= ========= =========
</TABLE>

At September 30, 1994 and 1993, nonaccrual loans above included $5.7
million and $9.0 million of single family loans that were ninety days
delinquent, subject to government guaranty, and upon which interest continued to
accrue. There were no such loans at March 31, 1996 and September 30, 1995.

If the nonaccrual loans as of March 31, 1996 and September 30, 1995 had
been performing in accordance with their original terms throughout the six
months ended March 31, 1996 and fiscal 1995, interest income recognized would
have been $4.3 million and $6.4 million. The actual interest income recognized
on these loans for the six months ended March 31, 1996 was $695,000 and for
fiscal 1995 was $2.0 million. No commitments exist to lend additional funds to
borrowers whose loans were on nonaccrual status at March 31, 1996 and September
30, 1995.

At March 31, 1996, the recorded investment in impaired loans pursuant to
SFAS No. 114, totalled $4.7 million and the average outstanding balance for the
six months ended March 31, 1996 was $4.5 million. No allowance for credit losses
was required on these loans because the measured values of the loans exceeded
the recorded investments in the loans. Interest income of $230,000 was
recognized on impaired loans during the six months ended March 31, 1996, of
which $192,000 was collected in cash.

F-26

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ALLOWANCE FOR CREDIT LOSSES

<TABLE>
<CAPTION>
LOANS HELD TO MATURITY
------------------------------------------------------------------ LOANS
COMMERCIAL HELD FOR SALE
REAL MORTGAGE -------------------
SINGLE ESTATE BANKER SINGLE
FAMILY AND FINANCE FAMILY
SINGLE RESIDENTIAL MULTI- BUSINESS LINE OF MORTGAGE SINGLE
FAMILY CONSTRUCTION CONSUMER FAMILY CREDIT CREDIT WAREHOUSE FAMILY
------- ------------ -------- ------ ---------- -------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
September 30, 1990................. $ 6,729 $ 38 $ -- $ 53 $ -- $-- $-- $ --
Provision........................ 3,133 148 -- 60 552 -- 229 --
Net charge-offs.................. (775) -- (19 ) -- -- -- -- --
Other............................ (131) -- 100 31 -- -- -- --
------- ------------ -------- ------ ---------- -------- --------- -------
Balance at
September 30, 1991................. 8,956 186 81 144 552 -- 229 --
Provision........................ 14,156 135 39 75 6,261 -- 467 --
Net charge-offs.................. (2,827) -- (76 ) -- -- -- (118) --
Other............................ (6,817) -- 100 -- 4,564 -- -- 2,107
------- ------------ -------- ------ ---------- -------- --------- -------
Balance at
September 30, 1992................. 13,468 321 144 219 11,377 -- 578 2,107
Provision........................ 1,824 56 264 1,285 (25) 944 (265) --
Net charge-offs.................. (2,161) (71) (53 ) -- -- -- (148) --
Other............................ 378 -- -- (30) 30 -- -- (378)
------- ------------ -------- ------ ---------- -------- --------- -------
Balance at
September 30, 1993................. 13,509 306 355 1,474 11,382 944 165 1,729
Provision........................ 2,369 93 2,794 1,215 875 (260) (89) --
Net charge-offs.................. (1,702) -- (1,327 ) (233) (10,145) -- -- --
Other............................ 1,729 -- -- -- -- -- -- (1,729)
------- ------------ -------- ------ ---------- -------- --------- -------
Balance at
September 30, 1994................. 15,905 399 1,822 2,456 2,112 684 76 --
Provision........................ 18,493 (38) 4,178 596 1,374 (274) (36) --
Net charge-offs.................. (4,804) -- (2,753 ) 2 (3,389) -- (2) --
------- ------------ -------- ------ ---------- -------- --------- -------
Balance at
September 30, 1995................. $29,594 $361 $ 3,247 $3,054 $ 97 $ 410 $ 38 $ --
======= ============ ======== ====== ========== ======== ========= =======

Balance at
September 30, 1994................. $15,905 $399 $ 1,822 $2,456 $ 2,112 $ 684 $ 76 $ --
Provision........................ 2,293 74 1,791 516 -- (448) (69) --
Net charge-offs.................. (1,414) -- (1,158 ) 2 -- -- (2) --
------- ------------ -------- ------ ---------- -------- --------- -------
Balance at
March 31, 1995..................... $16,784 $473 $ 2,455 $2,974 $ 2,112 $ 236 $ 5 $ --
======= ============ ======== ====== ========== ======== ========= =======

Balance at
September 30, 1995................. $29,594 $361 $ 3,247 $3,054 $ 97 $ 410 $ 38 $ --
Provision........................ 2,429 122 3,030 175 86 2 6 --
Net charge-offs.................. (3,224) -- (2,938 ) -- -- -- -- --
------- ------------ -------- ------ ---------- -------- --------- -------
Balance at
March 31, 1996..................... $28,799 $483 $ 3,339 $3,229 $ 183 $ 412 $ 44 $ --
======= ============ ======== ====== ========== ======== ========= =======
</TABLE>

TOTAL
--------

Balance at
September 30, 1990................. $ 6,820
Provision........................ 4,122
Net charge-offs.................. (794)
Other............................ --
--------
Balance at
September 30, 1991................. 10,148
Provision........................ 21,133
Net charge-offs.................. (3,021)
Other............................ (46)
--------
Balance at
September 30, 1992................. 28,214
Provision........................ 4,083
Net charge-offs.................. (2,433)
Other............................ --
--------
Balance at
September 30, 1993................. 29,864
Provision........................ 6,997
Net charge-offs.................. (13,407)
Other............................ --
--------
Balance at
September 30, 1994................. 23,454
Provision........................ 24,293
Net charge-offs.................. (10,946)
--------
Balance at
September 30, 1995................. $ 36,801
========
Balance at
September 30, 1994................. $ 23,454
Provision........................ 4,157
Net charge-offs.................. (2,572)
--------
Balance at
March 31, 1995..................... $ 25,039
========
Balance at
September 30, 1995................. $ 36,801
Provision........................ 5,850
Net charge-offs.................. (6,162)
--------
Balance at
March 31, 1996..................... $ 36,489
========

F-27

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. LOAN SERVICING

SINGLE FAMILY SERVICING PORTFOLIO
PRINCIPAL BALANCES

AT SEPTEMBER 30,
AT MARCH 31, --------------------
1996 1995 1994
------------- --------- ---------

(IN MILLIONS)
OWNED LOANS.......................... $ 7,261 $ 7,603 $ 4,537
Less: Loans serviced by
others........................ 3,125 3,477 1,764
------------- --------- ---------
Total owned loans serviced
by Bank.................. 4,136 4,126 2,773
------------- --------- ---------
LOANS SERVICED FOR OTHERS
Purchased servicing rights...... 4,315 4,652 1,419
Loans originated and sold with
servicing retained............ 1,720 1,187 1,886
Servicing sales -- not yet
transferred from Bank......... 351 1,047 1,109
Other........................... 27 276 239
------------- --------- ---------
Total loans serviced for
others................... 6,413 7,162 4,653
MORTGAGE-BACKED SECURITIES
SECURITIZED BY BANKING SEGMENT..... 1,225 1,360 1,554
------------- --------- ---------
Total servicing
portfolio................ $11,774 $ 12,648 $ 8,980
============= ========= =========

The table above includes single family, single family residential
construction, and single family mortgage warehouse loans. In addition to the
single family servicing portfolio, there were $296 million, $177 million, and
$252 million of multi-family loans serviced for others at March 31, 1996 and
September 30, 1995 and 1994.

FAIR VALUE OF SINGLE FAMILY SERVICING PORTFOLIO

AT SEPTEMBER 30,
AT MARCH 31, ----------------------
1996 1995 1994
------------- ---------- ----------

(IN MILLIONS)
PRINCIPAL
Total loans serviced for
others........................ $ 6,413 $ 7,162 $ 4,653
Mortgage-backed securities
securitized by Banking
Segment....................... 1,225 1,360 1,554
Servicing purchases -- not yet
transferred to Bank........... -- -- 3,357
Servicing sales -- not yet
transferred from Bank......... (351) (1,047) (1,109)
Single family mortgage warehouse
loans subject to
SFAS No. 122.................. 380 411 --
------------- ---------- ----------
Total principal............ $ 7,667 $ 7,886 $ 8,455
============= ========== ==========

(IN THOUSANDS)

FAIR VALUE........................... $ 132,235 $ 122,250 $ 137,433
BOOK VALUE
OMSR............................ 38,267 23,062 --
PMSR............................ 45,116 52,035 56,677
------------- ---------- ----------
Total book value........... 83,383 75,097 56,677
------------- ---------- ----------
Fair value in excess of
book value (see Note
12)...................... $ 48,852 $ 47,153 $ 80,756
============= ========== ==========

F-28

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

MORTGAGE SERVICING RIGHTS

OMSRS PMSRS OMSRS PMSRS OMSRS PMSRS PMSRS PMSRS
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning of period....... $ 23,062 $ 52,035 $ -- $ 56,677 $ -- $ 56,677 $ 10,650 $ 16,036
Additions........................ 14,944 1,142 13,435 10,508 28,694 12,546 50,955 1,768
Amortization..................... (1,125) (4,823) (234) (4,930) (1,010) (9,821) (4,928) (3,518)
Writedown........................ -- -- -- -- -- -- -- (2,633)
Deferred hedging (gains)
losses......................... -- (1,730) -- -- -- (7,173) -- --
Sales............................ -- (122) (8,543) -- (4,622) (376) -- (1,003)
Other............................ 1,386 (1,386) -- (173) -- 182 -- --
--------- --------- --------- --------- --------- --------- --------- ---------
Balance at end of period............. $ 38,267 $ 45,116 $ 4,658 $ 62,082 $ 23,062 $ 52,035 $ 56,677 $ 10,650
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>

As discussed in Note 1, SFAS No. 122 was implemented effective October 1,
1994. As a result, originated MSRs of $28.7 million were recorded, net income
for fiscal 1995 and stockholders' equity increased $9.8 million, and earnings
per common share increased $0.33. Per share results have been restated to
reflect the 1,800 to one stock conversion effective June 1996. See Note 21 for a
discussion of subsequent events. The effect of the implementation on the
Consolidated Statement of Operations was as follows:

<TABLE>
<CAPTION>
TOTAL FISCAL FOURTH THIRD SECOND FIRST
1995 QUARTER QUARTER QUARTER QUARTER
------------ ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
BEFORE SFAS NO. 122 IMPLEMENTATION
Non-interest income............. $ 98,042 $13,096 $23,185 $29,120 $32,641
Non-interest expense............ 193,567 51,905 40,251 51,381 50,030
Income before income taxes and
minority interest............. 74,181 9,256 21,106 17,593 26,226
Income tax expense.............. 31,323 3,754 9,164 7,546 10,859
Net income...................... 31,881 1,391 9,708 7,884 12,898
Earnings per common share....... 1.02 0.04 0.31 0.25 0.42
AFTER SFAS NO. 122 IMPLEMENTATION
Non-interest income............. 114,981 25,201 23,127 30,641 36,012
Non-interest expense............ 194,576 52,466 40,465 51,553 50,092
Income before income taxes and
minority interest............. 90,111 20,800 20,834 18,942 29,535
Income tax expense.............. 37,415 8,169 9,060 8,062 12,124
Net income...................... 41,719 8,520 9,540 8,717 14,942
Earnings per common share....... 1.35 0.28 0.31 0.28 0.48
</TABLE>

7. COVERED ASSETS AND FEDERAL FINANCIAL ASSISTANCE

Concurrent with the Bank's incorporation on December 30, 1988, the Parent
Company, the Bank, and certain of their direct and indirect parent entities
entered into an Assistance Agreement ("Assistance Agreement") with the Federal
Savings and Loan Insurance Corporation ("FSLIC") whereby the Bank acquired
substantially all of the assets and assumed all of the deposits and certain
liabilities of United Savings Association of Texas ("Old USAT"), an insolvent
thrift institution (the "Acquisition"). The majority of assets acquired were
designated as Covered Assets ("Covered Assets") and were subject to certain
provisions contained in the Assistance Agreement. The Assistance Agreement
provided for, among other things, financial assistance to the Bank.

F-29

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On December 23, 1993, the Parent Company, the Bank, and certain of their
direct and indirect parent entities, and the Federal Deposit Insurance
Corporation, as manager of the FSLIC Resolution Fund ("FRF"), entered into a
Settlement and Termination Agreement (the "Settlement Agreement") providing,
among other things, for the termination of the Assistance Agreement and the
disposition of Covered Assets. Accordingly, effective December 28, 1993, the
Bank no longer owned or managed any Covered Assets, and stopped receiving
financial assistance from the FRF. In connection with this settlement, the Bank
received a payment totalling $195.3 million.

FOR THE YEAR ENDED
SEPTEMBER 30,
---------------------
1994 1993
---------- ---------
(IN THOUSANDS)
Payments affecting the results of
operations......................... $ 23,143 $ 9,289
Other payments
Settlement payment.............. 195,300 --
Other........................... 468 61,578
---------- ---------
Total FRF payments......... $ 218,911 $ 70,867
========== =========

8. DEPOSITS

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
---------------------------------------------------------------
AT MARCH 31,
1996 1995 1994 1993
------------------- ------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE
--------- -------- --------- -------- --------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NON-INTEREST BEARING DEPOSITS........ $ 242,560 -- % $ 181,196 -- % $ 76,498 -- % $ 44,149 -- %
INTEREST-BEARING DEPOSITS
Transaction accounts............. 222,148 1.00 219,307 1.50 233,666 1.49 229,972 2.07
Insured money fund accounts
Consumer....................... 493,000 4.11 397,473 3.73 407,029 3.12 397,511 2.69
Commercial..................... 717,308 5.32 857,669 5.82 416,571 4.84 51,938 2.60
--------- --- --------- --- --------- --- --------- ---
Subtotal..................... 1,210,308 4.83 1,255,142 5.16 823,600 3.99 449,449 2.68
--------- --- --------- --- --------- --- --------- ---
Savings accounts................. 139,343 2.50 144,301 2.73 222,769 2.60 312,778 2.68
Certificates of deposit
Consumer....................... 2,912,263 5.72 3,063,631 5.84 2,949,715 4.88 3,251,391 4.77
Commercial..................... 3,348 5.02 2,273 5.36 -- -- -- --
Wholesale...................... 233,351 9.70 316,370 9.06 457,956 7.92 551,649 7.13
--------- --- --------- --- --------- --- --------- ---
Subtotal..................... 3,148,962 6.01 3,382,274 6.14 3,407,671 5.29 3,803,040 5.11
--------- --- --------- --- --------- --- --------- ---
Total interest-bearing
deposits................... 4,720,761 5.37 5,001,024 5.59 4,687,706 4.74 4,795,239 4.58
--------- --- --------- --- --------- --- --------- ---
Total deposits............... $4,963,321 5.11% $5,182,220 5.40% $4,764,204 4.67% $4,839,388 4.53%
========= === ========= === ========= === ========= ===
Consumer............................. $3,843,134 $3,868,498 $3,834,238 $4,207,739
Commercial........................... 886,836 997,352 472,009 80,000
Wholesale............................ 233,351 316,370 457,957 551,649
--------- --------- --------- ---------
Total deposits............... $4,963,321 $5,182,220 $4,764,204 $4,839,388
========= ========= ========= =========
</TABLE>

F-30

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At March 31, 1996 and September 30, 1995, certificates of deposit ("CDs")
summarized by scheduled maturity by year and weighted average interest rate were
as follows:

<TABLE>
<CAPTION>
CERTIFICATES MATURING IN THE YEAR ENDING MARCH 31,
--------------------------------------------------------------------------
STATED RATE 1997 1998 1999 2000 2001 THEREAFTER TOTAL
- ------------------------------------- ------------ ------------ ---------- ---------- --------- ---------- ------------
(IN THOUSANDS)
<C> <C> <C> <C> <C> <C> <C> <C>
2.99% and below...................... $ 1,824 $ -- $ -- $ -- $ -- $ -- $ 1,824
3.00% to 3.99%....................... 21,033 3,827 649 8 -- 3 25,520
4.00% to 4.99%....................... 291,351 237,112 16,495 32,615 1,051 3,099 581,723
5.00% to 5.99%....................... 524,650 564,293 144,050 47,412 5,496 15,581 1,301,482
6.00% to 6.99%....................... 131,259 436,705 82,683 57,147 60,189 19,592 787,575
7.00% to 7.99%....................... 127,964 80,121 7,690 5,723 21,599 12,888 255,985
8.00% to 8.99%....................... 11,580 1,273 2,581 3,010 1,700 379 20,523
9.00% to 9.99%....................... 265 741 6,249 2,925 12 446 10,638
10.00% to 10.99%..................... 31,200 7,444 23,974 728 591 325 64,262
Over 10.99%.......................... 69,648 29,517 -- 265 -- -- 99,430
------------ ------------ ---------- ---------- --------- ---------- ------------
$ 1,210,774 $ 1,361,033 $ 284,371 $ 149,833 $ 90,638 $ 52,313 $ 3,148,962
============ ============ ========== ========== ========= ========== ============
</TABLE>

<TABLE>
<CAPTION>
CERTIFICATES MATURING IN THE YEAR ENDING SEPTEMBER 30,
--------------------------------------------------------------------------
STATED RATE 1996 1997 1998 1999 2000 THEREAFTER TOTAL
- ------------------------------------- ------------ ------------ ---------- ---------- --------- ---------- ------------
(IN THOUSANDS)
<C> <C> <C> <C> <C> <C> <C> <C>
2.99% and below...................... $ 1,947 $ -- $ -- $ -- $ -- $ -- $ 1,947
3.00% to 3.99%....................... 49,923 4,209 649 8 -- 3 54,792
4.00% to 4.99%....................... 419,671 58,644 7,242 32,816 50 100 518,523
5.00% to 5.99%....................... 637,453 338,794 142,232 46,123 5,308 476 1,170,386
6.00% to 6.99%....................... 449,506 437,013 82,291 57,725 60,339 16,062 1,102,936
7.00% to 7.99%....................... 147,563 82,049 7,726 5,728 21,722 12,944 277,732
8.00% to 8.99%....................... 33,642 1,262 675 4,165 2,272 376 42,392
9.00% to 9.99%....................... 42,640 564 6,504 2,909 11 442 53,070
10.00% to 10.99%..................... 4,950 37,235 13,594 10,019 657 325 66,780
Over 10.99%.......................... -- 78,438 15,026 252 -- -- 93,716
------------ ------------ ---------- ---------- --------- ---------- ------------
$ 1,787,295 $ 1,038,208 $ 275,939 $ 159,745 $ 90,359 $ 30,728 $ 3,382,274
============ ============ ========== ========== ========= ========== ============
</TABLE>

Scheduled maturities of CDs of $100,000 or more were as follows:

<TABLE>
<CAPTION>
AT MARCH 31, 1996 AT SEPTEMBER 30, 1995
--------------------- ---------------------
NUMBER OF DEPOSIT NUMBER OF DEPOSIT
ACCOUNTS AMOUNT ACCOUNTS AMOUNT
--------- -------- --------- --------
(DOLLARS IN THOUSANDS)

<S> <C> <C> <C> <C>
Three months or less................. 648 $ 68,289 475 $ 51,307
Over three through six months........ 895 94,458 664 70,615
Over six through twelve months....... 1,455 151,881 1,188 124,752
Over twelve months................... 1,352 143,660 2,115 222,801
--------- -------- --------- --------
Total...................... 4,350 $458,288 4,442 $469,475
========= ======== ========= ========
</TABLE>

F-31

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INTEREST EXPENSE ON DEPOSITS

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
---------------------- ----------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
Transaction and insured money fund
<S> <C> <C> <C> <C> <C>
accounts........................... $ 34,453 $ 25,261 $ 61,232 $ 22,261 $ 18,314
Savings accounts..................... 1,883 2,620 4,715 7,311 7,055
Certificates of deposit.............. 102,174 94,623 198,419 179,462 200,614
---------- ---------- ---------- ---------- ----------
Total........................... $ 138,510 $ 122,504 $ 264,366 $ 209,034 $ 225,983
========== ========== ========== ========== ==========
</TABLE>

9. FEDERAL HOME LOAN BANK ADVANCES

<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED SEPTEMBER 30,
MARCH 31, ----------------------------------------
1996 1995 1994 1993
---------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Maximum outstanding at any
month-end.......................... $4,384,798 $ 4,386,605 $ 2,697,829 $ 2,217,745
Daily average balance................ 4,346,960 3,560,844 2,285,630 1,344,129
Average interest rate................ 6.18% 6.31% 3.98% 3.62%
</TABLE>

The aggregate amounts of principal maturities for FHLB advances for the
periods indicated were as follows:

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
-------------------------------------------------
AT MARCH 31,
1996 1995 1994
----------------------- ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE AMOUNT RATE
------------ -------- ------------ -------- ------------ --------
(DOLLARS IN THOUSANDS)
<C> <C> <C> <C> <C> <C> <C>
1995................................. $ -- -- % $ -- -- % $ 1,838,200 4.98%
1996................................. -- -- 2,391,885 6.22 640,884 5.19
1997................................. 3,815,107 5.79 1,855,765 6.33 115,000 6.03
1998................................. 192,671 6.03 115,000 6.60 5,000 7.44
1999................................. 118,700 5.50 8,700 7.65 8,700 7.65
2000................................. 2,700 7.80 2,700 7.80 2,700 7.80
2001................................. 4,800 7.92 4,800 7.92 4,800 7.92
Thereafter........................... 5,045 8.33 5,045 8.33 5,045 8.33
------------ -------- ------------ -------- ------------ --------
Total...................... $ 4,139,023 5.80% $ 4,383,895 6.28% $ 2,620,329 5.11%
============ ======== ============ ======== ============ ========
</TABLE>

F-32

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
AND FEDERAL FUNDS PURCHASED

<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED SEPTEMBER 30,
MARCH 31, ------------------------------------
1996 1995 1994 1993
---------- ------------ ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
REVERSE REPURCHASE AGREEMENTS
Balance outstanding at
period-end.................... $ 949,936 $ 1,172,533 $ 553,000 $ 300,000
Fair value of collateral at
period-end.................... 987,478 1,239,527 673,000 321,200
Maximum outstanding at any
month-end..................... 1,096,508 1,355,540 553,000 659,000
Daily average balance........... 982,115 887,932 273,899 345,269
Average interest rate........... 5.82% 5.99% 3.85% 3.23%
FEDERAL FUNDS PURCHASED
Balance outstanding at
period-end.................... $ -- $ -- $ -- $ 10,000
Maximum outstanding at any
month-end..................... -- -- 15,000 10,000
Daily average balance........... 54 521 767 740
Average interest rate........... 5.94% 5.95% 3.73% 2.84%
</TABLE>

Scheduled maturities of reverse repurchase agreements outstanding at March
31, 1996 and September 30, 1995 were as follows:

AT MARCH 31, 1996 AT SEPTEMBER 30, 1995
----------------- ---------------------

(IN THOUSANDS)
October 1995...................... $-- $ 627,533
April 1996........................ 589,936 185,000
July 1996......................... 360,000 360,000
----------------- ---------------------
$ 949,936 $1,172,533
================= =====================

The counterparties to all reverse repurchase agreements at March 31, 1996
and September 30, 1995 have agreed to resell the same securities upon maturity
of such agreements. The securities collateralizing the reverse repurchase
agreements have been delivered to the counterparty or its agent. At March 31,
1996 and September 30, 1995, the reverse repurchase agreements were outstanding
with the following counterparties:

AT MARCH 31, AT SEPTEMBER 30,
1996 1995
------------ ----------------
CARRYING VALUE
--------------------------------
(IN THOUSANDS)
Morgan Stanley and Co.
Incorporated....................... $360,000 $ 496,614
Donaldson, Lufkin, and Jenrette
Securities Corporation............. 239,936 94,000
CS First Boston Corporation.......... 185,000 239,309
Goldman, Sachs and Co................ 165,000 146,500
Salomon Brothers Holding Company
Inc. .............................. -- 196,110
------------ ----------------
$949,936 $1,172,533
============ ================

11. SENIOR NOTES

In May 1993, the Parent Company issued $115 million of 8.05% Senior Notes
("Senior Notes") and repaid the long-term debt and the note payable to a related
party. In connection with this transaction, the Parent Company paid a prepayment
penalty, a make-whole premium, and charged-off the remaining capitalized debt

F-33

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
issuance costs of $9.5 million, $1.6 million, and $3.4 million, respectively.
These penalties and costs are reflected as an extraordinary loss in fiscal 1993.
The extraordinary loss had no tax benefit in accordance with SFAS No. 109.

The Senior Notes were not registered under the Securities Act of 1933, as
amended (the "Securities Act"), but were offered and sold in a private offering
to qualified institutional investors in reliance on Rule 144A under the
Securities Act and to a limited number of institutional accredited investors
within the meaning of Rule 501 of Regulation D under the Securities Act.

The Senior Notes had an initial interest rate of 8.05% PER ANNUM, payable
semi-annually, and are due on May 15, 1998. The interest rate on the Senior
Notes was subject to increase in certain circumstances if the Parent Company did
not consummate an Exchange Offer ("Exchange Offer") by certain dates. The
Exchange Offer would provide holders of the Senior Notes with the ability to
effect, for federal income tax purposes, a tax free exchange of the Senior
Notes, for Exchange Notes ("Exchange Notes"). The PER ANNUM interest rate on the
Senior Notes increased by 0.5%, to 8.55% in October 1993, and increased by 0.5%
to 9.05% in February 1994. When the Exchange Offer is consumated, the interest
rate will revert to the initial rate of 8.05%.

The Senior Notes are not redeemable prior to maturity, except upon the
occurrence of a change of control (as defined) of the Parent Company or the Bank
(i) at the option of the Parent Company, in whole but not in part, and (ii) at
the option of holders, in whole or in part, in each case, at 101% of their
principal amount plus accrued interest to the date of redemption. The Senior
Notes do not have the benefit of any sinking fund obligation.

The cost of issuing the Senior Notes totalled $4.9 million, and
amortization for the six months ended March 31, 1996 and 1995 and fiscal 1995,
1994, and 1993 was $488,000, $488,000, $976,000, $977,000, and $366,000,
respectively.

The Parent Company's ability to meet its long-term obligations is
contingent on the Bank's ability to pay dividends on its common stock. As
discussed in Note 15, the ability of the Bank to pay dividends on its preferred
or common stock without prior Office of Thrift Supervision (the "OTS") approval
is subject to its continued profitability and the maintenance of certain capital
ratios. Further, the payment of dividends by the Bank to the Parent Company on
the Bank's common stock is subordinate to the payment of dividends on the Bank's
preferred stock. See Note 16 for a discussion of the preferred stock of the
Bank. Under the Senior Note indenture, aggregate dividends paid by the Company
on the Common Stock and by the Bank on the Preferred Stock, Series A and
Preferred Stock, Series B, and certain other payments or investments, is limited
to the sum of (i) 50% of cumulative consolidated net income (or, if negative
100% of such deficit) after March 31, 1993, subject to certain exclusions, (ii)
the proceeds from any issuance of capital stock by the Parent Company after
March 31, 1993, and (iii) $12 million. At March 31, 1996 and September 30, 1995,
$123.7 million and $117.5 million were available for payment of future dividends
under this restriction. See Note 21 for a discussion of subsequent events.

12. FINANCIAL INSTRUMENTS

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires the disclosure of fair value information about financial instruments,
whether or not recognized in the statement of financial condition. Quoted market
prices, when available, are used as the measure of fair value. In cases where
quoted market prices are not available, fair values are based on present value
estimates or other valuation techniques. Because assumptions used in these
valuation techniques are inherently subjective in nature, the estimated fair
values cannot always be substantiated by comparison to independent market quotes
and, in many cases, the estimated fair values could not necessarily be realized
in an immediate sale or settlement of the instrument.

The fair value estimates presented herein are based on relevant information
available to management as of March 31, 1996, September 30, 1995, and 1994.
Management is not aware of any factors that would significantly

F-34

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
affect these estimated fair value amounts. As these reporting requirements
exclude certain financial instruments and all non-financial instruments, the
aggregate fair value amounts presented herein do not represent management's
estimate of the underlying value of the Parent Company and the Bank.
Additionally, such amounts exclude intangible asset values such as the value of
core deposit intangibles. The following methods and assumptions were used to
estimate the fair value of each class of financial instrument for which it is
practicable to estimate that value.

SHORT-TERM INTEREST-EARNING ASSETS. The carrying amount approximates the
fair value.

TRADING ACCOUNT ASSETS. The carrying values are market values, which are
generally based on quoted market prices or dealer quotes, if available. If a
quoted market price is not available, market value is estimated using quoted
market prices for instruments with similar credit, maturity, and interest
characteristics.

SECURITIES AND MORTGAGE-BACKED SECURITIES. The carrying amounts for certain
securities and mortgage-backed securities approximate fair value as they mature
within 90 days and do not present significant credit concerns. The fair value of
securities and mortgage-backed securities with longer maturities are estimated
based on bid prices published in financial newspapers or bid quotations received
from securities dealers.

LOANS. Fair values are estimated for portfolios of loans with similar
characteristics and include the value of related servicing rights, if
appropriate. Loans are segregated by type, by rate, and by performing and
nonperforming categories. As adjustable-rate loans (excluding single family)
reprice frequently, their carrying value approximates their fair value. For
fixed-rate loans and single family loans, excluding the single family mortgage
warehouse, fair value is estimated using contractual cash flows discounted at
secondary market rates, adjusted for prepayment estimates, or using current
rates offered for similar loans. Fair value of the single family mortgage
warehouse loans is estimated using outstanding commitment prices from investors
or current investor yield requirements. The fair value of nonperforming loans is
estimated using the carrying value less any related allowance for credit losses.

FHLB STOCK. The carrying amount approximates the fair value as it is
redeemable at its par value.

DEPOSITS. Under SFAS No. 107, the estimated fair value of deposits with no
stated maturity, which includes demand deposits, money market, and other savings
accounts, is equal to the amount payable on demand. Although market premiums
paid for depository institutions reflect an additional value for these deposits,
SFAS No. 107 prohibits adjusting fair value for any value expected to be derived
from retaining those deposits for a future period of time or from the benefit
that results from the ability to fund interest-earning assets with these deposit
liabilities. The SFAS No. 107 fair value of fixed-maturity deposits is
estimated, using a discounted cash flow model with rates currently offered by
the Bank for deposits of similar remaining maturities.

FHLB ADVANCES, REVERSE REPURCHASE AGREEMENTS, AND FEDERAL FUNDS PURCHASED.
The fair value is estimated based on the discounted value of contractual cash
flows using rates currently available to the Bank for borrowings with similar
terms and remaining maturities.

SENIOR NOTES. The fair value of the Senior Notes is based on discounting
future cash flows using the current rates at which similar debt would be issued
by issuers with similar credit ratings and remaining maturities.

OTHER ASSETS AND LIABILITIES. With the exception of that portion of the
excess servicing receivable classified as other assets, the carrying amounts of
financial instruments in these classifications are considered a reasonable
estimate of fair value due to their short-term nature. At March 31, 1996 and
September 30, 1995 and 1994, the fair value of the excess servicing receivable
exceeded its carrying value of $6.9 million, $7.1 million, and $7.9 million, by
$4.3 million, $5.1 million, and $4.7 million. The fair value of the excess
servicing receivable is equal to the present value of estimated net future cash
flows discounted at a current market rate.

FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK. The fair value of
interest rate swaps, caps, and floors, and financial options are based on
pricing models. The fair value of financial futures contracts, forward delivery

F-35

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
contracts, and fixed-rate commitments to extend credit are based on current
market prices. The notional amount of adjustable-rate commitments to extend
credit approximates their fair value.

SERVICING PORTFOLIO. See Note 1 for a description of the method used to
value the single family servicing portfolio.

SFAS NO. 107 FAIR VALUES
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, -------------------------------------------------
1996 1995 1994
----------------------- ----------------------- ----------------------
CARRYING SFAS NO. CARRYING SFAS NO. CARRYING SFAS NO.
VALUE 107 VALUE VALUE 107 VALUE VALUE 107 VALUE
---------- --------- ---------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL ASSETS
Short-term interest-earning
assets......................... $ 794,970 $ 794,970 $ 583,983 $ 583,983 $ 435,648 $ 435,648
Trading account assets........... 1,267 1,267 1,081 1,081 1,011 1,011
Securities....................... 58,351 59,458 116,013 116,811 114,115 114,580
Mortgage-backed securities....... 1,954,070 1,935,188 2,398,263 2,378,171 2,828,903 2,774,717
Loans............................ 7,878,080 8,014,145 8,260,240 8,418,464 5,046,174 5,095,133
FHLB stock....................... 233,038 233,038 225,952 225,952 132,816 132,816
Other assets..................... 108,708 112,996 150,542 155,631 86,849 91,548
NON-FINANCIAL ASSETS................. 238,152 N/A 247,460 N/A 264,645 N/A
========= ========= =========
---------- ---------- ---------
Total assets................. $11,266,636 $11,983,534 $8,910,161
========== ========== =========
FINANCIAL LIABILITIES
Deposits......................... $4,963,321 $5,004,342 $5,182,220 $5,215,438 $4,764,204 $4,791,027
FHLB advances.................... 4,139,023 4,145,304 4,383,895 4,395,965 2,620,329 2,615,204
Reverse repurchase agreements and
federal funds purchased........ 949,936 950,282 1,172,533 1,171,884 553,000 553,000
Senior Notes..................... 115,000 119,701 115,000 115,383 115,000 111,324
Other liabilities................ 156,418 156,418 162,073 162,073 116,484 116,484
NON-FINANCIAL LIABILITIES, MINORITY
INTEREST, AND STOCKHOLDERS'
EQUITY............................. 942,938 N/A 967,813 N/A 741,144 N/A
========= ========= =========
---------- ---------- ---------
Total liabilities, minority
interest, and stockholders'
equity..................... $11,266,636 $11,983,534 $8,910,161
========== ========== =========
OTHER FINANCIAL -- FAIR VALUE
Interest rate swaps............ $ -- $ (359) $ -- $ (1,517) $ -- $ (1,462)
Interest rate caps............. -- 2,954 -- 1,113 -- --
Interest rate floors........... -- 3,305 -- 4,895 -- --
Financial options.............. -- 156 -- 103 -- --
Financial futures contracts.... -- 971 -- (1,869) -- 375
Forward delivery contracts..... -- 6,686 -- (2,877) -- 3,014
Commitments to extend credit... -- 1,257 -- 897 -- (767)
NON-FINANCIAL -- UNREALIZED GAINS
Single family servicing
portfolio, as adjusted (See
Note 6)...................... -- 48,852 -- 47,153 -- 80,756
</TABLE>

FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The Bank enters into certain financial instruments with off-balance-sheet
risk in the ordinary course of business to reduce its exposure to changes in
interest rates. The Bank utilizes only traditional financial instruments for
this purpose and does not enter into instruments such as leveraged derivatives
or structured notes. The financial instruments used for hedging interest rate
risk include interest rate swaps, caps, floors, and financial options, financial
futures contracts, and forward delivery contracts. A hedge is an attempt to
reduce risk by creating a relationship whereby any losses on the hedged asset or
liability are expected to be counterbalanced in whole or part by gains on the
hedging financial instrument. Thus, market risk resulting from a particular off-
balance-sheet instrument is normally offset by other on or off-balance-sheet
transactions. The Bank seeks to

F-36

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
manage credit risk by limiting the total amount of arrangements outstanding,
both by counterparty and in the aggregate, by monitoring the size and maturity
structure of the financial instruments, by assessing the creditworthiness of the
counterparty, and by applying uniform credit standards for all activities with
credit risk.

Notional principal amounts indicated in the following table represent the
extent of the Bank's involvement in particular classes of financial instruments
and generally exceed the expected future cash requirements relating to the
instruments.

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, ----------------------
1996 1995 1994
------------ ---------- ----------

(IN THOUSANDS)
<S> <C> <C> <C>
Interest rate swaps.................. $ 150,000 $ 615,000 $ 505,000
Interest rate caps................... 1,315,000 565,000 --
Interest rate floors................. 310,000 310,000 200,000
Financial options.................... 89,100 23,000 --
Financial futures contracts.......... 31,800 529,000 40,900
Forward delivery contracts........... 514,767 509,463 354,439
Commitments to extend credit......... 1,300,855 999,792 969,072
</TABLE>

Financial instruments with off-balance-sheet risk at March 31, 1996 and
September 30, 1995 were scheduled to mature as follows:

<TABLE>
<CAPTION>
MATURING IN THE YEAR ENDING MARCH 31,
------------------------------------------------
1997 1998 1999 THEREAFTER TOTAL
------------ ---------- --------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest rate swaps.................. $ 150,000 $ -- $ -- $ -- $ 150,000
Interest rate caps................... 350,000 400,000 -- 565,000 1,315,000
Interest rate floors................. -- 310,000 -- -- 310,000
Financial options.................... 89,100 -- -- -- 89,100
Financial futures contracts.......... 31,800 -- -- -- 31,800
Forward delivery contracts........... 514,767 -- -- -- 514,767
Commitments to extend credit......... 1,051,080 195,766 12,231 41,778 1,300,855
------------ ---------- --------- ---------- ------------
Total...................... $ 2,186,747 $ 905,766 $ 12,231 $ 606,778 $ 3,711,522
============ ========== ========= ========== ============

MATURING IN THE YEAR ENDING SEPTEMBER 30,
-------------------------------------------------
1996 1997 1998 THEREAFTER TOTAL
------------ ---------- ---------- ---------- ------------
(IN THOUSANDS)
Interest rate swaps.................. $ 565,000 $ 50,000 $ -- $ -- $ 615,000
Interest rate caps................... -- -- -- 565,000 565,000
Interest rate floors................. -- 60,000 250,000 -- 310,000
Financial options.................... 23,000 -- -- -- 23,000
Financial futures contracts.......... 529,000 -- -- -- 529,000
Forward delivery contracts........... 509,463 -- -- -- 509,463
Commitments to extend credit......... 866,728 78,195 17,764 37,105 999,792
------------ ---------- ---------- ---------- ------------
Total...................... $ 2,493,191 $ 188,195 $ 267,764 $ 602,105 $ 3,551,255
============ ========== ========== ========== ============
</TABLE>

F-37

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INTEREST RATE SWAPS. Below is an itemization of swaps by type and items
hedged. These swaps were entered into in an effort to more closely match the
repricing of the Bank's liabilities with the related assets. During the six
months ended March 31, 1996, $465 million of interest rate swap contracts
expired.

NOTIONAL FIXED FLOATING HEDGED
AMOUNT RATE RATE ITEM
-------- ------- -------- -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
AT MARCH 31, 1996
Receive Floating/Pay Fixed........... $100,000 6.58% 5.63%(2) Commercial deposits
Receive Fixed/Pay Floating........... 25,000 4.60 5.58(2) Consumer deposits
25,000 6.00 5.40(1) Consumer deposits
--------
Total........................... $150,000
========
AT SEPTEMBER 30, 1995
Receive Floating/Pay Fixed........... $ 75,000 6.10 5.81(1) FHLB advances
340,000 6.50 5.86(1) Reverse repurchase
agreements
100,000 6.58 6.00(2) Commercial deposits
Receive Fixed/Pay Floating........... 75,000 4.32 5.88(2) Consumer deposits
25,000 6.00 5.81(1) Consumer deposits
--------
Total........................... $615,000
========
AT SEPTEMBER 30, 1994
Receive Floating/Pay Fixed........... $150,000 6.02 5.02(1) FHLB advances
280,000 5.76 4.90(1) Reverse repurchase
agreements
Receive Fixed/Pay Floating........... 75,000 4.32 4.82(2) Consumer deposits
--------
Total........................... $505,000
========
</TABLE>

(1) Based on the one month London InterBank Offered Rate ("LIBOR") as of the
last reset prior to the date reported.

(2) Based on the three month LIBOR as of the last reset prior to the date
reported.

During fiscal 1993, the Bank sold interest rate swap agreements with
notional amounts totalling $215.0 million prior to the original maturities,
resulting in a $4.1 million gain on the sale. The gain was deferred and
amortized as a credit to interest expense over the remaining terms of the hedged
deposit liabilities. This deferred gain was $1.8 million at September 30, 1994
and was fully amortized during fiscal 1995.

F-38

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INTEREST RATE CAPS. The Bank simultaneously purchased and sold caps during
fiscal 1995 in an effort to hedge certain adjustable-rate loans. The Bank
purchased interest rate caps during fiscal 1996 in an effort to hedge certain
adjustable-rate mortgage-backed securities. The Bank will receive interest on
the caps it purchased if the index rates rise above the contracted rates. The
Bank will pay interest on the cap it sold if the index rate rises above the
contracted rate.

NOTIONAL INDEX CONTRACTED
AMOUNT RATE RATE
-------- ----- ----------
(DOLLARS IN THOUSANDS)
AT MARCH 31, 1996........ buy $565,000 5.48 %(1) 7.86%
sell 565,000 5.48 (1) 8.57
750,000 5.06 (2) 5.81

AT SEPTEMBER 30, 1995.... buy $565,000 5.91 (1) 7.86
sell 565,000 5.91 (1) 8.57

(1) Based on the six month LIBOR as of the last reset prior to the date
reported.

(2) Based on the one year Constant Maturity Treasury ("CMT") as of the last
reset prior to the date reported.

INTEREST RATE FLOORS. Floor agreements outstanding at September 30, 1994
were entered into in an effort to shorten the duration of certain long-term
fixed-rate consumer deposits in a declining interest rate environment.
Additional floor contracts were entered into during fiscal 1995 in an effort to
hedge the MSRs against declines in value as a result of prepayments.

AVERAGE
NOTIONAL INDEX FLOOR HEDGED
AMOUNT RATE RATE ITEM
-------- ----- ------- -----------------
(DOLLARS IN THOUSANDS)
AT MARCH 31, 1996............ $260,000 5.78 %(1) 6.70% MSRs
50,000 6.43 (2) 7.20 MSRs
--------
Total................... $310,000
========
AT SEPTEMBER 30, 1995........ $260,000 6.01 (1) 6.70 MSRs
50,000 6.17 (2) 7.20 MSRs
--------
Total................... $310,000
========
AT SEPTEMBER 30, 1994........ $200,000 5.13 (3) 3.13 Consumer deposits
========

(1) Based on the five year CMT as of the last reset prior to the date reported.

(2) Based on the ten year CMT as of the last reset prior to the date reported.

(3) Based on the one month LIBOR as of the last reset prior to the date
reported.

An interest rate floor agreement with a notional principal amount of $530.0
million hedging single family MSRs was sold prior to its original maturity
during fiscal 1995, resulting in a gain of $6.4 million. The gain was deferred
and is being accreted to operations offsetting the related MSR intangible
amortization expense. At March 31, 1996, the deferred gain remaining from the
sale of the interest rate floor was approximately $5.5 million. Interest
received on interest rate floor agreements totalled $1.7 million and $817,000 at
March 31, 1996 and September 30, 1995.

FINANCIAL OPTIONS. At March 31, 1996 and September 30, 1995 there were
purchased Treasury call options outstanding with notional principal amounts
totalling $22.5 million and $23.0 million. These options were entered into in an
effort to hedge MSRs against declines in value as a result of an increase in
prepayments caused by declining interest rates. The purchased Treasury call
option outstanding at September 30, 1995 was sold

F-39

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
during fiscal 1996, for a gain of $319,000 as the MSRs being hedged were sold.
This gain was included in the gain on the sale of MSRs. During the six months
ended fiscal 1996, an additional option with notional principal amount of $22.5
million was purchased.

During fiscal 1996, the Bank purchased a Eurodollar put option with
notional principal amount of $2 billion in an effort to hedge certain MBS. The
Eurodollar put option was then sold for a loss of $49,000 as the mortgage-backed
securities being hedged were sold. The loss was included in the gain on the sale
of the MBS.

During fiscal 1996, Treasury put options with notional principal amounts
totalling $16.6 million were entered into in an effort to hedge loans the Bank
originated for its own portfolio from the date that the interest rate is locked
until the date the loans are sold or funded ("portfolio pipeline").

During fiscal 1996, the Bank purchased a Treasury call option with a
notional principal amount of $50.0 million. The option was entered into as a
trading activity and the related premium paid was included in trading account
assets at March 31, 1996.

FINANCIAL FUTURES CONTRACTS. At March 31, 1996 and September 30, 1995 and
1994 there were Treasury futures contracts outstanding with notional principal
amounts totalling $31.8 million, $160.0 million and $40.9 million. These
treasury futures contracts were entered into in an effort to hedge loans in the
portfolio pipeline. During fiscal 1996, Treasury futures contracts with notional
principal amounts totalling $141.0 million were closed as the loans being hedged
were sold. Losses of $327,000 and $6.0 million and gains of $37,000 on Treasury
futures contracts as of March 31, 1996 and September 30, 1995 and 1994 were
deferred and included as an adjustment to the carrying amount of the loans.

The Eurodollar futures contracts outstanding at September 30, 1995 with
notional amounts totalling $369.0 million, were entered into in an effort to
hedge the interest costs for a fixed period on certain borrowings that reprice
based on short-term rates. As of March 31, 1996, all of the Eurodollar futures
contracts outstanding at September 30, 1995 were closed or had expired. Losses
of $360,000 on closed Eurodollar futures contracts were deferred and included as
an adjustment to the carrying amount of the borrowings at March 31, 1996.

FORWARD DELIVERY CONTRACTS. Forward delivery contracts are entered into to
sell single family mortgage warehouse loans and to manage the risk that a change
in interest rates will decrease the value of the single family mortgage loan
warehouse or commitments to originate mortgage loans ("mortgage pipeline").

F-40

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FORWARD DELIVERY CONTRACTS

AT SEPTEMBER 30,
AT MARCH 31, --------------------
1996 1995 1994
------------ --------- ---------

(IN MILLIONS)
COUNTERPARTY
FNMA............................ $173 $ 265 $ 133
GNMA............................ 258 205 205
Other........................... 84 39 16
------------ --------- ---------
Total...................... $515 $ 509 $ 354
============ ========= =========
TYPE
Fixed........................... $463 $ 428 $ 236
Variable........................ 52 81 118
------------ --------- ---------
Total...................... $515 $ 509 $ 354
============ ========= =========
LOANS AVAILABLE TO FILL COMMITMENTS
Single family mortgage
warehouse....................... $380 $ 411 $ 252
Mortgage pipeline (estimated)... 191 185 136
------------ --------- ---------
Total...................... $571 $ 596 $ 388
============ ========= =========

SHORT SALES. During fiscal 1994, the Bank entered into short sales of
$121.5 million of Treasury notes in an effort to hedge the fixed-rate portfolio
pipeline, and also in an effort to hedge loans. The short sale positions were
closed out prior to their maturity and the resulting gain of $103,000 was
reflected as a realized gain on trading account assets for the year ended
September 30, 1994. The Bank does not routinely enter into short sales.

COMMITMENTS TO EXTEND CREDIT. The Bank's exposure to credit loss for
commitments to extend credit is represented by the contractual amount of those
agreements. The Bank uses the same credit policies in making funding commitments
as it does for on-balance-sheet instruments. These commitments generally have
fixed expiration dates or other termination clauses and require the payment of a
fee to the Bank. Because commitments may expire without being drawn upon, the
total contract amounts do not necessarily represent future cash requirements.

AT SEPTEMBER 30,
AT MARCH 31, ----------------------
1996 1995 1994
------------- ---------- ----------

(IN THOUSANDS)
Single family........................ $ 773,137 $ 589,157 $ 468,604
Other................................ 527,718 410,635 500,468
------------- ---------- ----------
Total...................... $1,300,855 $ 999,792 $ 969,072
============= ========== ==========
Fixed................................ $ 398,698 $ 282,101 $ 338,462
Variable............................. 902,157 717,691 630,610
------------- ---------- ----------
Total...................... $1,300,855 $ 999,792 $ 969,072
============= ========== ==========

Included in the commitments to extend credit amounts above are letters of
credit of $6.0 million, $5.4 million, and $320,000 at March 31, 1996 and
September 30, 1995 and 1994.

RECOURSE OBLIGATIONS. The Bank had servicing of approximately $25.6
million, $26.6 million, and $25.4 million, at March 31, 1996 and September 30,
1995 and 1994 for which certain recourse obligations apply. Management believes
that it has adequately provided reserves for its recourse obligations related to
this servicing.

F-41

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. INCOME TAXES

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
-------------------- ----------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CURRENT TAX PROVISION (BENEFIT)
Federal......................... $ 1,677 $ 2,094 $ 3,459 $ 1,145 $ 7,448
State........................... 2,033 1,447 2,080 1,841 2,091
Payments due in lieu of taxes... 7,112 6,327 15,261 (3,449) 8,491
DEFERRED TAX PROVISION (BENEFIT)
Federal......................... 14,456 10,318 16,575 17,681 44,441
State........................... -- -- 40 (1,279) --
Change in valuation allowance... -- -- -- (47,838) (103,203)
GOODWILL REDUCTION FOR UTILIZATION OF
ACQUIRED NET OPERATING LOSS
CARRYFORWARDS...................... -- -- -- -- 14,579
--------- --------- --------- ---------- -----------
Total income tax expense (benefit).. $ 25,278 $ 20,186 $ 37,415 $ (31,899) $ (26,153)
========= ========= ========= ========== ===========
</TABLE>

FEDERAL TAXATION

The Parent Company and the Bank are subject to regular income tax and
alternative minimum tax ("AMT"). For the six months ended March 31, 1996 and
fiscal 1995, alternative minimum taxable income ("AMTI") was generated resulting
primarily from the limitation on the utilization of AMT net operating loss
carryforwards ("NOLs"). Corporations may only offset 90% of their AMTI with AMT
NOLs. For the six months ended March 31, 1995 and fiscal 1994, federal taxable
income was generated resulting primarily from residual interests in real estate
mortgage investment conduits ("REMICs"), which cannot be offset by NOLs. For
fiscal 1993, AMTI was generated resulting primarily from assistance received
from the FRF and the limitation on the utilization of AMT NOLs.

Tax NOLs at March 31, 1996 and September 30, 1995 were as follows:

AT MARCH 31, 1996
----------------------------------------
ALTERNATIVE EXPIRATION
YEAR GENERATED REGULAR TAX MINIMUM TAX DATE
- ------------------------------------- ----------- ----------- ----------

(IN MILLIONS)
December 30, 1988.................... $ 24 $ 46 2003
September 30, 1989................... 329 154 2004
September 30, 1990................... 296 139 2005
September 30, 1991................... 119 52 2006
September 30, 1992................... 33 12 2007
September 30, 1994................... 7 -- 2009

AT SEPTEMBER 30, 1995
----------------------------------------

December 30, 1988.................... $ 103 $ 113 2003
September 30, 1989................... 329 154 2004
September 30, 1990................... 296 139 2005
September 30, 1991................... 119 52 2006
September 30, 1992................... 33 12 2007

Utilization of the NOLs generated for the year ended December 30, 1988 are
subject to federal income tax rules that limit the utilization to federal
taxable income of the Bank and its subsidiaries only. The remaining NOLs may be
utilized against the federal taxable income of the other companies within the
"affiliated group" of which the Parent Company and the Bank are members.

F-42

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PAYMENTS DUE IN LIEU OF TAXES

Pursuant to the terms of the Assistance Agreement, the amount of financial
assistance paid to the Bank by the FRF was reduced each year by an amount equal
to one-third of any Federal and State Net Tax Benefits (as defined by the
Assistance Agreement). The Assistance Agreement further provided that in no
event would the amount paid to the FRF related to Net Tax Benefits be less than
a guaranteed minimum totalling $10 million payable over five years. Additional
payments due in lieu of taxes above the guaranteed minimum payments are included
in the Consolidated Statements of Operations as incurred as a component of the
provision for taxes. The final guaranteed payment was made in July 1994 for
fiscal 1993. The Assistance Agreement was terminated in December 1993. As part
of the Settlement Agreement, the Parent Company, the Bank, and certain of their
direct and indirect parent entities entered into a Tax Benefits Agreement,
pursuant to which the Bank will pay one-third of certain tax benefits that are
utilized by the Bank through the taxable year ending nearest to September 30,
2003. The amounts reflected in the Consolidated Financial Statements are based
on estimated tax benefits utilized by the Bank and may vary from amounts paid
due to the actual utilization of tax benefits reported in the federal income tax
return.

ACCOUNTING FOR INCOME TAXES

During the fourth quarter of fiscal 1993, the Bank recognized $59 million
as a tax benefit for the expected utilization of $252 million in NOLs against
future taxable income. Tax benefits arising from an acquisition should first
reduce to zero any goodwill related to that acquisition, then decrease other
non-current intangible assets resulting from that acquisition, and finally
reduce income tax expense. As a result of the recognition of $59 million in tax
benefits, income tax expense was reduced $44 million and goodwill associated
with the Acquisition was reduced by $15 million during the fourth quarter of
1993. During fiscal 1994, the Bank recognized an additional $58 million as a tax
benefit for the expected utilization of $249 million in NOLs against future
taxable income. For the six months ended March 31, 1996 and 1995 and fiscal
1995, no tax benefit was recognized. See Note 21 for a discussion of subsequent
events.

For the six months ended March 31, 1996 and 1995 and fiscal 1995, 1994, and
1993, the Parent Company recognized no benefit for income taxes for its stand
alone net operating loss and net operating loss carryforwards, because the
criteria to recognize a tax benefit under SFAS No. 109 was not met.

F-43

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Income tax and related payments differ from the amount computed by applying
the federal income tax statutory rate on income as follows:

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
-------------------- ---------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
TAXES CALCULATED..................... $ 21,485 $ 16,967 $ 31,539 $ 34,356 $ 47,784
INCREASE (DECREASE) FROM
Reduction in valuation allowance
for
deferred tax assets........... -- -- -- (47,838) (103,203)
Change in estimate of net
deferred tax
assets........................ -- -- -- (11,340) --
Goodwill reduction for
utilization of
acquired net operating loss
carryforwards................. -- -- -- -- 14,579
Nontaxable assistance........... -- -- -- (8,100) (3,343)
Alternative minimum tax......... -- -- -- -- 7,448
Provision (benefit) for payments
due
in lieu of taxes.............. -- -- -- (3,449) 8,491
State income tax................ 2,033 1,448 2,080 1,841 2,091
Other........................... 1,760 1,771 3,796 2,631 --
--------- --------- --------- ---------- ----------
Total...................... $ 25,278 $ 20,186 $ 37,415 $ (31,899) $ (26,153)
========= ========= ========= ========== ==========
</TABLE>

The change in the valuation allowance for fiscal 1994 and 1993 arises from
the utilization of NOLs against both current and expected future taxable income
of the Bank.

F-44

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DEFERRED TAX ASSETS AND LIABILITIES

AT SEPTEMBER 30,
AT MARCH 31, ------------------------
1996 1995 1994
------------ ----------- -----------

(IN THOUSANDS)
DEFERRED TAX ASSETS
Net operating losses............ $ 193,196 $ 211,637 $ 241,702
Purchase accounting............. 9,451 10,064 12,700
Capital loss carryforwards...... -- -- 169
Unrealized losses on securities
available for sale............ 1,842 3,990 8,050
State........................... 2,817 2,817 4,338
AMT credit...................... 4,458 2,985 --
Other........................... 11,028 7,648 8,344
------------ ----------- -----------
Total deferred tax
assets................... 222,792 239,141 275,303
------------ ----------- -----------
DEFERRED TAX LIABILITIES
Bad debt reserve................ 8,955 11,577 34,928
FHLB stock...................... 8,673 8,673 --
REO............................. 7,096 7,096 --
State........................... 16 16 3,059
Other........................... 6,016 3,008 7,897
------------ ----------- -----------
Total deferred tax
liabilities.............. 30,756 30,370 45,884
------------ ----------- -----------
Net deferred tax asset before
valuation allowance........... 192,036 208,771 229,419
Valuation allowance............. (131,200) (131,200) (131,200)
------------ ----------- -----------
Net deferred tax assets.... $ 60,836 $ 77,571 $ 98,219
============ =========== ===========

The Bank is permitted under the Code to deduct an annual addition to a
reserve for bad debts in determining taxable income, subject to certain
limitations. This addition differs from the provision for credit losses for
financial reporting purposes. No deferred taxes have been provided on
approximately $52 million of tax bad debt reserves prior to 1988. This tax
reserve for bad debts is included in taxable income of later years only if the
bad debt reserves are subsequently used for purposes other than to absorb bad
debt losses. Circumstances that would require an accrual of a portion or all of
this unrecorded tax liability are a reduction in loan levels relative to the end
of 1987, failure to meet the tax definition of a savings institution, dividend
payments in excess of both current year and accumulated tax earnings and
profits, or other distributions in dissolution, liquidation, or redemption of
stock. Because the Bank does not intend to use the reserves for purposes other
than to absorb losses, deferred income taxes of approximately $18 million have
not been provided. The Bank has recognized the deferred tax consequences of
differences between the financial statement and income tax treatment of
allowances for credit losses arising after December 31, 1987. See Note 17.

F-45

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. EMPLOYEE BENEFITS

The Bank has an employee tax deferred savings plan (plan 401(k) under the
Code) available to all eligible employees. Through June 30, 1995, the Bank
contributed dollar for dollar up to three percent of the participant's earnings
and employees could contribute up to twelve percent of their earnings on a tax
deferred basis. The Bank's 401(k) plan was amended effective July 1, 1995. The
Bank currently contributes fifty cents for every dollar contributed up to two
percent of the participant's earnings, and dollar for dollar for contributions
between two and four percent of the participant's earnings. The maximum
contribution percentage is now fifteen percent of an employee's earnings on a
tax deferred basis, subject to Internal Revenue Service maximum contributions
limitations. This is a participant directed plan. Plan assets are held in trust
and managed by Fidelity Institutional Retirement Services Company. Contributions
to the plan are in such amounts and within certain limitations as the Bank may
authorize. The Bank's contributions to the plan were approximately $739,000,
$774,000, $1.5 million, $1.7 million, and $1.5 million for the six months ended
March 31, 1996 and 1995 and for fiscal 1995, 1994, and 1993.

15. REGULATORY MATTERS

The regulatory capital requirements, as defined in the OTS capital
regulations, are 1.50% for Tangible Capital, 3.00% for Core Capital, and 8.00%
for Total Capital. Tangible and Core Capital are stated as a percentage of
adjusted total assets and Total Capital is stated as a percentage of
risk-weighted assets. The following table shows the Bank's compliance with
regulatory capital requirements:

<TABLE>
<CAPTION>
AT MARCH 31, 1996 AT SEPTEMBER 30, 1995 AT SEPTEMBER 30, 1994
------------------------------ ------------------------------ ------------------------------
ACTUAL REQUIRED ACTUAL % ACTUAL REQUIRED ACTUAL % ACTUAL REQUIRED ACTUAL %
--------- --------- -------- --------- --------- -------- --------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STOCKHOLDERS'
EQUITY............. $ 826,455 $ 794,678 $ 646,334
Add: Net unrealized
losses........... 3,068 6,647 --
Less:
Intangible
assets......... (21,030) (23,956) (32,907)
Non-qualifying
deferred tax
assets......... (37,617) (37,617) (81,864)
Non-qualifying
MSRs........... (112) (25) (3,244)
--------- --------- ---------
TANGIBLE CAPITAL..... 770,764 $ 168,104 6.88% 739,727 $ 178,844 6.20% 528,319 $ 131,887 6.01%
Add: Core deposit
intangibles...... 9,463 10,838 15,259
--------- --------- ---------
CORE CAPITAL......... 780,227 336,492 6.96% 750,565 358,013 6.29% 543,578 264,232 6.17%
General allowance
for credit
losses........... 36,545 36,855 23,567
--------- --------- ---------
TOTAL CAPITAL........ $ 816,772 460,220 14.20% $ 787,420 468,245 13.45% $ 567,145 323,525 14.02%
========= ========= =========
</TABLE>

Notwithstanding the above capital requirements, the Bank's capital
requirements were established pursuant to the Forbearance Agreement issued
simultaneously with the Assistance Agreement. The OTS has taken the position,
with which the Bank disagrees, that the capital forbearances are no longer
available because of the enactment of the FIRREA. Despite the OTS position,
management believes that all significant waivers, approvals, and forbearances
related to the Bank's acquisition, including the capital forbearances, remain in
full force and effect following the enactment of FIRREA. Pursuant to the
Settlement Agreement, the Bank has retained all claims relating to the
forbearances against the United States of America, and on July 25, 1995, the
Bank, the Parent Company, and certain of their direct and indirect parent
entities filed suit against the United States of America in the Court of Federal
Claims for alleged failures of the United States to honor certain contractual
obligations, including obligations related to the Forbearance Agreement. The
lawsuit is in a preliminary stage.

F-46

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Bank meets its fully phased-in capital requirements. OTS regulations
generally allow dividends to be paid without prior OTS approval under certain
conditions provided that the level of regulatory capital, following the payment
of such dividends, meets the fully phased-in capital requirements. At March 31,
1996 and September 30, 1995, there was an aggregate of approximately $186.5
million and $148.9 million available for the payment of dividends under these
requirements. See Note 21 for a discussion of subsequent events.

The Bank's net income and stockholders' equity figures as presented in the
Consolidated Statements of Financial Condition and Operations in the Bank's
quarterly report on Form 10-Q for the quarter ended March 31, 1996 and the
Bank's annual report on Form 10-K for the year ended September 30, 1995 agree
with the information included in the Bank's Thrift Financial Report filed with
the OTS as of March 31, 1996 and as of September 30, 1995. The Bank's capital
level at March 31, 1996 and September 30, 1995, qualified it as "well-
capitalized", the highest of five tiers under applicable regulatory definition.

16. MINORITY INTEREST AND STOCKHOLDERS' EQUITY

MINORITY INTEREST

The Bank is authorized by its charter to issue a total of 10,000,000 shares
of preferred stock. In fiscal 1995, the Bank publicly issued 4,000,000 shares,
$25 liquidation preference per share, of 9.60% noncumulative preferred stock
(par value $0.01) (the "Preferred Stock, Series B"). In fiscal 1993, the Bank
publicly issued 3,420,000 shares, $25 liquidation preference per share, of
10.12% noncumulative preferred stock (par value $0.01) (the "Preferred Stock,
Series A"). Costs incurred in connection with the stock issuances were recorded
as reductions of paid-in capital. These shares are not owned by the Parent
Company.

Shares of the Series A and Series B Preferred Stock are not subject to
redemption prior to December 31, 1997 and September 30, 2000, except in the
event of certain mergers and other transactions. The shares of Series A and
Series B Preferred Stock are redeemable at the option of the Bank, in whole or
in part, at any time on or after December 31, 1997 or September 30, 2000, at the
redemption prices set forth in the table below:

SERIES A SERIES B DOLLAR EQUIVALENT
BEGINNING DECEMBER 31, BEGINNING SEPTEMBER 30, REDEMPTION PRICE PER SHARE
- ----------------------- ------------------------ ---------------- -----------------
<S> <C> <C> <C> <C>
1997 2000 105% $ 26.25
1998 2001 104 26.00
1999 2002 103 25.75
2000 2003 102 25.50
2001 2004 101 25.25
2002 and thereafter 2005 and thereafter 100 25.00
</TABLE>

WARRANTS

Warrants outstanding represent the right to purchase 158,823 shares of the
Bank's common stock for an exercise price of $0.01 per share. The warrants are
exercisable through December 29, 2004. The Bank agreed to make payments in lieu
of dividends to the holder of the warrants upon payment of dividends on the
Bank's common stock from December 28, 1993 through December 30, 1998. The
warrants will be redeemed upon the occurrence of the merger or liquidation of
the Bank or certain events constituting a change in control of the Bank's direct
or indirect parent entities, at a price equivalent to the value of the number of
shares of the Bank's common stock into which the warrants are exercisable, such
value to be derived from the consideration paid in connection with the merger,
liquidation, or change in control.

CAPITAL STOCK

The authorized capital stock of the Parent Company, par value of $0.01,
consists of Preferred Stock and Common Stock, Class A, B, and C. Of the 2,500
shares of preferred stock and the 2,797 shares of Class B Common Stock
authorized, no shares were issued at March 31, 1996 and September 30, 1995 and
1994. At

F-47

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
March 31, 1996 and September 30, 1995, authorized shares of Class A Common Stock
and Class C Common Stock were 22,500 and 2,797. The Class C Common Stock shares
have been privately sold to investors and are non-voting stock. Holders of Class
C Common Stock may, under certain circumstances, convert their shares into the
same number of shares of Class B Common Stock.

EARNINGS PER COMMON SHARE

The table below presents information necessary for the computation of
earnings per common share, on both a primary and fully diluted basis (in
thousands, except share data and earnings per share). The dilutive effect of the
outstanding Bank warrants has been considered in computing earnings per common
share. Average shares and per share results have been restated to reflect the
1,800 to one stock conversion effective June 1996. See Note 21 for a discussion
of subsequent events.

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
-------------------- ---------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Income before extraordinary loss..... $ 26,759 $ 23,659 $ 41,719 $ 108,970 $ 141,919
Less: Bank's net income attributable
to common stock equivalents on
warrants........................... (1,791) (1,622) (2,895) (6,451) (8,730)
--------- --------- --------- ---------- ----------
Income before extraordinary loss
applicable to common shares........ 24,968 22,037 38,824 102,519 133,189
Extraordinary loss................... -- -- -- -- (14,549)
--------- --------- --------- ---------- ----------
Net income applicable to common
shares............................. $ 24,968 $ 22,037 $ 38,824 $ 102,519 $ 118,640
========= ========= ========= ========== ==========
Average number of common shares
outstanding........................ 28,863 28,863 28,863 28,863 28,863
========= ========= ========= ========== ==========
Earnings per common share before
extraordinary loss................. $ 0.87 $ 0.76 $ 1.35 $ 3.55 $ 4.61
Extraordinary loss per common
share.............................. -- -- -- -- 0.50
--------- --------- --------- ---------- ----------
EARNINGS PER COMMON SHARE............ $ 0.87 $ 0.76 $ 1.35 $ 3.55 $ 4.11
========= ========= ========= ========== ==========
</TABLE>

17. COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

A petition for review has been filed in the United States District Court of
Appeals for the Fifth Circuit seeking to modify, terminate, and set aside the
order approving the Acquisition, which involved substantially all of the Bank's
initial assets and liabilities. The same petitioner filed a Motion to Intervene
and a Complaint in Intervention in an action pending in the U.S. District Court
of Texas, also seeking to set aside the order approving the Acquisition. The
petitioner contends, in both cases, that it submitted the most favorable bid to
acquire the assets and liabilities of the Old USAT and that it should have been
selected as the winning bidder.

The Parent Company is not a party to either of these proceedings. The Bank
has intervened in the Fifth Circuit case and may file a Motion to Intervene in
the District Court case at a later date. Management believes, after consultation
with legal counsel, that the claims of the petitioner are barred by applicable
time limits, have no basis for assertion under existing law, and will not have a
material adverse effect on the Bank's or the Parent Company's financial
condition, results of operations, or liquidity.

The Bank is involved in legal proceedings occurring in the ordinary course
of business that management believes, after consultation with legal counsel, are
not, in the aggregate, material to the financial condition, results of
operations, or liquidity of the Bank or the Parent Company.

A substantial part of the Bank's business has involved the origination,
purchase, and sale of mortgage loans. During the past several years, numerous
individual claims and purported consumer class actions were commenced against a
number of financial institutions, their subsidiaries, and other mortgage lending
companies seeking civil statutory and actual damages and rescission under the
federal Truth In Lending Act (the "TILA"), as well as remedies for alleged
violations of various state unfair trade practices laws and restitution or
unjust enrichment in connection with certain mortgage loan transactions.

F-48

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Bank has a substantial mortgage loan servicing portfolio and maintains
escrow accounts in connection with this servicing. During the past several
years, numerous individual claims and purported consumer class action claims
were commenced against a number of financial institutions, their subsidiaries,
and other mortgage lending institutions generally seeking declaratory relief
that certain of the lenders' escrow account servicing practices violate the Real
Estate Settlement Practices Act and breach the lenders' contracts with
borrowers. Such claims also generally seek actual damages and attorney's fees.

In addition to the foregoing, mortgage lending institutions have been
subjected to an increasing number of other types of individual claims and
purported consumer class action claims that relate to various aspects of the
origination, pricing, closing, servicing, and collection of mortgage loans and
that allege inadequate disclosure, breach of contract, or violation of state
laws. Claims have involved, among other things, interest rates and fees charged
in connection with loans, interest rate adjustments on adjustable-rate mortgage
loans, timely release of liens upon loan payoffs, the disclosure and imposition
of various fees and charges, and the placing of collateral protection insurance.

While the Bank has had various claims similar to those discussed above
asserted against it, management does not expect these claims to have a material
adverse effect on the Bank's or the Parent Company's financial condition,
results of operations, or liquidity.

INSURANCE ASSESSMENT

Congress has passed legislation, which is currently in joint conference
committee that, if it became law, would result in an assessment on all Savings
Association Insurance Fund ("SAIF")-insured deposits in such amounts that will
increase the SAIF Fund reserve ratio to 1.25% of SAIF-insured deposits. This
one-time assessment has been estimated in the range of 0.75% to 0.90% of
deposits. If this legislation became law, it could result in an assessment, net
of tax, payable by the Bank amounting to as much as $23.7 million to $28.5
million. Thereafter, SAIF premiums are expected to decline to levels
approximating BIF premiums. Management believes that the Bank will be able to
maintain its status as a "well-capitalized" institution after payment of any
assessment described above.

BAD DEBT RESERVE RECAPTURE

The United States Congress has passed legislation that, if it became law,
would require recapture of a thrift's post-1987 tax bad debt reserve over a six
year period, with the opportunity to defer recapture by up to two years if
certain residential loan requirements are met. There would be no financial
statement impact from this recapture because a deferred tax liability has
already been provided for on the Bank's post-1987 tax bad debt reserves. At
September 30, 1995, the Bank had approximately $101 million of post-1987 tax bad
debt reserves. The current tax liability resulting from recapture of these
reserves would be reduced by NOLs available to offset this income.

F-49

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FACILITIES OPERATIONS

Future minimum payments on data processing agreements and significant
operating leases in effect at September 30, 1995 were as follows (in thousands):

YEARS ENDING
SEPTEMBER 30, AMOUNT
- ------------------------------------- ---------

1996.............................. $ 19,884
1997.............................. 11,671
1998.............................. 8,937
1999.............................. 5,072
2000.............................. 1,495
Thereafter........................ 8,678
---------
$ 55,737
=========

Total data processing and rental expense for the six months ended March 31,
1996 and 1995 and fiscal 1995, 1994, and 1993, under the same or similar
agreements as in the preceding table, after consideration of certain credits and
rental income, were $11.5 million, $11.5 million, $22.9 million, $22.4 million,
and $21.5 million.

18. FINANCIAL HIGHLIGHTS BY PRINCIPAL BUSINESS OPERATION

The Bank operates as a fully integrated financial services company. This
business is conducted through the Community Banking, Financial Markets, and
Commercial Banking Groups, which comprise the Banking Segment, and the Mortgage
Banking Segment of the Bank. Summarized financial information by business
segment and for the Parent Company for the periods indicated, was as follows:

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED MARCH 31, 1996
-----------------------------------------------------------------
MORTGAGE
BANKING BANKING PARENT
SEGMENT SEGMENT COMPANY ELIMINATIONS COMBINED
------------- --------- ------- ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues................................ $ 123,856 $ 49,842 $(1,366) $ (5,791) $ 166,541
Earnings before income taxes and
minority interest..................... 64,121 3,006 (1,930 ) (3,810) 61,387
Depreciation and amortization of
intangibles........................... 4,594 11,132 488 (1,981) 14,233
Capital expenditures.................... 2,750 239 -- -- 2,989
Average identifiable assets............. 11,295,739 634,013 4,707 (394,930) 11,539,529
Loan transfers to (from)................ 493,180 (493,180) -- -- --
Interest income (expense) on single
family mortgage warehouse outstanding
loan balance.......................... 11,895 (11,895) -- -- --
Servicing (expense) income on Banking
Segment's loans....................... (6,917) 6,917 -- -- --
</TABLE>

- ------------

The elimination amounts reflect the following: (i) dividends received by the
Parent Company from the Bank, (ii) interest income and MSR amortization expense
relating to loans held by the Banking Segment serviced by the Mortgage Banking
Segment, and (iii) the single family mortgage warehouse funded by the Banking
Segment.

F-50

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED MARCH 31, 1995
-----------------------------------------------------------------
MORTGAGE
BANKING BANKING PARENT
SEGMENT SEGMENT COMPANY ELIMINATIONS COMBINED
------------- --------- ------- ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues................................ $ 93,919 $ 67,149 $ 38 $ (6,827) $ 154,279
Earnings before income taxes and
minority interest..................... 37,223 17,029 (566 ) (5,209) 48,477
Depreciation and amortization of
intangibles........................... 6,194 10,149 488 (1,618) 15,213
Capital expenditures.................... 1,123 105 -- -- 1,228
Average identifiable assets............. 9,359,478 452,593 9,587 (289,060) 9,532,598
Loan transfers to (from)................ 659,186 (659,186) -- -- --
Interest income (expense) on single
family mortgage warehouse outstanding
loan balance.......................... 9,393 (9,393) -- -- --
Servicing (expense) income on Banking
Segment's loans....................... (5,604) (5,604) -- -- --

FOR THE YEAR ENDED SEPTEMBER 30, 1995
-------------------------------------------------------------------
Revenues............................. 203,115 119,601 (3,910 ) (9,826) 308,980
Earnings before income taxes and
minority interest.................. 82,163 19,357 (5,000 ) (6,409) 90,111
Depreciation and amortization of
intangibles........................ 12,305 20,965 976 (3,417) 30,829
Capital expenditures................. 5,859 273 -- -- 6,132
Average identifiable assets.......... 10,258,857 482,965 8,061 (312,820) 10,437,063
Loan transfers to (from)............. 1,012,771 (1,012,771) -- -- --
Interest income (expense) on single
family mortgage warehouse
outstanding loan balance........... 19,903 (19,903) -- -- --
Servicing (expense) income on Banking
Segment's loans.................... (12,672) 12,672 -- -- --

FOR THE YEAR ENDED SEPTEMBER 30, 1994
-------------------------------------------------------------------
Revenues............................. 189,378 115,544 1,279 (13,530) 292,671
Earnings before income taxes and
minority interest.................. 73,757 24,404 (645 ) (11,435) 86,081
Depreciation and amortization of
intangibles........................ 16,560 10,696 977 (2,095) 26,138
Capital expenditures................. 5,456 4,962 -- -- 10,418
Average identifiable assets.......... 8,174,275 717,551 4,401 (612,600) 8,283,627
Loan transfers to (from)............. 1,319,020 (1,319,020) -- -- --
Interest income (expense) on single
family mortgage warehouse
outstanding loan balance........... 33,173 (33,173) -- -- --
Servicing (expense) income on Banking
Segment's loans.................... (10,223) 10,223 -- -- --

FOR THE YEAR ENDED SEPTEMBER 30, 1993
-------------------------------------------------------------------
Revenues............................. 221,476 121,028 1,070 (15,224) 328,350
Earnings before income taxes,
minority interest, and
extraordinary loss................. 106,015 31,492 20 (15,224) 122,303
Depreciation and amortization of
intangibles........................ 20,757 8,445 694 -- 29,896
Capital expenditures................. 6,145 8,256 -- -- 14,401
Average identifiable assets.......... 7,193,808 981,711 7,790 (864,532) 7,318,777
Loan transfers to (from)............. 528,666 (528,666) -- -- --
Interest income (expense) on single
family mortgage warehouse
outstanding loan balance........... 43,103 (43,103) -- -- --
Servicing (expense) income on Banking
Segment's loans.................... (8,256) 8,256 -- -- --
</TABLE>

Revenues are comprised of net interest income (before the provision for
credit losses) and non-interest income, and, in the case of Parent Company only
revenue, dividends received from the Bank. Interest costs incurred by the Parent
Company are included in its results above since they relate to long-term debt
and are not directly attributable to a specific segment.

F-51

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Earnings before income taxes, minority interest, and extraordinary loss equal
revenue, less the provision for credit losses and non-interest expenses.
Non-interest expenses of the Bank are fully allocated to each segment of the
Bank. Non-interest expenses incurred by support departments that are directly
attributable to a segment are charged to the appropriate segment. General
corporate overhead expenses not specifically identified to an individual
segment, but necessary for the maintenance of the Bank as a going concern, are
also allocated to the two segments. Parent Company expenses are not allocated to
the Bank's business segments.

For segment reporting purposes, the value of servicing related to loans
purchased from third parties by the Banking Segment is segregated from the
original loan basis and is allocated to the Mortgage Banking Segment. The
amortization of this capitalized amount approximated $1.2 million and $1.2
million for the six months ended March 31, 1996 and 1995, respectively, $2.4
million for fiscal 1995, and $1.8 million for fiscal 1994, and is reflected in
the Mortgage Banking Segment figures above.

For loans transferred from the Mortgage Banking Segment to the Banking
Segment, the difference, if any, between the Banking Segment's "purchase price"
and the loan's actual Book Value is retained by the Mortgage Banking Segment at
the time of transfer. The amount retained is amortized to operations of the
Mortgage Banking Segment and approximated $736,000 and $443,000 for the six
months ended March 31, 1996 and 1995, respectively, $1.0 million for fiscal
1995, and $283,000 for fiscal 1994.

19. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table represents summarized data for the first two quarters
in fiscal 1996 and each of the quarters in fiscal 1995 and 1994 (in thousands,
except earnings per share).

<TABLE>
<CAPTION>
1996 1995 1994
-------------------- ------------------------------------------ --------------------
SECOND FIRST FOURTH THIRD SECOND FIRST FOURTH THIRD
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income...................... $ 203,436 $ 217,785 $ 224,308 $ 194,865 $ 172,992 $ 154,594 $ 133,563 $ 119,136

Interest expense..................... 148,548 160,741 166,580 146,220 129,915 110,045 93,118 76,998
--------- --------- --------- --------- --------- --------- --------- ---------
Net interest income.............. 54,888 57,044 57,728 48,645 43,077 44,549 40,445 42,138
Provision for credit losses.......... 3,181 2,669 9,663 10,473 3,223 934 3,421 798
--------- --------- --------- --------- --------- --------- --------- ---------
Net interest income after provision
for credit losses.................. 51,707 54,375 48,065 38,172 39,854 43,615 37,024 41,340
Non-interest income.................. 27,687 26,922 25,201 23,127 30,641 36,012 28,479 26,453
Non-interest expense................. 50,012 49,292 52,466 40,465 51,553 50,092 50,607 53,723
--------- --------- --------- --------- --------- --------- --------- ---------
Income before income taxes and
minority interest.................. 29,382 32,005 20,800 20,834 18,942 29,535 14,896 14,070
Income tax expense (benefit)......... 12,144 13,134 8,169 9,060 8,062 12,124 681 (38,551)
--------- --------- --------- --------- --------- --------- --------- ---------
Net income before minority
interest........................... 17,238 18,871 12,631 11,774 10,880 17,411 14,215 52,621
Loss minority interest:
Subsidiary preferred stock
dividends...................... 4,563 4,563 4,111 2,163 2,163 2,163 2,164 2,163
Payments in lieu of dividends.... -- 224 -- 71 -- 306 -- 298
--------- --------- --------- --------- --------- --------- --------- ---------
NET INCOME....................... $ 12,675 $ 14,084 $ 8,520 $ 9,540 $ 8,717 $ 14,942 $ 12,051 $ 50,160
========= ========= ========= ========= ========= ========= ========= =========
Net income applicable to common
stock.............................. $ 11,824 $ 13,144 $ 7,936 $ 8,851 $ 8,086 $ 13,951 $ 11,531 $ 47,199
Earnings per common share............ $ 0.41 $ 0.46 $ 0.28 $ 0.31 $ 0.28 $ 0.48 $ 0.40 $ 1.63
Average common shares and common
stock equivalents outstanding...... 28,863 28,863 28,863 28,863 28,863 28,863 28,863 28,863
</TABLE>

SECOND FIRST
QUARTER QUARTER
--------- ---------
Interest income...................... $ 118,333 $ 123,674

Interest expense..................... 73,617 77,191
--------- ---------
Net interest income.............. 44,716 46,483
Provision for credit losses.......... 1,298 1,480
--------- ---------
Net interest income after provision
for credit losses.................. 43,418 45,003
Non-interest income.................. 27,909 36,048
Non-interest expense................. 45,133 50,130
--------- ---------
Income before income taxes and
minority interest.................. 26,194 30,921
Income tax expense (benefit)......... 5,751 220
--------- ---------
Net income before minority
interest........................... 20,443 30,701
Loss minority interest:
Subsidiary preferred stock
dividends...................... 2,163 2,163
Payments in lieu of dividends.... 59 --
--------- ---------
NET INCOME....................... $ 18,221 $ 28,538
========= =========
Net income applicable to common
stock.............................. $ 17,038 $ 26,751
Earnings per common share............ $ 0.59 $ 0.93
Average common shares and common
stock equivalents outstanding...... 28,863 28,863

The 1995 figures have been restated to reflect the implementation of SFAS
No. 122 effective October 1, 1994. See Notes 1 and 6. Average shares and per
share results have been restated to reflect the 1,800 to one stock conversion
effective June 1996. See Note 21 for a discussion of subsequent events.

F-52

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

20. CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY

The condensed financial statements of the Parent Company do not include all
of the information and notes normally included with financial statements
prepared in accordance with generally accepted accounting principles. See Note
21 for a discussion of subsequent events.

PARENT COMPANY
CONDENSED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS)

AT AT SEPTEMBER 30,
MARCH 31, ----------------------
1996 1995 1994
--------- ---------- ----------

ASSETS
Cash and cash equivalents............ $ 1 $ 1 $ 1
Securities purchased under agreements
to resell.......................... 682 2,121 710
Investment in Bank United............ 640,955 609,178 560,834
Intangible assets.................... 2,075 2,563 3,539
Other assets......................... 1,775 1,287 5,398
--------- ---------- ----------
TOTAL ASSETS......................... $645,488 $ 615,150 $ 570,482
========= ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Senior Notes......................... $115,000 $ 115,000 $ 115,000
Other liabilities.................... 4,047 4,047 4,120
--------- ---------- ----------
Total liabilities.......... 119,047 119,047 119,120
--------- ---------- ----------
STOCKHOLDERS' EQUITY
Common stock
Class A......................... 1 1 1
Class C......................... 1 1 1
Paid-in capital...................... 118,009 118,009 121,767
Retained earnings.................... 411,498 384,739 343,020
Unrealized gains (losses) on
subsidiary's securities and
mortgage-backed securities
available for sale, net of tax..... (3,068 ) (6,647) (13,427)
--------- ---------- ----------
Total stockholders'
equity................... 526,441 496,103 451,362
--------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY............................. $645,488 $ 615,150 $ 570,482
========= ========== ==========

These condensed financial statements should be read in conjunction with the
Consolidated Financial Statements and Notes thereto.

F-53

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PARENT COMPANY
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
-------------------- ---------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME
Dividends from the Bank.............. $ 3,810 $ 5,209 $ 6,409 $ 11,435 $ 15,224
Short-term interest-earning assets... 29 31 88 21 107
--------- --------- --------- ---------- ----------
Total income............... 3,839 5,240 6,497 11,456 15,331
--------- --------- --------- ---------- ----------
EXPENSE
Interest expense -- note payable to
related party...................... -- -- -- -- 601
Interest expense -- long-term debt... -- -- -- -- 10,214
Interest expense -- Senior Notes..... 5,205 5,202 10,407 10,177 3,446
Amortization of intangibles.......... 488 488 976 977 694
Other................................ 76 116 114 947 356
--------- --------- --------- ---------- ----------
Total expense.............. 5,769 5,806 11,497 12,101 15,311
--------- --------- --------- ---------- ----------
INCOME (LOSS) BEFORE UNDISTRIBUTED
INCOME OF BANK, INCOME TAXES, AND
EXTRAORDINARY LOSS................. (1,930) (566) (5,000) (645) 20
Equity in undistributed income of
the Bank........................ 28,198 23,675 45,322 104,316 141,910
--------- --------- --------- ---------- ----------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY LOSS................. 26,268 23,109 40,322 103,671 141,930
Income tax (benefit) expense....... (491) (550) (1,397) (5,299) 11
--------- --------- --------- ---------- ----------
INCOME BEFORE EXTRAORDINARY LOSS..... 26,759 23,659 41,719 108,970 141,919
Extraordinary loss -- early
extinguishment of debt............. -- -- -- -- (14,549)
--------- --------- --------- ---------- ----------
NET INCOME........................... $ 26,759 $ 23,659 $ 41,719 $ 108,970 $ 127,370
========= ========= ========= ========== ==========
</TABLE>

These condensed financial statements should be read in conjunction with the
Consolidated Financial Statements and Notes thereto.

F-54

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PARENT COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
---------------------- ------------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................... $ 26,759 $ 23,659 $ 41,719 $ 108,970 $ 127,370
Adjustments to reconcile net income
to net cash
(used) provided by operating
activities:
Equity in undistributed income
of the
Bank.......................... (28,198) (23,675) (45,322) (104,316) (141,910)
Amortization of intangibles..... 488 488 976 977 694
Change in other assets.......... (488) 3,566 4,111 (5,393) (1,594)
Change in other liabilities..... -- 26 (73) 159 2,670
---------- ---------- ---------- ----------- -----------
Net cash (used) provided by
operating activities..... (1,439) 4,064 1,411 397 (12,770)
---------- ---------- ---------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in securities purchased
under agreements to resell......... 1,439 (4,064) (1,411) (397) (313)
---------- ---------- ---------- ----------- -----------
Net cash provided (used) by
investing activities..... 1,439 (4,064) (1,411) (397) (313)
---------- ---------- ---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt and
note payable to related
party......................... -- -- -- -- (106,090)
Proceeds from issuance of Senior
Notes......................... -- -- -- -- 115,000
---------- ---------- ---------- ----------- -----------
Net cash provided by
financing activities..... -- -- -- -- 8,910
---------- ---------- ---------- ----------- -----------
NET DECREASE IN CASH AND CASH
EQUIVALENTS........................ -- -- -- -- (4,173)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD................ 1 1 1 1 4,174
---------- ---------- ---------- ----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD...................... $ 1 $ 1 $ 1 $ 1 $ 1
========== ========== ========== =========== ===========
</TABLE>

These condensed financial statements should be read in conjunction with the
Consolidated Financial Statements and Notes thereto.

F-55

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

21. SUBSEQUENT EVENTS

NAME CHANGE. In June 1996, the Company changed its name from USAT Holdings
Inc. to Bank United Corp. and the Bank changed its name from Bank United of
Texas to Bank United.

DIVIDEND PAYMENT. On May 6, 1996, the Bank paid a $100 million dividend to
the Company on the Bank Common Stock and a related contractually required
payment to the FDIC in lieu of dividends in the amount of $5.9 million. On the
same day, the Company paid a dividend on its common stock in the amount of $100
million.

RESTRUCTURING. Prior to June 1996, the Company was a subsidiary of Hyperion
Holdings Inc., a Delaware corporation ("Hyperion Holdings"), which was a
subsidiary of Hyperion Partners L.P., a Delaware limited partnership ("Hyperion
Partners"). In June 1996, the following actions were taken (collectively, the
"Restructuring"): (i) Hyperion Holdings exchanged shares of a newly created
class of its nonvoting common stock for certain shares of its voting common
stock held by Hyperion Partners; (ii) Hyperion Partners then distributed the
Hyperion Holdings common stock owned by it to its limited and general partners
in accordance with the terms of the limited partnership agreement of Hyperion
Partners (the "Distribution") and; (iii) following the Distribution, Hyperion
Holdings was merged with and into the Company (the "Merger"). As a result of the
Merger, the common stockholders of Hyperion Holdings (i.e. the limited and
general partners of Hyperion Partners) received shares of Class A voting and
Class B nonvoting Common Stock of the Company. As of the date of the Merger,
Hyperion Holdings had no significant assets, liabilities or business other than
its investment in the Company. The Merger was accounted for in a manner similar
to a pooling of interests. Due to the immaterial nature of the assets,
liabilities and operations of Hyperion Holdings prior to the Merger, prior
period results were not restated.

STOCK CONVERSION. Prior to the Merger, the Company had outstanding 13,238
shares of Class A voting and 2,797 shares of Class C nonvoting Common Stock.
Subsequent to the Restructuring and an 1,800 to one stock conversion, the
Company had a total of 28,863,000 shares of Common Stock outstanding as follows:
Class A Common Stock (voting) -- 23,828,400 shares, Class B (nonvoting) --
5,034,600 shares, and no shares of Class C Common Stock (which were cancelled
upon their conversion to Class B Common Stock in the Merger). The Company also
filed a registration statement in June 1996 with the Securities and Exchange
Commission to offer shares of the Class A Common Stock to the public.

RECOGNITION OF TAX BENEFITS. The Parent Company's Certificate of
Incorporation and By-Laws were restated with the intent to preserve certain
beneficial tax attributes limiting disposition of Class A Common Stock and other
interests in the Parent Company by certain stockholders. These limitations
allowed the recognition of tax benefits in June 1996 for the expected
utilization of NOLs. These tax benefits were not recognized in prior periods due
to limitations on the utilization of NOLs if an ownership change had occurred.
In June 1996 the Parent Company and the Bank entered into a federal tax sharing
agreement. This agreement results in the recognition of a tax benefit for the
expected utilization of the Parent Company's NOLs by the Bank. A total tax
benefit of $101.7 million was recognized as a reduction of income tax expense
and an increase in the net deferred tax asset.

EXECUTIVE MANAGEMENT COMPENSATION PLAN. In June 1996, the Company Board
approved an Executive Management Compensation Plan (the "Compensation Plan")
containing the following provisions: (i) a cash bonus of $ million payable by
1996; (ii) the award of shares of Company Class A Common Stock with restrictions
on its tranferability for a period of three years from its issuance; and (iii)
issuance of options for purchase of an equivalent number of shares of Company
Class A Common Stock; such options vest ratably over three years from the date
of grant. The options' exercise price approximates the fair market value at the
date of the grant and will expire if not exercised in June 2003.

Compensation expense totalling $10 million, $6.2 million net of tax, will
be recognized in the third quarter of 1996 for the cash bonus and the restricted
stock award. Since the stock options have an exercise price approximating the
fair value of the Parent Company's stock, compensation expense is not recognized
for their issuance.

F-56

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." This statement defines a fair value based method of accounting
for an employee stock option or similar equity instrument and encourages
adoption of that method for all employee stock compensation plans. However, it
also allows an entity to continue to measure compensation cost for those plans
using the intrinsic value based method currently being followed and make pro
forma disclosures of net income and earnings per share under the fair value
based method of accounting. This statement is effective for financial statements
with fiscal years beginning after December 15, 1995, with earlier application
encouraged. Management is currently evaluating the proposed alternatives under
this statement.

These transactions are illustrated in the March 31, 1996 Pro Forma
Condensed Consolidated Statement of Financial Condition and the March 31, 1996
Pro Forma Condensed Consolidated Statement of Operations.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(IN THOUSANDS)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS PRO FORMA
AT ------------------------------------------------- AT
MARCH 31, DIVIDEND TAX ISSUANCE COMPENSATION MARCH 31,
1996 PAYMENT BENEFIT COSTS PLAN 1996
----------- --------- -------- -------- ------------ ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents............. $ 135,691 $ -- $ -- $ -- $ -- $ 135,691
Securities purchased under agreements
to resell and federal funds sold.... 659,279 (105,900) -- (2,000 ) (4,000) 547,379
Trading account assets................ 1,267 -- -- -- -- 1,267
Securities............................ 58,351 -- -- -- -- 58,351
Mortgage-backed securities............ 1,954,070 -- -- -- -- 1,954,070
Loans................................. 7,878,080 -- -- -- -- 7,878,080
Other assets.......................... 579,898 -- 101,700 -- -- 681,598
----------- --------- -------- -------- ------------ ----------
Total assets.................... $11,266,636 $(105,900) $101,700 $(2,000 ) $ (4,000) $11,256,436
=========== ========= ======== ======== ============ ==========
LIABILITIES, MINORITY INTEREST, AND
STOCKHOLDERS' EQUITY
LIABILITIES
Deposits.............................. $ 4,963,321 $ -- $ -- $ -- $ -- $4,963,321
Borrowings............................ 5,088,959 -- -- -- -- 5,088,959
Other liabilities..................... 502,415 -- -- -- (3,800) 498,615
----------- --------- -------- -------- ------------ ----------
Total liabilities............... 10,554,695 -- -- -- (3,800) 10,550,895
MINORITY INTEREST
Preferred stock issued by consolidated
subsidiary.......................... 185,500 -- -- -- -- 185,500
STOCKHOLDERS' EQUITY.................... 526,441 (105,900) 101,700 (2,000 ) (200) 520,041
----------- --------- -------- -------- ------------ ----------
TOTAL LIABILITIES, MINORITY INTEREST,
AND STOCKHOLDERS' EQUITY.............. $11,266,636 $(105,900) $101,700 $(2,000 ) $ (4,000) $11,256,436
=========== ========= ======== ======== ============ ==========
</TABLE>

F-57

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
FOR THE SIX PRO FORMA ADJUSTMENTS FOR THE SIX
MONTHS ENDED ------------------------------------------------ MONTHS ENDED
MARCH 31, DIVIDEND TAX ISSUANCE COMPENSATION MARCH 31,
1996 PAYMENT BENEFIT COSTS PLAN 1996
------------- --------- --------- -------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest income.................. $421,221 $ -- $ -- $-- $ -- $ 421,221
Interest expense................. 309,289 -- -- -- -- 309,289
------------- --------- --------- -------- ------------ -------------
Net interest income.......... 111,932 -- -- -- -- 111,932
Provision for credit losses...... 5,850 -- -- -- -- 5,850
------------- --------- --------- -------- ------------ -------------
Net interest income after
provision for credit
losses..................... 106,082 -- -- -- -- 106,082
NON-INTEREST INCOME
Net gains (losses)
Sales of single family
servicing rights and single
family warehouse loans....... 19,157 -- -- -- -- 19,157
Securities and mortgage-backed
securities................... 2,863 -- -- -- -- 2,863
Other loans.................... 3,485 -- -- -- -- 3,485
Loan servicing fees and
charges........................ 22,107 -- -- -- -- 22,107
Other fees and changes........... 6,997 -- -- -- -- 6,997
------------- --------- --------- -------- ------------ -------------
Total non-interest income.... 54,609 -- -- -- -- 54,609
NON-INTEREST EXPENSE
Compensation and benefits........ 39,898 -- -- -- 10,000 49,898
Occupancy........................ 9,439 -- -- -- -- 9,439
Data processing.................. 8,120 -- -- -- -- 8,120
Amortization of intangibles...... 9,801 -- -- -- -- 9,801
Other............................ 32,046 -- -- -- -- 32,046
------------- --------- --------- -------- ------------ -------------
Total non-interest expense... 99,304 -- -- -- 10,000 109,304
------------- --------- --------- -------- ------------ -------------
INCOME BEFORE TAXES AND MINORITY
INTEREST........................... 61,387 -- -- -- (10,000) 51,387
Income tax expense (benefit)......... 25,278 -- (101,700) -- (3,800) (80,222)
------------- --------- --------- -------- ------------ -------------
Net Income Before Minority
Interest........................... 36,109 -- 101,700 -- (6,200) 131,609
Less minority interest:
Preferred Stock Dividends...... 9,126 -- -- -- -- 9,126
Payments in lieu of
dividends.................... 224 5,900 -- -- -- 6,124
------------- --------- --------- -------- ------------ -------------
Net Income........................... $26,759 $(5,900) $ 101,700 $-- $ (6,200) $ 116,359
============= ========= ========= ======== ============ =============
EARNINGS PER COMMON SHARE............ $ 0.87
=============
</TABLE>

The historical average number of common shares outstanding used in
computing earnings per common share for the six months ended March 31, 1996 were
28,863,000 and reflects the 1,800 to one stock conversion in June 1996. The pro
forma average number of common shares outstanding have been adjusted to give
effect to the shares of restricted stock issued in accordance with the
Compensation Plan, as though these shares were issued on October 1, 1995.

F-58

BANK UNITED CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table shows the Bank's regulatory capital ratios on a
historical and a pro forma basis:

MARCH 31,
-----------------------
1996 1996
HISTORICAL PRO FORMA
---------- ---------

Tangible Capital........................ 6.88% 5.89%
Core Capital............................ 6.96 5.97%
Total Capital........................... 14.20 12.12%

The Parent Company's and the Bank's dividend restrictions on a historical
and a pro forma basis follows:

MARCH 31,
-----------------------
1996 1996
HISTORICAL PRO FORMA
---------- ---------

Parent Company
Dividend Limitation -- Senior Note
Indenture........................ $ 123,746 $ 62,672
Bank
Dividend Limitation -- OTS
Regulations...................... $ 186,460 $159,577

F-59

ANNEX A
EXCHANGE AND REGISTRATION RIGHTS

EXCHANGE AND REGISTRATION RIGHTS, dated as of May 10, 1993, by and between
USAT Holdings, Inc., a Delaware corporation [now known as Bank United Corp.]
(the "Company"), and the purchasers (collectively the "Purchasers") of the 8.05%
Senior Notes due May 15, 1998 of the Company.

1. CERTAIN DEFINITIONS.

For purposes of these Exchange and Registration Rights, the following terms
shall have the following respective meanings:

(a) "CLOSING DATE" shall mean the date on which the Securities are
initially issued.

(b) "COMMISSION" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular
purpose.

(c) "EFFECTIVE TIME", in the case of an Exchange Offer, shall mean the
date on which the Commission declares the Exchange Offer registration
statement effective or on which such registration statement otherwise
becomes effective and, in the case of a Shelf Registration, shall mean the
date on which the Commission declares the Shelf Registration effective or
on which the Shelf Registration otherwise becomes effective.

(d) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, or
any successor thereto, as the same shall be amended from time to time.

(e) "EXCHANGE OFFER" shall have the meaning assigned thereto in
Section 2 hereof.

(f) The term "HOLDER" shall mean any person who, at the Closing Date,
owns any Registrable Securities and such of its respective successors and
assigns who acquire Registrable Securities, directly or indirectly, from
such person or from any successor or assign of such person.

(g) "INDENTURE" shall mean the Indenture, dated as of May 15, 1993,
between the Company and The Bank of New York, as Trustee.

(h) The term "PERSON" shall mean a corporation, association,
partnership, organization, business, individual, government or political
subdivision thereof or governmental agency.

(i) "REGISTRABLE SECURITIES" shall mean the Securities; PROVIDED,
HOWEVER, that such Securities shall cease to be Registrable Securities when
(i) a registration statement registering such Securities under the
Securities Act has been declared or becomes effective and such Securities
have been sold or otherwise transferred by the holder thereof pursuant to
such effective registration statement or (ii) such Securities are sold
pursuant to Rule 144 (or any successor provision) promulgated under the
Securities Act under circumstances in which any legend borne by such
Securities relating to restrictions on transferability thereof, under the
Securities Act or otherwise, is removed by the Company or pursuant to the
Indenture.

(j) "REGISTRATION EXPENSES" shall have the meaning assigned thereto in
Section 4 hereof.

(k) "SECURITIES" shall mean, collectively, the 8.05% Senior Notes due
May 15, 1998 of the Company to be issued and sold to the Purchasers, and
Securities issued in exchange therefor or in lieu thereof pursuant to the
Indenture.

(l) "SECURITIES ACT" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.

(m) "SHELF REGISTRATION" shall have the meaning assigned thereto in
Section 2 hereof.

(n) "TRUST INDENTURE ACT" shall mean the Trust Indenture Act of 1939,
or any successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.

A-1

2. REGISTRATION UNDER THE SECURITIES ACT.

(a) Except as set forth in Section 2(b) below, the Company agrees to use
its best efforts to file under the Securities Act, as soon as practicable, but
no later than 30 days after the Closing Date, a registration statement relating
to an offer to exchange (the "Exchange Offer") any and all of the Securities for
a like aggregate principal amount of debt securities of the Company which are
substantially identical to the Securities (and which are entitled to the
benefits of a trust indenture which is substantially identical to the indenture
and which has been qualified under the Trust Indenture Act) except that they
have been registered pursuant to an effective registration statement under the
Securities Act. The Company agrees to use its best efforts to consummate the
Exchange Offer on or prior to the date that is 150 days after the Closing Date.
The Exchange Offer will be registered under the Act on the appropriate form and
will comply with all applicable tender offer rules and regulations under the
Exchange Act. The Exchange Offer will be deemed to have been consummated only if
the debt securities received by holders in the Exchange Offer for Registrable
Securities are, upon receipt, transferable by each such holder (other than an
affiliate of the Company) without restriction under the Securities Act and the
Exchange Act and without material restrictions under the blue sky or securities
laws of a substantial proportion of the States. The Exchange Offer shall be
deemed to have been consummated upon the earlier to occur of (i) the Company
having exchanged new securities for all outstanding Registrable Securities
pursuant to the Exchange Offer and (ii) the Company having exchanged, pursuant
to the Exchange Offer, new securities for all Registrable Securities that have
been tendered and not withdrawn on the date that is 30 days following the
commencement of the Exchange Offer. Upon the making of an Exchange Offer in
accordance with this paragraph (a), the Company may omit to comply with such of
the procedures set forth in Section 3(c) hereof as may be appropriate under the
circumstances without adversely affecting the interests of the holders of
Registrable Securities under these Exchange and Registration Rights, taken as a
whole, but the other provisions of these Exchange and Registration Rights other
than Sections 3(d), 3(e), clause (i) and the last sentence of Section 4, and
Section 7, shall continue to apply MUTATIS MUTANDIS. The Company agrees, in the
event any holder of Securities that is a broker-dealer shall have so requested a
reasonable time prior to the effectiveness of the registration statement
relating to the Exchange Offer and provided that such broker-dealer shall have
provided the Company with all information required to be included in the
registration statement with respect to such holder, (i) to use its best efforts
to include in such registration statement a prospectus for use in any resales by
such broker-dealer and (ii) to keep such registration statement effective for a
period of 60 days after the effective date thereof. With respect to such
registration statement the Company and such holder shall have the benefit of,
and shall provide to the other party, the rights of indemnification and
contribution set forth in Section 6 hereof.

(b) If prior to the consummation of the Exchange Offer existing Commission
interpretations are changed such that the debt securities received by holders in
the Exchange Offer for Registrable Securities are not or would not be, upon
receipt, transferable by each such holder (other than an affiliate of the
Company) without restriction under the Securities Act, the Company shall file
under the Securities Act, as soon as practicable, but no later than 30 days
after the Closing Date, a "shelf" registration statement providing for the
registration of, and the sale on a continuous or delayed basis by the holders
of, all of the Registrable Securities, pursuant to Rule 415 under the Securities
Act and/or any similar rule that may be adopted by the Commission (the "Shelf
Registration"). The Company agrees to use its best efforts to cause the Shelf
Registration to become or be declared no later than 150 days after the Closing
Date and to keep such Shelf Registration continuously effective for a period
ending on the earlier of the third anniversary of the Effective Time or such
time as there are no longer any Registrable Securities. The Company further
agrees, if necessary, to supplement or make amendments to the Shelf
Registration, if required by the rules, regulations or instructions applicable
to the registration form used by the Company for such Shelf Registration or by
the Securities Act or rules and regulations thereunder for shelf registration,
and the Company agrees to furnish to the holders of the Registrable Securities
copies of any such supplement or amendment prior to its being used and/or filed
with the Commission.

(c) The holders of the Registrable Securities shall be entitled to a
"Step-Up" in the interest rate as set forth in the Registrable Securities during
any period after the 30th day after the Closing Date prior to the date on which
a registration statement is filed pursuant to Section 2(a) or 2(b) above, and
during any period after the 150th day after the Closing Date prior to the date
on which the Exchange Offer has been consummated or the Shelf Registration has
become or been declared effective by the Commission. In addition, the holders of
the Registrable Securities shall be entitled to a "Second Step-Up" in the
interest rate as set forth in the Registrable

A-2

Securities during any period after the 270th day after the Closing Date prior to
the date on which the Exchange Offer has been consummated or the Shelf
Registration has become or been declared effective by the Commission.

3. REGISTRATION PROCEDURES.

(a) Prior to or at the Effective Time of the Exchange Offer or the Shelf
Registration, as the case may be, the Company shall qualify the Indenture under
the Trust Indenture Act of 1939.

(b) In the event that such qualification would require the appointment of a
new trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.

(c) In connection with the Company's obligations with respect to the Shelf
Registration, if applicable, the Company shall use its best efforts to effect or
cause the Shelf Registration to permit the sale of the Registrable Securities by
the holders thereof in accordance with the intended method or methods of
distribution thereof described in the Shelf Registration. In connection
therewith, the Company shall, as soon as reasonably possible:

(i) prepare and file with the Commission a registration statement with
respect to the Shelf Registration on any form which may be utilized by the
Company and which shall permit the disposition of the Registrable
Securities in accordance with the intended method or methods thereof, as
specified in writing by the holders of the Registrable Securities, and use
its best efforts to cause such registration statement to become effective
as soon as reasonably possible thereafter;

(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus included
therein as may be necessary to effect and maintain the effectiveness of
such registration statement for the period specified in Section 2(b) hereof
and as may be required by the applicable rules and regulations of the
Commission and the instructions applicable to the form of such registration
statement, and furnish to the holders of the Registrable Securities copies
of any such supplement or amendment prior to its being used and/or filed
with the Commission;

(iii) comply with the provisions of the Securities Act with respect to
the disposition of all of the Registrable Securities covered by such
registration statement in accordance with the intended methods of
disposition by the holders thereof set forth in such registration
statement;

(iv) provide (A) the holders of the Registrable Securities to be
included in such registration statement, (B) the underwriters (which term,
for purposes of these Exchange and Registration Rights, shall include a
person deemed to be an underwriter within the meaning of Section 2(11) of
the Securities Act), if any, thereof, (C) the sales or placement agent, if
any, therefor, (D) counsel for such underwriters or agent, and (E) not more
than one counsel for all the holders of such Registrable Securities the
opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the Commission,
and each amendment or supplement thereto;

(v) for a reasonable period prior to the filing of such registration
statement, and throughout the period specified in Section 2(b) hereof, make
available for inspection by the parties referred to in Section 3(c)(iv)
above who shall certify to the Company that they have a current intention
to sell the Registrable Securities pursuant to the Shelf Registration
Statement such financial and other information and books and records of the
Company, and cause the officers, employees, counsel and independent
certified public accountants of the Company to respond to such inquiries,
as shall be reasonably necessary, in the judgment of the respective counsel
referred to in such Section, to conduct a reasonable investigation within
the meaning of Section 11 of the Securities Act; PROVIDED, HOWEVER, that
each such party shall be required to maintain in confidence and not to
disclose to any other person any information or records reasonably
designated by the Company in writing as being confidential, until such time
as (A) such information becomes a matter of public record (whether by
virtue of its inclusion in such registration statement or otherwise), or
(B) such person shall be required so to disclose such information pursuant
to the subpoena or order of any court or other governmental agency or body
having jurisdiction over the matter (subject to the requirements of such
order, and only after such person shall have given the Company prompt prior
written notice of such requirement), or (C) such information is required to
be set forth in such registration statement or the prospectus included
therein or in an amendment to such registration statement or an amendment
or supplement to such prospectus in order that such registration statement,
prospectus, amendment or supplement, as the case may be, does not contain
an untrue statement of a material fact or omit to state therein a material
fact required to

A-3

be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;

(vi) promptly notify the selling holders of Registrable Securities,
the sales or placement agent, if any, therefor and the managing underwriter
or underwriters, if any, thereof and confirm such advice in writing, (A)
when such registration statement or the prospectus included therein or any
prospectus amendment or supplement or post-effective amendment has been
filed, and, with respect to such registration statement or any
post-effective amendment, when the same has become effective, (B) of any
comments by the Commission and by the Blue Sky or securities commissioner
or regulator of any state with respect thereto or any request by the
Commission for amendments or supplements to such registration statement or
prospectus or for additional information, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of such
registration statement or the initiation or threatening of any proceedings
for that purpose, (D) if at any time the representations and warranties of
the Company contemplated by Section 3(c)(xv) or Section 5 hereof cease to
be true and correct in all material respects, (E) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purpose, or (F) at
any time when a prospectus is required to be delivered under the Securities
Act, that such registration statement, prospectus, prospectus amendment or
supplement or post-effective amendment, or any document incorporated by
reference in any of the foregoing, contains an untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances then existing;

(vii) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement or any
post-effective amendment thereto at the earliest practicable date;

(viii) if requested by any managing underwriter or underwriters, any
placement or sales agent or any holder of Registrable Securities, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as is required by the applicable rules and regulations of the
Commission and as such managing underwriter or underwriters, such agent or
such holder specifies should be included therein relating to the terms of
the sale of such Registrable Securities, including, without limitation,
information with respect to the principal amount of Registrable Securities
being sold by such holder or agent or to any underwriters, the name and
description of such holder, agent or underwriter, the offering price of
such Registrable Securities and any discount, commission or other
compensation payable in respect thereof, the purchase price being paid
therefor by such underwriters and with respect to any other terms of the
offering of the Registrable Securities to be sold by such holder or agent
or to such underwriters; and make all required filings of such prospectus
supplement or post-effective amendment promptly after notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment;

(ix) furnish to each holder of Registrable Securities, each placement
or sales agent, if any, therefor, each underwriter, if any, thereof and the
respective counsel referred to in Section 3(c)(iv) an executed copy of such
registration statement, each such amendment and supplement thereto (in each
case including all exhibits thereto and documents incorporated by reference
therein) and such number of copies of such registration statement
(excluding exhibits thereto and documents incorporated by reference therein
unless specifically so requested by such holder, agent or underwriter, as
the case may be) and of the prospectus included in such registration
statement (including each preliminary prospectus and any summary
prospectus), in conformity with the requirements of the Securities Act, and
such other documents, as such holder, agent, if any, and underwriter, if
any, may reasonably request in order to facilitate the offering and
disposition of the Registrable Securities owned by such holder, offered or
sold by such agent or underwritten by such underwriter and to permit such
holder, agent and underwriter to satisfy the prospectus delivery
requirements of the Securities Act; and the Company hereby consents to the
use of such prospectus (including such preliminary and summary prospectus)
and any amendment or supplement thereto by each such holder and by any such
agent and underwriter, in each case in the form most recently provided to
such party by the Company, in connection with the offering and sale of the
Registrable Securities covered by the prospectus (including such
preliminary and summary prospectus) or any supplement or amendment thereto;

A-4

(x) use its best efforts to (A) register or qualify the Registrable
Securities to be included in such registration statement under such
securities laws or blue sky laws of such jurisdictions as any holder of
such Registrable Securities and each placement or sales agent, if any,
therefor and underwriter, if any, thereof shall reasonably request, (B)
keep such registrations or qualifications in effect and comply with such
laws so as to permit the continuance of offers, sales and dealings therein
in such jurisdictions during the period the Shelf Registration is required
to remain effective under Section 2(b) above and for so long as may be
necessary to enable any such holder, agent or underwriter to complete its
distribution of Securities pursuant to such registration statement and (C)
take any and all other actions as may be reasonably necessary or advisable
to enable each such holder, agent, if any, and underwriter, if any, to
consummate the disposition in such jurisdictions of such Registrable
Securities; PROVIDED, HOWEVER, that the Company shall not be required for
any such purpose to (I) qualify as a foreign corporation in any
jurisdiction wherein it would not otherwise be required to qualify but for
the requirements of this Section 3(c)(x), (II) consent to general service
of process in any such jurisdiction or (III) make any changes to the
Company's Certificate of Incorporation or By-laws or any agreement between
the Company and its stockholders;

(xi) use its best efforts to obtain the consent or approval of each
governmental agency or authority, whether federal, state or local, which
may be required to effect the Shelf Registration or the offering or sale in
connection therewith or to enable the selling holder or holders to offer,
or to consummate the disposition of, their Registrable Securities;

(xii) cooperate with the holders of the Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold,
which certificates shall be printed, lithographed or engraved, or produced
by any combination of such methods, and which shall not bear any
restrictive legends; and, in the case of an underwritten offering, enable
such Registrable Securities to be in such denominations and registered in
such names as the managing underwriters may request at least two business
days prior to any sale of the Registrable Securities;

(xiii) provide a CUSIP number for all Registrable Securities, not
later than the effective date of the Shelf Registration;

(xiv) enter into one or more underwriting agreements, engagement
letters, agency agreements, "best efforts" underwriting agreements or
similar agreements, as appropriate, including (without limitation)
customary provisions relating to indemnification and contribution, and take
such other actions in connection therewith as any holder of Registrable
Securities aggregating at least 33% in aggregate principal amount of the
Outstanding Securities, and as the holders of Registrable Securities
aggregating at least 66% in aggregate principal amount of the Outstanding
Securities, shall request in order to expedite or facilitate the
disposition of such Registrable Securities; provided, that the Company
shall not be required to enter into any such agreement more than once with
respect to all of the Registrable Securities, and may delay entering into
such agreement until the consummation of any underwritten public offering
which the Company shall have then engaged;

(xv) whether or not an agreement of the type referred to in Section
(3)(c)(xiv) hereof is entered into and whether or not any portion of the
offering contemplated by such registration statement is an underwritten
offering or is made through a placement or sales agent or any other entity,
(A) make such representations and warranties to the holders of such
Registrable Securities and the placement or sales agent, if any, therefor
and the underwriters, if any, thereof in form, substance and scope as are
customarily made in connection with an offering of debt securities pursuant
to any appropriate agreement and/or to a registration statement filed on
the form applicable to the Shelf Registration; (B) obtain an opinion of
counsel to the Company in customary form and covering such matters, of the
type customarily covered by such an opinion, as the managing underwriters,
if any, as any holder of at least 25% in aggregate principal amount of the
Registrable Securities, and as the holders of at least a majority in
aggregate principal amount of the Registrable Securities may reasonably
request, addressed to such holder or holders and the placement or sales
agent, if any, therefor and the underwriters, if any, thereof and dated the
effective date of such registration statement (and if such registration
statement contemplates an underwritten offering of a part or all of the
Registrable Securities, dated the date of the closing under the
underwriting agreement relating thereto) (it being agreed that the matters
to be covered by such opinion shall include, without limitation, the

A-5

due incorporation and good standing of the Company and its subsidiaries;
the qualification of the Company and its subsidiaries to transact business
as foreign corporations; the due authorization, execution and delivery of
these Exchange and Registration Rights and of any agreement of the type
referred to in Section (3)(c)(xiv) hereof; the due authorization,
execution, authentication and issuance, and the validity and
enforceability, of the Securities; the absence of material legal or
governmental proceedings involving the Company; the absence of a breach by
the Company or its subsidiaries of, or a default under, agreements binding
the Company or any subsidiary; the absence of governmental approvals
required to be obtained in connection with the Shelf Registration, the
offering and sale of the Registrable Securities, these Exchange and
Registration Rights or any agreement of the type referred to in Section
(3)(c)(xiv) hereof; the compliance as to form of such registration
statement and any documents incorporated by reference therein and of the
Indenture with the requirements of the Securities Act and the Trust
Indenture Act, respectively; and, as of the date of the opinion and of the
registration statement or most recent post-effective amendment thereto, as
the case may be, the absence from such registration statement and the
prospectus included therein, as then amended or supplemented, and from the
documents incorporated by reference therein of an untrue statement of a
material fact or the omission to state therein a material fact necessary to
make the statements therein not misleading (in the case of such documents,
in the light of the circumstances existing at the time that such documents
were filed with the Commission under the Exchange Act)); (C) obtain a "cold
comfort" letter or letters from the independent certified public
accountants of the Company addressed to the selling holders of Registrable
Securities and the placement or sales agent, if any, therefor and the
underwriters, if any, thereof, dated (I) the effective date of such
registration statement and (II) the effective date of any prospectus
supplement to the prospectus included in such registration statement or
post-effective amendment to such registration statement which includes
unaudited or audited financial statements as of a date or for a period
subsequent to that of the latest such statements included in such
prospectus (and, if such registration statement contemplates an
underwritten offering pursuant to any prospectus supplement to the
prospectus included in such registration statement or post-effective
amendment to such registration statement which includes unaudited or
audited financial statements as of a date or for a period subsequent to
that of the latest such statements included in such prospectus, dated the
date of the closing under the underwriting agreement relating thereto),
such letter or letters to be in customary form and covering such matters of
the type customarily covered by letters of such type; (D) deliver such
documents and certificates, including officers' certificates, as may be
reasonably requested by any holder of at least 25% in aggregate principal
amount of the Registrable Securities being sold or by the holders of at
least a majority in aggregate principal amount of the Registrable
Securities being sold and the placement or sales agent, if any, therefor
and the managing underwriters, if any, thereof to evidence the accuracy of
the representations and warranties made pursuant to clause (A) above or
those contained in Section 5(a) hereof and the compliance with or
satisfaction of any agreements or conditions contained in the underwriting
agreement or other agreement entered into by the Company; and (E) undertake
such obligations relating to expense reimbursement, indemnification and
contribution as are provided in Section 6 hereof;

(xvi) notify in writing each holder of Registrable Securities of any
proposal by the Company to amend or waive any provision of these Exchange
and Registration Rights pursuant to Section 9(h) hereof and of any
amendment or waiver effected pursuant thereto, each of which notices shall
contain the text of the amendment or waiver proposed or effected, as the
case may be;

(xvii) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or participate as
a member of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Rules of Fair Practice and the
By-Laws of the National Association of Securities Dealers, Inc. ("NASD"))
thereof, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, assist such broker-dealer in complying with the
requirements of such Rules and By-Laws, including, without limitation, by
(A) if such Rules or By-Laws, including Schedule E thereto, shall so
require, engaging a "qualified independent underwriter" (as defined in such
Schedule) to participate in the preparation of the registration statement
relating to such Registrable Securities, to exercise usual standards of due
diligence in respect thereto and, if any portion of the offering
contemplated by such registration statement is an underwritten offering or
is made through a placement or sales agent, to recommend the yield

A-6

of such Registrable Securities, (B) indemnifying any such qualified
independent underwriter to the extent of the indemnification of
underwriters provided in Section 6 hereof, and (C) providing such
information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Rules of Fair Practice
of the NASD; and

(xviii) comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders as soon as
practicable but in any event not later than eighteen months after the
effective date of such registration statement, an earning statement of the
Company and its subsidiaries complying with Section 11(a) of the Securities
Act (including, at the option of the Company, Rule 158 thereunder).

(d) In the event that the Company would be required, pursuant to Section
3(c)(vi)(F) above, to notify the selling holders of Registrable Securities, the
placement or sales agent, if any, therefor and the managing underwriters, if
any, thereof, the Company shall without delay prepare and furnish to each such
holder, to each placement or sales agent, if any, and to each underwriter, if
any, a reasonable number of copies of a prospectus supplemented or amended so
that, as thereafter delivered to purchasers of Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
Each holder of Registrable Securities agrees that upon receipt of any notice
from the Company pursuant to Section 3(c)(vi)(F) hereof, such holder shall
forthwith discontinue the disposition of Registrable Securities pursuant to the
registration statement applicable to such Registrable Securities until such
holder shall have received copies of such amended or supplemented prospectus,
and if so directed by the Company, such holder shall deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus covering such Registrable Securities
at the time of receipt of such notice.

(e) The Company may require each holder of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding such holder and such holder's intended method of
distribution of such Registrable Securities as the Company may from time to time
reasonably request in writing, but only to the extent that such information is
required in order to comply with the Securities Act. Each such holder agrees to
notify the Company as promptly as practicable of any inaccuracy or change in
information previously furnished by such holder to the Company or of the
occurrence of any event in either case as a result of which any prospectus
relating to such registration contains or would contain an untrue statement of a
material fact regarding such holder or such holder's intended method of
distribution of such Registrable Securities or omits to state any material fact
regarding such holder or such holder's intended method of distribution of such
Registrable Securities required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing,
and promptly to furnish to the Company any additional information required to
correct and update any previously furnished information or required so that such
prospectus shall not contain, with respect to such holder or the distribution of
such Registrable Securities, an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.

4. REGISTRATION EXPENSES.

The Company agrees to bear and to pay or cause to be paid promptly upon
request being made therefor all expenses incident to the Company's performance
of or compliance with these Exchange and Registration Rights, including, without
limitation, (a) all Commission and any NASD registration and filing fees and
expenses, (b) all fees and expenses in connection with the qualification of the
Securities for offering and sale under the State securities and blue sky laws
referred to in Section 3(c)(x) hereof, including reasonable fees and
disbursements of counsel for the placement or sales agent or underwriters in
connection with such qualifications, (c) all expenses relating to the
preparation, printing, distribution and reproduction of each registration
statement required to be filed hereunder, each prospectus included therein or
prepared for distribution pursuant hereto, each amendment or supplement to the
foregoing, the certificates representing the Securities and all other documents
relating hereto, (d) messenger and delivery expenses, (e) fees and expenses of
the Trustee under the Indenture and of any escrow agent or custodian, (f)
internal expenses (including, without limitation, all salaries and expenses of
the Company's officers and employees performing legal or accounting duties), (g)
fees, disbursements and expenses

A-7

of counsel and independent certified public accountants of the Company
(including the expenses of any opinions or "cold comfort" letters required by or
incident to such performance and compliance), (h) fees, disbursements and
expenses of any "qualified independent underwriter" engaged pursuant to Section
3(c)(xvii) hereof, (i) reasonable fees, disbursements and expenses of one
counsel for the holders of Registrable Securities retained in connection with
such registration, as selected by the holders of at least a majority in
aggregate principal amount of the Registrable Securities being registered, and
fees, expenses and disbursements of any other persons, including special
experts, retained by the Company in connection with such registration
(collectively, the "Registration Expenses"). To the extent that any Registration
Expenses are incurred, assumed or paid by any holder of Registrable Securities
or any placement or sales agent therefor or underwriter thereof, the Company
shall reimburse such person for the full amount of the Registration Expenses so
incurred, assumed or paid promptly after receipt of a request therefor.
Notwithstanding the foregoing, the holders of the Registrable Securities being
registered shall pay all agency fees and commissions and underwriting discounts
and commissions attributable to the sale of such Registered Securities and the
fees and disbursements of any counsel or other advisors or experts retained by
such holders (severally or jointly), other than the counsel and experts
specifically referred to above.

5. REPRESENTATIONS AND WARRANTIES.

The Company represents and warrants to, and agrees with, each Purchaser and
each of the holders from time to time of Registrable Securities that:

(a) Each registration statement covering Registrable Securities and
each prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(c)(ix) hereof and any further
amendments or supplements to any such registration statement or prospectus,
when it becomes effective or is filed with the Commission, as the case may
be, and, in the case of an underwritten offering of Registrable Securities,
at the time of the closing under the underwriting agreement relating
thereto will conform in all material respects to the requirements of the
Securities Act and the Trust Indenture Act and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading; and at all times subsequent to the Effective Time when a
prospectus would be required to be delivered under the Securities Act,
other than from (i) such time as a notice has been given to holders of
Registrable Securities pursuant to Section 3(c)(vi)(F) hereof until (ii)
such time as the Company furnishes an amended or supplemented prospectus
pursuant to Section 3(d) hereof, each such registration statement, and each
prospectus (including any summary prospectus) contained therein or
furnished pursuant to Section 3(c)(ix) hereof, as then amended or
supplemented, will conform in all material respects to the requirements of
the Securities Act and the Trust Indenture Act and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing; PROVIDED,
HOWEVER, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by a holder of Registrable
Securities expressly for use therein.

(b) Any documents incorporated by reference in any prospectus referred
to in Section 5(a) hereof, when they become or became effective or are or
were filed with the Commission, as the case may be, will conform or
conformed in all material respects to the requirements of the Securities
Act or the Exchange Act, as applicable, and none of such documents will
contain or contained an untrue statement of a material fact or will omit or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; PROVIDED, HOWEVER, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by a holder of Registrable Securities expressly for
use therein.

(c) The compliance by the Company with all of the provisions of these
Exchange and Registration Rights and the consummation of the transactions
herein contemplated will not conflict with or result in a breach of any of
the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any subsidiary is a party or by which the Company or
any subsidiary is bound or to which any of the property or assets of the
Company or any subsidiary is subject, nor will such action result in any
violation of the provisions of the Certificate of

A-8

Incorporation, as amended, or the By-Laws of the Company or any statute or
any order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any subsidiary or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the consummation by the Company of the transactions
contemplated by these Exchange and Registration Rights, except the
registration under the Securities Act of the Registrable Securities,
qualification of the Indenture under the Trust Indenture Act and such
consents, approvals, authorizations, registrations or qualifications as may
be required under State securities or blue sky laws in connection with the
offering and distribution of the Registrable Securities.

(d) These Exchange and Registration Rights have been duly authorized,
executed and delivered by the Company.

6. INDEMNIFICATION.

(a) INDEMNIFICATION BY THE COMPANY. Upon the registration of the
Registrable Securities pursuant to Section 2 hereof, and in consideration of the
agreements of the Purchasers contained herein, and as an inducement to the
Purchasers to purchase the Securities, the Company shall, and it hereby agrees
to, indemnify and hold harmless each of the holders of Registrable Securities to
be included in such registration, and each person who participates as a
placement or sales agent or as an underwriter in any offering or sale of such
Registrable Securities against any losses, claims, damages or liabilities, joint
or several, to which such holder, agent or underwriter may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
registration statement under which such Registrable Securities were registered
under the Securities Act, or any preliminary, final or summary prospectus
contained therein or furnished by the Company to any such holder, agent or
underwriter, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and the Company shall, and it hereby agrees to, reimburse such
holder, such agent and such underwriter for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such action or claim as such expenses are incurred; PROVIDED, HOWEVER, that the
Company shall not be liable to any such person in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, or preliminary, final or summary
prospectus, or amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by such person expressly for use
therein; PROVIDED, FURTHER , that the Company shall not be liable to any
underwriter to the extent such loss, claim, damage, or liability results from
the fact that there was not delivered by such underwriter a final prospectus the
delivery of which would have avoided such loss, claim, damage or liability.

(b) INDEMNIFICATION BY THE HOLDERS AND ANY AGENTS AND UNDERWRITERS. The
Company may require, as a condition to including any Registrable Securities in
any registration statement filed pursuant to Section 2 hereof and to entering
into any underwriting agreement with respect thereto, that the Company shall
have received an undertaking reasonably satisfactory to it from the holder of
such Registrable Securities and from each underwriter named in any such
underwriting agreement, severally and not jointly, to (i) indemnify and hold
harmless the Company, and all other holders of Registrable Securities, against
any losses, claims, damages or liabilities to which the Company or such other
holders of Registrable Securities may become subject, under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, or any preliminary, final or summary prospectus contained therein or
furnished by the Company to any such holder, agent or underwriter, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company by such holder
or underwriter expressly for use therein, and (ii) reimburse the Company for any
legal or other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim; PROVIDED, HOWEVER, that no
such holder shall be required

A-9

to undertake liability to any person under this Section 6(b) for any amounts in
excess of the dollar amount of the proceeds to be received by such holder from
the sale of such holder's Registrable Securities pursuant to such registration.

(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified party
under subsection (a) or (b) above of written notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions of
or contemplated by this Section 6, notify such indemnifying party in writing of
the commencement of such action; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may have to any
indemnified party other than under the indemnification provisions of or
contemplated by Section 6(a) or 6(b) hereof. In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying party
of the commencement thereof, such indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, such indemnifying party shall not be
liable to such indemnified party for any legal expenses of other counsel or any
other expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of
investigation.

(d) CONTRIBUTION. Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 6(a) or Section 6(b) are
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, claims, damages or liabilities (or actions in respect thereof)
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and the
indemnified party in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by such indemnifying party or by such indemnified party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if contributions pursuant to this
Section 6(d) were determined by pro rata allocation (even if the holders or any
agents or underwriters or all of them were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 6(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages, or
liabilities (or actions in respect thereof) referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 6(d), no holder shall
be required to contribute any amount in excess of the amount by which the dollar
amount of the proceeds received by such holder from the sale of any Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) exceeds the amount of any damages which such holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission, and no underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Registrable
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The holders' and any underwriters' obligations in this
Section 6(d) to contribute shall be several in proportion to the principal
amount of Registrable Securities registered or underwritten, as the case may be,
by them and not joint.

(e) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each officer, director and partner of
each holder, agent and underwriter and each person, if any, who controls any
holder, agent or

A-10

underwriter within the meaning of the Securities Act; and the obligations of the
holders and any underwriters contemplated by this Section 6 shall be in addition
to any liability which the respective holder or underwriter may otherwise have
and shall extend, upon the same terms and conditions, to each officer and
director of the Company (including any person who, with his consent, is named in
any registration statement as about to become a director of the Company) and to
each person, if any, who controls the Company within the meaning of the
Securities Act.

7. UNDERWRITTEN OFFERINGS.

(a) SELECTION OF UNDERWRITERS. If any of the Registrable Securities covered
by the Shelf Registration are to be sold pursuant to an underwritten offering,
the managing underwriter or underwriters thereof shall be designated by the
holders of at least a majority in aggregate principal amount of the Registrable
Securities to be included in such offering, provided that such designated
managing underwriter or underwriters is or are reasonably acceptable to the
Company.

(b) PARTICIPATION BY HOLDERS. Each holder of Registrable Securities hereby
agrees with each other such holder that no such holder may participate in any
underwritten offering hereunder unless such holder (i) agrees to sell such
holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.

8. RULE 144.

The Company covenants to the holders of Registrable Securities that to the
extent it shall be required to do so under the Exchange Act, the Company shall
timely file the reports required to be filed by it under the Exchange Act or the
Securities Act (including, but not limited to, the reports under Section 13 and
15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted
by the Commission under the Securities Act) and the rules and regulations
adopted by the Commission thereunder, and shall take such further action as any
holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitations of the
exemption provided by Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission. Upon the request of any holder of Registrable Securities, the
Company shall deliver to such holder a written statement as to whether it has
complied with such requirements.

9. MISCELLANEOUS.

(a) NO INCONSISTENT AGREEMENTS. The Company represents, warrants, covenants
and agrees that it has not granted, and shall not grant, registration rights
with respect to Registrable Securities or any other securities which would be
inconsistent with the terms contained in these Exchange and Registration Rights.

(b) SPECIFIC PERFORMANCE. The parties hereto acknowledge that there may be
no adequate remedy at law if any party fails to perform any of its obligations
hereunder and that each party may be irreparably harmed by any such failure, and
accordingly agree that each party, in addition to any other remedy to which it
may be entitled at law or in equity, shall be entitled to compel specific
performance of the obligations of any other party under these Exchange and
Registration Rights in accordance with the terms and conditions of these
Exchange and Registration Rights, in any court of the United States or any State
thereof having jurisdiction.

(c) NOTICES. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, if delivered personally or by courier, or
three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows: If to the Company, to it
at USAT Holdings Inc., 520 Madison Ave., New York, New York 10022, Attention:
General Counsel, [now Bank United Corp. at 50 Charles Lindbergh Blvd.,
Uniondale, New York 11553] and if to a holder, to the address of such holder set
forth in the security register or other records of the Company, or to such other
address as any party may have furnished to the others in writing in accordance
herewith, except that notices of change of address shall be effective only upon
receipt.

(d) PARTIES IN INTEREST. All the terms and provisions of these Exchange
and Registration Rights shall be binding upon, shall inure to the benefit of and
shall be enforceable by the respective successors and assigns of the parties
hereto. In the event that any transferee of any holder of Registrable Securities
shall acquire Registrable

A-11

Securities, in any manner, whether by gift, bequest, purchase, operation of law
or otherwise, such transferee shall, without any further writing or action of
any kind, be deemed a party hereto for all purposes and such Registrable
Securities shall be held subject to all of the terms of these Exchange and
Registration Rights, and by taking and holding such Registrable Securities such
transferee shall be entitled to receive the benefits of and be conclusively
deemed to have agreed to be bound by and to perform all of the terms and
provisions of these Exchange and Registration Rights. If the Company shall so
request, any such successor, assign or transferee shall agree in writing to
acquire and hold the Registrable Securities subject to all of the terms hereof.

(e) SURVIVAL. The respective indemnities, agreements, representations,
warranties and each other provision set forth in these Exchange and Registration
Rights or made pursuant hereto shall remain in full force and effect regardless
of any investigation (or statement as to the results thereof) made by or on
behalf of any holder of Registrable Securities, any director, officer or partner
of such holder, any agent or underwriter or any director, officer or partner
thereof, or any controlling person of any of the foregoing, and shall survive
delivery of and payment for the Registrable Securities pursuant to the Purchase
Agreements and the transfer and registration of Registrable Securities by such
holder and the consummation of an Exchange Offer.

(f) LAW GOVERNING. These Exchange and Registration Rights shall be
governed by and construed in accordance with the laws of the State of New York.

(g) HEADINGS. The descriptive headings of the several Sections and
paragraphs of these Exchange and Registration Rights are inserted for
convenience only, do not constitute a part of these Exchange and Registration
Rights and shall not affect in any way the meaning or interpretation of these
Exchange and Registration Rights.

(h) ENTIRE AGREEMENT; AMENDMENTS. These Exchange and Registration Rights
and the other writings referred to herein or delivered pursuant hereto which
form a part hereof contain the entire understanding of the parties with respect
to its subject matter. These Exchange and Registration Rights supersede all
prior agreements and understandings between the parties with respect to its
subject matter. These Exchange and Registration Rights may be amended and the
observance of any term of these Exchange and Registration Rights may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a written instrument duly executed by the Company and the
holders of at least 66 2/3 percent in aggregate principal amount of the
Registrable Securities at the time outstanding. Each holder of any Registrable
Securities at the time or thereafter outstanding shall be bound by any amendment
or waiver effected pursuant to this Section 9(h), whether or not any notice,
writing or marking indicating such amendment or waiver appears on such
Registrable Securities or is delivered to such holder.

(i) INSPECTION. For so long as these Exchange and Registration Rights shall
be in effect, these Exchange and Registration Rights and a complete list of the
names and addresses of all the holders of Registrable Securities shall be made
available for inspection and copying on any business day by any holder of
Registrable Securities at the offices of the Company at the address thereof set
forth in Section 9(c) above.

A-12

================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO EXCHANGE, OR A SOLICITATION OF
AN OFFER TO EXCHANGE, ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT
RELATES OR AN OFFER TO EXCHANGE OR A SOLICITATION OF AN OFFER TO EXCHANGE SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information....................................................................................... 3
Exchange Agent............................................................................................... 3
Summary...................................................................................................... 4
Risk Factors................................................................................................. 13
The Company.................................................................................................. 20
Purpose of the Exchange Offer................................................................................ 22
The Exchange Offer........................................................................................... 22
Federal Income Tax Considerations............................................................................ 27
Use of Proceeds.............................................................................................. 28
Dividend Policy.............................................................................................. 28
Capitalization............................................................................................... 29
Ratios of Earnings to Fixed Charges.......................................................................... 31
Selected Consolidated Financial and Other Data............................................................... 32
Management's Discussion and Analysis of
Financial Condition and Results of Operations.............................................................. 35
Business..................................................................................................... 59
Regulation................................................................................................... 79
Description of Properties.................................................................................... 100
Legal Proceedings............................................................................................ 100
Management................................................................................................... 102
Common Stock Offering: Selling Stockholders.................................................................. 120
Description of the Notes..................................................................................... 124
Plan of Distribution......................................................................................... 139
Legal Matters................................................................................................ 139
Experts...................................................................................................... 139
Index of Certain Defined Terms............................................................................... 140
Index to Consolidated Financial Statements................................................................... F-1
Independent Auditors' Report................................................................................. F-2
Exchange and Registration Rights............................................................................. A-1
</TABLE>

UNTIL .............., ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================

BANK UNITED CORP.

EXCHANGE OFFER

8.05% SENIOR NOTES
DUE MAY 15, 1998

-------------------------------
PROSPECTUS
-------------------------------

JUNE , 1996

================================================================================

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by them in connection with specified actions, suits or proceedings, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation, a "derivative action") if they acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, if they had no reasonable cause to believe their conduct was
unlawful. A similar standard is applicable in the case of derivative actions,
except that indemnification only extends to expenses (including attorneys' fees)
incurred in connection with the defense or settlement of such actions, and the
statute requires court approval before there can be any indemnification where
the person seeking indemnification has been found liable to the corporation. The
statute provides that it is not exclusive of other indemnification that may be
granted by a corporation's bylaws, disinterested director vote, stockholder
vote, agreement or otherwise.

The Restated Certificate of Incorporation of the Company (the
"Certificate") provides that each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person, or a person of whom such person is the legal
representative, is or was a director or officer of the Company or is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, will be indemnified and held harmless by
the Company to the fullest extent authorized by the DGCL, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment), against all expense, liability and loss reasonably incurred or
suffered by such person in connection therewith. Such right to indemnification
includes the right to have the Company pay the expenses incurred in defending
any such proceeding in advance of its final disposition, subject to the
provisions of the DGCL. Such rights are not exclusive of any other right which
any person may have or thereafter acquire under any statute, provision of the
Certificate, By-Laws, agreement, vote of stockholders or disinterested directors
or otherwise. No repeal or modification of such provision will in any way
diminish or adversely affect the rights of any director, officer, employee or
agent of the Company thereunder in respect of any occurrence or matter arising
prior to any such repeal or modification. The Certificate also specifically
authorizes the Company to maintain insurance and to grant similar
indemnification rights to employees or agents of the Company.

The DGCL permits a corporation to provide in its certificate of
incorporation that a director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability for (i) any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) payments of unlawful dividends or unlawful stock
repurchases or redemptions, or (iv) any transaction from which the director
derived an improper personal benefit.

The Certificate provides that a director of the Company will not be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except, if required by the DGCL as
amended from time to time, for liability (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL, which concerns unlawful payments of
dividends, stock purchases or redemptions, or (iv) for any transaction from
which the director derived an improper personal benefit. Neither the amendment
nor repeal of such provision will eliminate or reduce the effect of such
provision in respect of any matter occurring, or any cause of action, suit or
claim that, but for such provision, would accrue or arise prior to such
amendment or repeal.

II-1

In addition, Lewis S. Ranieri, Salvatore A. Ranieri, and Scott A. Shay, who
are directors of the Company, may be entitled to indemnification from Hyperion
Partners L.P. and Hyperion Ventures L.P., the former upstream affiliates of the
Company. Such former upstream affiliates, at their sole discretion, may elect to
indemnify other persons who serve as directors or officers of the Company.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. The following exhibits are filed as part of this
Registration Statement.

<TABLE>
<CAPTION>
ITEM 601
REGULATION S-K
EXHIBIT
REFERENCE
NUMBER DESCRIPTION
- ------------------------ ------------------------------------------------------------------------------------------
<S> <C> <C>
3.1** -- Form of Restated Certificate of Incorporation of the Registrant, as amended.

3.2** -- Form of By-Laws of the Registrant.
4.1** -- Indenture, dated as of May 15, 1993, between the
Registrant and Bank of New York, as Trustee, relating
to the Registrant's 8.05% Senior Notes due May 15,
1998.
4.2** -- Form of 8.05% Senior Note due May 15, 1998 (included in the Indenture filed as Exhibit 4.1
hereto).
4.3** -- Exchange and Registration Rights relating to Registrant's 8.05% Senior Notes due May 15,
1998.
4.4** -- First Supplemental Indenture, dated as of January 23, 1995, between the Registrant and the
Bank of New York, as Trustee, relating to Registrant's 8.05% Senior Notes due May 15,
1998.
5.1` -- Opinion and consent of Bryan Cave LLP.
8` -- Opinion and consent of Bryan Cave LLP (Federal Tax Matters).
10.1** -- Assistance Agreement, dated December 30, 1988, among the Bank, the Registrant, Hyperion
Holdings, Hyperion Partners, and the FSLIC.
10.1a** -- Settlement and Termination Agreement, dated as of
December 23, 1993, among the Bank, the Registrant,
Hyperion Holdings, Hyperion Partners and the FDIC.
10.1b** -- Tax Benefits Agreement, dated December 28, 1993,
among the Bank, the Registrant, Hyperion Holdings,
Hyperion Partners and the FDIC.
10.2** -- Acquisition Agreement, dated December 30, 1988, between the Bank and the FSLIC.
10.3** -- Warrant Agreement, dated December 30, 1988, between the Bank and the FSLIC.
10.3a** -- Amended and Restated Warrant Agreement dated December 28, 1993, between the Bank and the
FDIC.
10.4** -- Regulatory Capital Maintenance Agreement, dated
December 30, 1988 among the Bank, the Registrant,
Hyperion Holdings, Hyperion Partners, and the FSLIC
(terminated).
10.5** -- Federal Stock Charter of the Bank and First Amendment to charter approved on August 26,
1992.
10.6** -- Amended and Restated Federal Stock Charter of the Bank and Second Amendment approved on
October 30, 1992.
10.6a** -- Third Amendment to the Federal Stock Charter of the Bank approved on April 23, 1996.
10.6b** -- Amended and Restated Bylaws of the Bank.
10.7** -- Specimen Preferred Stock, Series A, certificate, $25.00 per share stated value of the
Bank.
10.7a** -- Certificate of Designation of Noncumulative Preferred Stock, Series A, of the Bank.
10.7b** -- Specimen Preferred Stock, Series B, certificate, $25.00 per share stated value, of the
Bank.
10.7c** -- Certificate of Designation of Noncumulative Preferred Stock, Series B, of the Bank.
10.8** -- Data Processing Agreement, dated January 1, 1992, between the Bank and Systematics
Financial Services, Inc., and First Amendment (dated
October 28, 1992) and Second Amendment (dated
September 1, 1992).
10.8a** -- Third Amendment, dated December 17, 1993, to the
Data Processing Agreement, dated January 1, 1992,
between the Bank and Systematics Financial Services,
Inc.
10.8b** -- Fourth Amendment, dated March 28, 1994, to the Data
Processing Agreement, dated January 1, 1992, between
the Bank and Systematics Financial Services, Inc.
10.8c** -- Fifth Amendment, dated April 1, 1994 to the Data
Processing Agreement, dated January 1, 1992, between
the Bank and Systematics Financial Services, Inc.

II-2

ITEM 601
REGULATION S-K
EXHIBIT
REFERENCE
NUMBER DESCRIPTION
- ------------------------ ------------------------------------------------------------------------------------------

10.8d** -- Sixth Amendment, dated February 26, 1996 to the
Data Processing Agreement, dated January 1, 1992,
between the Bank and Systematics Financial Services,
Inc.
10.9** -- Management and Consulting Services Agreement, dated January 1, 1992, between the Bank and
Systematics Financial Services, Inc., and First Amendment (dated March 18, 1992) and
Second Amendment (dated September 1, 1992).
10.10** -- Lease Agreement, dated April 1, 1989, between the
Bank and Homart Development Co. (Leased premises at
3200 Southwest Freeway) and First Amendment thereto
dated January 31, 1990.
10.10a** -- Second Amendment, dated November 14, 1994 to Lease
Agreement dated April 1, 1989, between the Bank and
Homart Development Co. (assigned to HD Delaware
Properties, Inc.).
10.10b** -- Third Amendment, dated January 8, 1996 to Lease
Agreement dated April 1, 1989 between the Bank and
Homart Development Co. (predecessor in interest of HMS
Office, L.P.).
10.11** -- Lease Agreement, dated November 20, 1990, between the Bank and Greenway Plaza, LTD.
(Leased premises at 3800 Buffalo Speedway).
10.12** -- Employment Agreement, dated March 18, 1991, between the Bank and Barry C. Burkholder.
10.12a** -- Amendment, dated April 10, 1996, to the Employment Agreement between the Bank and Barry C.
Burkholder.
10.13** -- Letter Agreement Related to Employment, dated April 4, 1990, between the Bank and Anthony
J. Nocella.
10.14** -- Letter Agreement Related to Employment, dated June 18, 1990 between the Bank and George R.
Bender.
10.15** -- Letter Agreement Related to Employment, dated April 6, 1990, between the Bank and Jonathon
K. Heffron.
10.16** -- Letter Agreement Related to Employment, dated May 10, 1991, between the Bank and Leslie H.
Green.
10.17** -- Management Incentive Plan, dated April 20, 1992.
10.18** -- Letter Agreement, dated January 5, 1990, between Hyperion Partners and certain
shareholders of the Registrant with respect to the provision of managerial assistance to
the Registrant.
10.22** -- Supplemental Executive Savings Plan of the Bank.
10.23** -- Directors Supplemental Savings Plan of the Bank.
12 -- Statement re: Calculation of Ratios of Earnings to Fixed Charges.
21` -- Subsidiaries of the Registrant.
23.1` -- Consent of Bryan Cave LLP (included in Exhibit 5.1).
23.2` -- Consent of Deloitte & Touche LLP, independent auditors.
26* -- Statement of Eligibility and Qualification of Trustee on Form T-1 of the Bank of New York
under the Trust Indenture Act of 1939.
28.1* -- Form of Letter of Transmittal.
99.2` -- Exchange Agent Agreement between Registrant and Bank of New York, as Exchange Agent.
99.3** -- Complaint filed by the Registrant and certain of its affiliates against the FDIC and
certain other governmental agencies in the Southern District of Texas, Galveston Division,
C.A. No. G-93-461.
</TABLE>
- ------------

* Previously filed.

** Filed as an Exhibit to the Company's Registration Statement on Form S-1
(Registration No. 333-06229), under same exhibit number, and incorporated
herein by this reference.

` To be filed by amendment.

II-3

All other Exhibits have been filed previously.

(b) Financial Statement Schedules.

The Consolidated Financial Statements listed in the Index to Consolidated
Financial Statements contained in the Offering Circular are hereby incorporated
herein by reference.

Schedules to the Consolidated Financial Statements are not required under
the related instructions or are inapplicable, and therefore have been omitted.

ITEM 22. UNDERTAKINGS.

(a) The undersigned registrant hereby undertakes that insofar as
indemnification for liabilities arising under the Securities Act of 1933 (the
"Act") may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim of indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or the registrant in the successful defense of any action, suit paid by a
director, officer or controlling person of the registrant in the successful
defense of any action suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

(b) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into this prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.

(c) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.

(d) (1) To file during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement; (i)
to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933; (ii) to reflect the prospectus any facts or
events arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in
the information set forth in the Registration Statement; (iii) to
include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;

(2) That, for purposes of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

II-4

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN UNIONDALE, STATE OF NEW YORK, ON THE 28TH DAY OF JUNE, 1996.

BANK UNITED CORP.
By /s/LEWIS S. RANIERI
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT HAS BEEN
SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON THE DATES
INDICATED BELOW.

SIGNATURES TITLE DATE
- --------------------------------- ----------------------------- ------------

(1) Principal Executive Officer:
/s/LEWIS S. RANIERI Chairman of the Board, June 28, 1996
LEWIS S. RANIERI President and Chief Executive
Officer

(2) Principal Financial and
Accounting Officer:
/s/ANTHONY J. NOCELLA Executive Vice President and June 28, 1996
ANTHONY J. NOCELLA Chief Financial Officer

(3) Directors:
/s/LEWIS S. RANIERI Director June 28, 1996
LEWIS S. RANIERI
/s/SALVATORE A. RANIERI Director June 28, 1996
SALVATORE A. RANIERI
/s/SCOTT A. SHAY Director June 28, 1996
SCOTT A. SHAY

II-5

EXHIBIT 12

BANK UNITED CORP.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED SEPTEMBER 30,
MARCH 31, ----------------------------------------------------------
1996 1995 1994 1993 1992 1991
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS
Income before income taxes, minority
interest, and extraordinary loss... $ 61,387 $ 90,111 $ 86,081 $ 122,303 $ 56,805 $ 18,706
Fixed charges........................ 312,232 560,989 328,940 308,181 355,860 335,836
----------- ---------- ---------- ---------- ---------- ----------
Income before income taxes, minority
interest, extraordinary loss, and
fixed charges...................... $ 373,619 $ 651,100 $ 415,021 $ 430,484 $ 412,665 $ 354,542
=========== ========== ========== ========== ========== ==========
FIXED CHARGES
Interest expense..................... $ 309,289 $ 552,760 $ 320,924 $ 300,831 $ 348,291 $ 330,659
One-third net rental expense......... 2,455 7,253 7,039 6,656 7,007 4,569
Amortization of debt expense......... 488 976 977 694 562 608
----------- ---------- ---------- ---------- ---------- ----------
Total fixed charges.................. $ 312,232 $ 560,989 $ 328,940 $ 308,181 $ 355,860 $ 335,836
=========== ========== ========== ========== ========== ==========
Earnings to fixed charges ratio...... 1.20 1.16 1.26 1.40 1.16 1.06
</TABLE>

COMPUTATION OF RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
AND BANK'S PREFERRED STOCK DIVIDENDS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED SEPTEMBER 30,
MARCH 31, ----------------------------------------------------------
1996 1995 1994 1993 1992 1991
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS
Income before income taxes, minority
interest, and extraordinary loss... $ 61,387 $ 90,111 $ 86,081 $ 122,303 $ 56,805 $ 18,706
Fixed charges........................ 312,232 560,989 328,940 308,181 355,860 335,836
----------- ---------- ---------- ---------- ---------- ----------
Income before income taxes, minority
interest, extraordinary loss, and
fixed charges...................... $ 373,619 $ 651,100 $ 415,021 $ 430,484 $ 412,665 $ 354,542
=========== ========== ========== ========== ========== ==========
COMBINED FIXED CHARGES AND BANK'S
PREFERRED STOCK DIVIDENDS
Interest expense..................... $ 309,289 $ 552,760 $ 320,924 $ 300,831 $ 348,291 $ 330,659
One-third net rental expense......... 2,455 7,253 7,039 6,656 7,007 4,569
Amortization of debt expense......... 488 976 977 694 562 608
----------- ---------- ---------- ---------- ---------- ----------
Total fixed charges.................. 312,232 560,989 328,940 308,181 355,860 335,836
Bank's Preferred Stock dividends,
pre-tax basis
Series A........................ 7,024 14,011 14,006 10,581 -- --
Series B........................ 7,793 3,152 -- -- -- --
----------- ---------- ---------- ---------- ---------- ----------
Combined fixed charges and Bank's
Preferred Stock dividends.......... $ 327,049 $ 578,152 $ 342,946 $ 318,762 $ 355,860 $ 335,836
=========== ========== ========== ========== ========== ==========
Earnings to combined fixed charges
and Bank's Preferred Stock
dividends ratio.................... 1.14 1.13 1.21 1.35 1.16 1.06
</TABLE>